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| Table of Contents |
1. Fixed Term Contracts
2. Revised Basic Conditions
3. Are your employees productive?
4. Statutory Rates of Tax: 2016 Year of Assessment
5. UIF Limit Decrease
6. Employees Transferred Off Shore
7. Tax Free Investment Accounts (TFIA's)
8. The Gautrain
9. Foreigners Coming to Work in South Africa
10. Income Protection Schemes
11. Training Layoff Scheme
12. Contact the HRTorQue Team |
| 1. Fixed Term Contracts |
| Author: Melany Bydawell |
The Labour Relations Amendment Act (2014) was implemented from 1 January 2015 and employers should take particular note of the provisions relating to fixed term contracts (section 198B) in respect of employees earning less than the current threshold of R205 433, 30 per annum.
An important point is that a fixed term contract, or successive fixed term contracts, may not endure for longer than three months unless:
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The nature of the work is of a limited or defined duration |
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The employer can demonstrate any other justifiable reason, such as the employee being engaged: |
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- as a temporary replacement of an absent employee;
- because of a temporary increase in the volume of work, which is not expected to
endure beyond 12 months;
- as a student or recent graduate, employed for the purpose of being trained or gaining
experience to enter into a job/profession;
- as a non-citizen with a work permit for a defined period;
- to work exclusively on a specific project for a defined duration;
- for the purpose of an official public works scheme;
- in a position funded by an external source for a limited period;
- as a person having reached the normal or agreed retirement age. |
Any Fixed term contracts which continue after the end of March 2015, or are entered into after that date will be subject to the following conditions:
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The employee must be as favourably treated as any other permanent employee doing the same or similar work (unless there is justifiable reason), |
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The employee must be given equal opportunities to apply for vacancies, |
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An employee engaged on a fixed term basis for more than 24 months must receive retrenchment pay upon termination. |
Any offer to employ an employee on a fixed term contract (or to renew or extend a fixed term contract) must be in writing and include the reason as provided for in Section 198B (3)(a) or (b) of the Act. |
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| 2. Revised Basic Conditions |
| Author: Nicky Hardwick |
| Following on from the recent amendments to the Basic Conditions of Employment Act published on the 26th November 2014 in Government Gazette No. 38250 it is important that all employers replace their BCEA 1A |(Summary of the BCEA) with the updated version. |
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| 3. Are your employees productive? |
| Author: Melany Bydawell |
"The greatest production results when each worker is given a definite task to be performed in a definite time in a definite manner."
- Dr. Frederick W. Taylor
What is a Work Study?
Work study is a management tool to achieve higher productivity in any organisation, whether manufacturing tangible products or offering services to its customers.
Objectives of Work Studies
• To measure the work content/activities of a position by measuring the time required to
do the job for a competent worker - to establish standard times.
• To increase productivity by ensuring the optimum use of human, machine and material
resources.
• To improve operational efficiency.
Benefits of Work Studies
• Increased productivity and operational efficiency.
• Reduced manufacturing costs.
• Objective manpower planning and related costs (for example additional and
unnecessary recruitment of employees and related costs).
• Improved work flow.
• Standard of performance to manager labour efficiency.
• Better Industrial Relations and employee morale.
• Basis for sound incentive schemes and objective performance management and
rewards.
An effective work study - requirements?
• Objective Job Profile describing the core activities within each Key Performance area/s.
• Extract of activities for daily record keeping.
• A reasonable period (minimum one month).
• Weekly collation of data and analysis.
• Established and reasonable time frames for each activity.
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| 4. Statutory Rates of Tax: 2016 Year of Assessment |
| Author: David Beattie |
The following new tax rates, rebates and thresholds proposed by the Minister of Finance in his Budget Speech on 25 February 2015 will come into effect on 1 March 2015.
Statutory rates applicable to individuals
| Taxable Income(R) |
Rates of Tax (R) |
| 0 - 181 900 |
18% of each R1 |
| 181 901 - 284 100 |
32 742 + 26% of the amount above R181 900 |
| 284 101 - 393 200 |
59 314 + 31% of the amount above R284 100 |
| 393 201 - 550 100 |
93 135 + 36% of the amount above R393 200 |
| 550 101 - 701 300 |
149 619 + 39% of the amount above R550 100 |
| 701 301 and above |
208 587 + 41% of the amount above R701 300 |
Tax rebates applicable to individuals
Primary rebate: R13 257
Secondary rebate (for person 65 years and older): R7 407
Tertiary rebate (for person 75 years and older): R2 466
Tax threshold applicable to individuals
Persons under 65 years: R73 650
Persons 65 - 74 years old: R114 800
Persons 75 years and older: R128 500
Medical Scheme Contribution Tax Credit
The medical scheme tax credit that will be effective from 1 March 2015 is:
R270 in respect of the taxpayer
R270 for the first dependant
R181 for each additional dependant
Residential Accommodation Fringe Benefit
The value of "B" in the formula prescribed in paragraph 9 of the Seventh Schedule has increased from R70 700 to 73 650 with effect from 1 March 2015.
Interest Rates
The official rate of interest applicable to interest-free or low-interest loan fringe benefits is 6.75%. No change to this rate has been announced.
The prescribed rate of interest applicable to the late or underpayment of tax is 9.25%. No change to this rate has been announced.
Unemployment Insurance Fund Contributions
The following statement was made in the Budget Speech by the Minister of Finance:
The second special revenue proposal is a one-year relief measure in respect of Unemployment Insurance Fund contributions. Unlike the Road Accident Fund, the UIF has an accumulated surplus of over R90billion. Improved benefits are now being introduced, but it is nonetheless possible to provide a temporary relief to both employers and employees. The proposal is that the contribution threshold should be reduced to R1 000 a month for the 2015/16 year. This means that employers and employees will each pay R10 a month during the year ahead, putting R15 billion back into the pockets of workers and businesses.
Although a decrease in the UIF threshold was announced in the Budget Speech, employers should be aware that it will only be effective from a date announced by the Minister of Finance in a Government Gazette notice which are still due to be published.
Rate per Kilometre
Cost Scale Table effective from 1 March 2015:
| Determined Value of the Vehicle |
Fixed Cost
(R pa) |
Fuel Cost
(c/km) |
Maintenance Cost
(c/km) |
| 0 to 80 000 |
26 105 |
78.7 |
29.3 |
| 80 001 to 160 000 |
46 505 |
87.9 |
36.7 |
| 160 001 to 240 000 |
66 976 |
95.5 |
40.4 |
| 240 001 to 320 000 |
84 945 |
102.7 |
44.1 |
| 320 001 to 400 000 |
102 974 |
109.9 |
51.8 |
| 400 001 to 480 000 |
140 797 |
130.4 |
75.6 |
| 480 001 to 560 000 |
121 886 |
126.1 |
60.8 |
| 560 001 and above |
140 797 |
130.4 |
75.6 |
Travel Reimbursements
The alternative rate per kilometre has been reduced from R3.30 per km to R3.18 per km. This rate is applicable at the option of the recipient where the distance travelled for business purposes does not exceed 8 000 kilometres per annum and no other form of compensation is received.
Subsistence Allowanced and Advances
Local travel
The deemed daily amount for travel in the Republic (e.g. subsistence allowance) is:
R353 per day for meals and incidental costs
R109 for each day for incidental costs only
Travel outside the Republic
The deemed daily amount for travel outside the Republic to defray the cost of meals and incidental costs, is an amount per day determined in accordance with the following table for the country in which that accommodation is located. |
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| 5. UIF Limit Decrease |
| Author: Karen van den Bergh |
Finance Minister, Nhlanhla Nene, announced in his maiden budget speech a significant reduction in the monthly UIF contributions payable by employers and employees.
The current contributions are calculated as 1% of the first R14 872 of an employee's remuneration (i.e. R148.72 per month). This will be lowered to 1% of the first R1 000, hence employers and employees will each pay a maximum monthly contribution of R10.
This change, once gazetted, will result in total annual contributions of R240 (i.e. R10 x 2 x 12 months) for the 2015/2016 tax year whereas previously the employee and employer would have paid annual contributions of R3 569.28 (i.e. R148.72 x 2 x 12 months).
For your planning purposes, please be advised that the decrease of the monthly UIF limit to R1 000 pm as proposed in the budget is likely to happen 'sooner' rather than 'later'.
There is no date as yet, but as soon as it becomes available, we will notify you. |
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| 6. Employees Transferred Off Shore |
| Author: Karen van den Bergh |
With the demand for skills opening borders, and South African companies expanding into overseas markets, many South Africans are taking the opportunity to work offshore. Payroll administrators are being asked to deal with the consequences of these moves. With the risk of falling foul of the legislation in this regard firmly on the employer's shoulders, it would be wise to brush up on the requirements for earnings to be classified as tax-free.
The following requirements must be met:
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The employee must be able to prove an employment relationship (an employment contract would suffice). Independent contractors and self-employed people would not qualify for the tax-free exemption. |
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The employee would need to be physically outside South Africa for more than 183 days within any 12-month period starting or ending during the tax year. |
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The employee would need to be outside South Africa for a period of at least 60 consecutive days in the 12-month period mentioned above. |
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It is important for employers to note that income for services rendered in South Africa must be taxed as normal. The fact that an employee qualifies to receive their foreign income tax-free does not mean that all income received in the tax year is tax-free. |
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The biggest challenge facing employers is when to regard the income as tax-free. SARS places the onus on the employer to deduct the right amount of tax from an employee, so the employer has to be satisfied that all the necessary criteria have been met before they declare the income as tax-free. |
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When the employee submits their annual tax return, SARS is bound to request that they upload the supporting documentation to prove the tax-free treatment of the applicable income. The employee will be best advised to upload the following information:
- A copy of the employment contract.
- A schedule of the days spent outside South Africa (agreeing to the stamps in the
employee's passport).
- A copy of the individual pages in the passport showing the exit and entry stamps. |
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If the employee is subject to income tax on the tax-free foreign income, they will need to supply all the above listed information on assessment to get the tax refunded. |
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| 7. Tax Free Investment Accounts (TFIA's) |
| Author: Karen van den Bergh |
There has been much talk about these accounts since SARS mentioned them as a means of encouraging savings. There is however very little information available in the market in terms of options available to taxpayers.
These accounts were introduced as of 1 March 2015. Only regulated institutions such as licensed banks, long-term insurers, and managers of registered collective investment schemes, the National Government (retail savings bonds), authorised stockbrokers and linked investment service providers may issue and administer these accounts.
This is how it is envisaged that this process will work:
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No income tax, dividends tax or Capital Gains Tax will be payable on the returns from these investments. |
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A maximum of R 30 000 per annum may be contributed to the investment. Any unused portion of the R 30 000 may not be carried over to the next year. |
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There is a lifetime limit of R 500 000 per portion. |
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If a taxpayer exceeds the limits there is a 40% penalty of the excess amount (e.g. the taxpayer pays R 35 000 into the investment thereby exceeding the annual limit by R 5 000. The penalty determined will be R 5 000 x 40% = R 2 000. |
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It is important to note that when returns on investment are added to the capital contribution, the balance may exceed both the annual and/or lifetime limit. However, where a taxpayer withdraws the returns and reinvests the same amount, that amount is regarded as a new contribution and this impacts both the annual and lifetime limits. |
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No transfers are allowed in the first year of investing (1 March 2015 to 29 February 2016). This includes both transfers within a service provider or to another service provider. |
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Parents can invest on behalf of their minor child. This minor child will use his / her own annual or lifetime limits. |
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Tax-free investment accounts cannot be used as transaction accounts. |
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Debit or stop orders and ATM transactions will not be possible from these accounts. |
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Only new accounts will qualify as the idea is to encourage new savings (in other words existing accounts may not be converted). |
Which accounts will qualify?
• Fixed deposits
• Unit trusts (collective investment schemes)
• Retail savings bonds
• Certain endowment policies issued by long-term insurers
• Linked investment products
• Exchange traded funds (ETFs) that are classified as collective investment schemes
Reporting requirements
The service providers will provide SARS twice a year, with the following information:
• Total contributions per year
• Return on investment: interest, dividends, capital losses and capital gains
The service providers will provide the taxpayer with this information by issuing an IT 3(s) - Tax Free Investment Certificate. |
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| 8. The Gautrain |
| Author: David Beattie |
There are numerous situations where an employee may be required to use the Gautrain in the performance of their job. The following two scenarios are looked at:
Scenario 1 - Where the employer owns the card:
The employee must keep a log of the business use of that card. The private usage must be taxed as a fringe benefit. This includes the travel from the place of work to the employee's residence.
Scenario 2 - Where the employee owns the card:
The employee would need to submit a detailed monthly schedule reflecting the business travel undertaken. The employee could then be reimbursed tax-free through the payroll.
The same logic is applied regarding the use of E-Toll tags. |
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| 9. Foreigners Coming to Work in South Africa |
| Author: David Beattie |
Foreigners are also regularly coming to impart skills in South Africa. A significant number of European migrants have entered South Africa due to the economic challenges in the European Union. There are certain decisions to be made in terms of the tax status of these inbound expatriates.
The tax implications are as follows:
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A non-resident rendering services in South Africa will be required to register as a taxpayer and render a tax return on their income earned in South Africa. |
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The ex-pat will need to establish if they are likely to be classified as 'ordinarily resident' for tax purposes. The criteria that need to be met were explained earlier in these notes. Once this person becomes 'ordinarily resident' they will be required to declare their worldwide income in South Africa. They would however be well advised to consult with a tax practitioner with experience in dealing with double taxation agreements, as this may exclude certain income from taxation, or offer tax credits where tax was also paid in a foreign territory. |
A guide detailing the taxation of foreigners is available on the SARS website. It is very comprehensive and covers the qualifying criteria, the concessions available to such people and the fringe benefits applicable. |
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| 10. Income Protection Schemes |
| Author: Karen van den Bergh |
All insurance policies that result in an annuity or lump sum pay-out and that are aimed at income or capital protection in respect of life, disability and severe illness events, will from 1st March 2015 conform to the principle of 'Premiums not deductible, Pay-out not taxed'.
For employers this will mean that:
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Employer-paid premiums will result in a fringe benefit of the same value being raised on the employee. |
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If the fringe benefit is raised on the employee, the employer-paid premiums will be deductible in full in the hands of the employer. |
For employees this will mean that:
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The above fringe benefit will not be deemed to be a payment made by the employee. |
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The premium (whether paid by the employer or by the employee) will not be deductible. |
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All pay-outs on life, disability and severe illness policies will be tax-free, irrespective of whether the pay-out takes the form of a lump sum or an annuity. The transitional arrangements for the starting date of March 2015 for current policyholders are:
- Premiums will no longer be deductible from March 2015 onwards even for pre-existing
plans.
- All policy pay-outs after 1st March 2015 will be tax-free even if premiums were
deducted prior to 1st March 2015. |
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| 11. Training Layoff Scheme |
| Author: Melany Bydawell |
Purpose and interpretation of training layoff agreement
Here are some conditions that apply to a training layoff agreement concluded to allow employers and workers to participate in a training layoff scheme as an alternative to retrenchment.
In order to be eligible to participate in the training layoff scheme the employer must:
• be in distress or facing distress;
• be contemplating the retrenchment of workers;
• have the potential of becoming sustainable through short term relief;
• be compliant with its statutory obligations.
The workers must:
• be at risk of being retrenched by the employer; or
• be subject, or likely to be subject, to reduced working hours or income reduction. |
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| 12. Contact the HRTorQue Team |
Head Office (Durban)
Phone: 031 564 1155
Fax: 031 564 1228
Email: [email protected]
Website: www.hrtorque.co.za
Address: 163 Umhlanga Rocks Drive
Durban North, KwaZulu-Natal |
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Sales
Melany Bydawell: 031 582 7425
[email protected] or 083 441 5618
Payroll & HR Administration
Karen van den Bergh: 031 582 7413
[email protected] or 082 891 1722
Human Resources / Employee Relations
Melany Bydawell: 031 582 7425
[email protected] or 083 441 5618 |
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