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| Editor's Note |
In this edition we start with a provocative article suggesting a large number of businesses in South Africa are hiding their heads in the sand when it comes to complying with legislation.
Given the recent spate of public holidays, we then look at public holidays and the payment of employees. We also consider whether temporary workers can be members of a company pension scheme.
As we move into winter we then look at sick leave entitlement and employers' rights to demand a medical certificate.
Finally, we look at the tax treatment of tips received by members of staff from patrons.
As usual, should you require any further detail on any of these topics, please feel free to contact us.
We do offer a referral scheme for new clients sent in our direction so if you know of anyone looking for outsourced payroll services then please let us know*.
*Terms and conditions apply |
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| Table of Contents |
1. Too many regulations - are businesses unconsciously incompetent?
2. Public holidays
3. Temporary workers as members of an employer pension scheme
4. Sick leave entitlement
5. Medical certificates
6. Tax treatment of tips
7. Contact HRTorQue |
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| 1. Unconscious incompetence - too much regulation |
| Author: Nicky Hardwick |
Editor's Note: While this article may be difficult for some to swallow, we see too many cases in practice for this fundamental concept to be ignored. Compliance with all the legislation in South Africa is hard even for large companies with all the resources. Too often companies follow the "ostrich syndrome" hoping it will go away... It won't. Our advice: use specialists where you can and manage this risk so you can focus on your core business.
In the South African context, running a business is hugely challenging due to the various Acts that govern how, when, where and what you need to do to be compliant. BBBEE, EE, SDL, PAYE, COIDA, UI-19, BCEA, LRA, ETI are a few of the acronyms thrown around - each with material consequences for business owners for non-compliance, ranging from financial penalties to actual jail time.
It is exceptionally difficult in South Africa for a business owner; HR Manager; Payroll Manager; Operations Manager to keep on top of all the various updates, legislation and changes that affect the employment of their staff.
It is with this in mind that I begin to question why many people do not turn to specialists or experts in this field.
Running a business is no longer about your core business taking up the majority of your time and compliance being a side note. Compliance is now a full time job and yet people continue to try to manage as if it was a "side note". When we look at other specialist fields such as medical and legal, people are quite happy to admit that they need specialist advice. You do not see business owners fighting their own legal battles or people going to a paramedic for advice on the pros and cons of having open heart surgery. But in the arena of Tax, Payroll and HR, why do business owners not follow the same logic?
I am of the opinion that this relates directly to the fact that South African legislation has changed so drastically in the last two decades and those responsible in business for managing the HR/Payroll compliance have unfortunately struggled to keep up and often have not realised that these have become specialist fields.
When we look at the four stages of competence 1) Unconscious incompetence; 2) Conscious incompetence; 3) Conscious competence and the final stage 4) Unconscious competence, there is clearly a need to move businesses away from the Unconscious Incompetence arena to the Conscious Competence and then importantly into the Conscious Competence space for compliance to once again be a manageable part of the business allowing the focus to be on the operations once again. |
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| 2. BCEA - Public holidays |
| Author: Karen van den Bergh |
The relevant section is section 18 of the Basic Conditions of Employment Act (BCEA).
| 1. |
An employer may not require an employee to work on a public holiday except in accordance with an agreement (this means - an employee only works on a public holiday if he agrees to work it). |
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| 2. |
If a public holiday falls on a day on which an employee would ordinarily work, an employer must pay - |
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| a. |
an employee who does not work on the public holiday, at least the wage that the employee would ordinarily... have received for work on that day; |
| b. |
an employee who does work on the public holiday -
(i) at least double the amount referred to in paragraph (a); or
(ii) if it is greater, the amount referred to in paragraph (a) plus the amount earned by the employee for the time worked on that day. |
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In other words, If the public holiday happens to be the employee's normal shift, then that the employee is entitled to be paid a minimum of double his normal wage rate for the day. If he does not work on that public holiday, he is entitled to be paid his normal wage rate for the day.
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If an employee works on a public holiday on which the employee would not ordinarily work, the employer must pay that employee an amount equal to - |
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| a. |
the employee's ordinary daily wage; plus |
| b. |
the amount earned by the employee for the work performed that day, whether calculated by reference to time worked or any other method. |
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If the employee does work on the public holiday, and it is not a day on which he would normally work, the employer must pay that employee a minimum of his ordinary daily wage rate, plus the amount earned by the employee for the work done on that day. If he does work on the public holiday, and his normal wage rate plus his wage for the time worked totals more than double his normal wage rate, then he must be paid the higher of the two.
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An employer must pay an employee for a public holiday on the employee's usual pay day. |
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| 5. |
If a shift worked by an employee falls on a public holiday and another day, the whole shift is deemed to have been worked on the public holiday, but if the greater portion of the shift was worked on the other day, the whole shift is deemed to have been worked on the other day. |
With night shift workers, part of the work may be done on an ordinary day and part on a public holiday (after midnight). The whole shift will be deemed to be worked on the public holiday, except if the hours worked before midnight are greater than the hours worked after midnight.
Explanations:
The conditions in section 18 apply to ALL employees - namely permanent employees, temporary employees, fixed term contract employees, the so-called "independent contractor" employee, project-employed employees, employees on basic salary, employees on basic salary plus commission and employees earning commission only. There is absolutely nothing whatsoever in section 18 which excludes any class of employee.
The earnings threshold per annum determined by the Minister, states that employees earning over that amount are excluded from section 18 (3) only - the remainder of the section still applies to that class of employee.
Section 18 (3) deals only with the amount to be paid to employees who earn under the threshold amount, if the employee works on a public holiday on which he would not ordinarily work. Thus, all employees, whether earnings are above or below the threshold amount, are entitled to public holidays.
The entitlement is to have the day off on full pay. The employee does not require the employer's consent to have the day off on full pay - the law states that he can have the day off on full pay.
If the public holiday falls on the day on which an employee would normally work - like the day after Easter is a Monday, and is a public holiday, Monday is a day which most employees would normally work if it wasn't a public holiday - the employer is bound by section 18 (2) (a) to pay that employee his normal wage for the day if the employee does not work on that day.
If the employee works on that Monday or any other public holiday, the employer must pay in at least double his normal wage rate for the day (section 18(b) (1)), or, if it is greater, his normal wage rate for the day plus the amount earned by the employee for the time worked on that day. This can happen with hourly paid workers.
If an employee works on a public holiday on which he would not normally work - for example, he works in a restaurant and they are normally closed on a Monday, or the public holiday happens to not be his normal shift - then the employer must pay that employee his ordinary daily wage, plus the amount earned by the employee for the work performed on that day. This may be an additional day's wages, or it may be calculated by time in the case of an hourly paid employee.
Any payment for work done on public holidays must be paid to the employee on his usual payday. It should also be noted (regarding night shift workers) that if the shift worked by the employee falls on a public holiday and another day (such as night shift on Easter Monday - the shift is partly Easter Monday, and partly Tuesday which is not a public holiday) then if the greater part of the shift was worked on the public holiday, the whole shift is deemed to have been worked on the public holiday.
If the greater part of the shift falls on the other day, then the whole shift is deemed to have been worked on the other day.
What about the exchange of a public holiday for another day, by agreement with the employee?
The permission to exchange is not regulated in the BCEA. It is regulated in the Public Holidays Act, and therefore has nothing to do with the payment for the public holiday. The Public Holidays Act states that, by agreement with the employee, a public holiday may be exchanged for another day.
As an example, let us take Easter Monday. This is a public holiday, but the employer requires his employees to work on Easter Monday.
If the employees take Easter Monday off, they are entitled only to be paid to their normal wage for the day.
Therefore, the employer can say to them that he would like them to work on Easter Monday, without receiving double pay for working on that day, and they can take another day off on full pay in substitution for Easter Monday.
If the employee works on Easter Monday without exchanging it for another day, he gets 2 days paid for working Easter Monday.
If the employee works on Easter Monday for a normal wage, and they take another day off on full pay, that also amounts to 2 day's pay.
Therefore there is no loss to the employees, and there is no financial gain to the employer.
What happens when the public holiday is a Sunday, and the Monday is declared a holiday?
Case number JR 1218/05, held in the Labour Court, Johannesburg, between Randfontein Estates Ltd v National Union of Mineworkers:
The question was asked whether it was one public holiday or two public holidays?
The court ruled that the provisions of the Public Holidays Act are quite clear. The Public Holiday act states that "the days mentioned in schedule 1 shall be public holidays, and whenever any public holiday falls on a Sunday, the following Monday shall be a public holiday."
The act goes further to define a public holiday as "the days mentioned in schedule 1 and any other day declared to be a public holiday under section 2K".
From the above, the Court found that the Monday is a public holiday additional to the public holiday on the Sunday.
Thus the answer is: if a public holiday falls on a Sunday, then the following Monday is a public holiday, and there are thus 2 public holidays - namely the Sunday and Monday. |
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| 3. Can temporary workers be a member of an employer's pension fund? |
| Author: Karen van den Bergh |
There is nothing preventing temporary workers from becoming a member of a company pension scheme. The prerequisite is for there to be an employer/employee contractual relationship.
The membership and eligibility criteria of a Fund is determined by the conditions of the employment contract. As such, there is nothing in law that prevents an employer from contributing to a retirement fund in respect of contract and temporary workers.
Typically an employer does not contribute toward temporary employees' pension benefits in the light of the temporary nature of their employment. As a result, the eligibility criteria are usually defined to include all full time employees under normal retirement age.
Importantly, the rules of the fund must comply with the SARS requirements for registration and approval.
In brief the SARS requirements include the following:
"The fund is a permanent fund bona fide established for the purpose of providing annuities for employees on their retirement from employment or for dependents or nominees of deceased employees or mainly for that purpose:
• The rules of the fund provide that
• Recurring annual contributions shall be in accordance with specified scales; and
• Membership shall be a condition of employment for all eligible categories of employees."
An employer-employee relationship is therefore a prerequisite. |
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| 4. Sick leave entitlement |
| Author: Karen van den Bergh |
Sick leave entitlement is based on a three-year cycle and is dependent on the number of days that an employee would normally work during a six-week period, calculated from the first day of employment. For example, if an employee works a five-day week, then six weeks would equate to 30 days and the employee would therefore be entitled to 30 days sick leave on full pay in every three-year cycle. Sick leave is not 10 days per year - sick leave is 30 days per three years.
The employer may not restrict an employee to taking only 10 days sick leave per year.
During the first six months of employment, the entitlement is 1 days paid sick leave for every 26 days worked, which amounts to approximately 1 day of sick leave in every 5 weeks. On the first working day of month number 7, the balance of the 30 days kicks in and is available to the employee.
If the employee took no sick leave during the first six months of employment, then on the first working day of month number seven that employee would have 30 days sick leave available to last him for the balance of 2 and a half years remaining in his first 3-year cycle.
If the employee took say 4 days sick leave during the first six months of employment, then on the first working day of month number seven, that employee would have 26 days sick leave available to last him for the next 2 and a half years.
This amount can be used by the employee at any time during the next 2 and a half years, or three years, as the case may be, but when it is all used up then of course the employee has no further sick leave available until the start of the next 3 year cycle.
If the employee, for example, uses up all his available sick leave in month number 8 of the cycle, then he has no sick leave left until the commencement of the next cycle.
Note, if the employee uses up all his available sick leave in month number 8, and then in month number 9 he resigns, the employer may not claim back any sick leave from that the employee. Any sick leave remaining to the credit of the employee at the end of a sick leave cycle is forfeited, and is not carried over to the next leave cycle.
Any sick leave remaining to the credit of the employee upon termination of the employment agreement by either party, is forfeited and the employee is not entitled to receive any payment for any sick leave days outstanding to the employee's credit. |
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| 5. When can a medical certificate be requested? |
| Author: Karen van den Bergh |
An employee who is off sick for more than two consecutive days (in other words, 3 days or more) is required to produce a medical certificate signed by a medical practitioner or any other person who is certified to diagnose and treat patients, and who is registered with a professional council established by an Act of Parliament.
In other words, a medical certificate signed by a clinic sister or traditional healer is not acceptable (unless they are registered). If the employee does not produce the required medical certificate as above, then the employer is entitled to treat the period of absence as unpaid leave, although the employee is entitled to request that it be taken as paid annual leave.
It is unlawful for an employer to insist that an employee produce a medical certificate for an absence on a Friday, or on a Monday, or on the Friday and the Monday, or for an absence on the day before or the day after a public holiday.
If an employee is absent on more than two occasions (even if only for one day) during the same eight-week period, then for any further absence, the employer is entitled to insist on a medical certificate, even if the absence is for only one day, and if it is not produced, then the employer is entitled to treat that absence as unpaid leave. |
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| 6. Tax treatment of tips |
| Author: Dave Beattie |
It is imperative that the facts and circumstances of the tipping arrangement be considered before deciding what the tax position is for the employer and the waitron. The reason for this is because the arrangement will determine who is beneficially entitled to the tips and whether the employer is acting as a conduit for the tips or a receiver in their own right. In the conduit approach the employer collects tips from patrons and then distributes them to the waitrons. This can take the form of tip payments that are specifically due to them as individuals, or according to a pre-agreed formula where the gross tips are divided between waitrons and other restaurant staff.
Alternatively, the employer may not act as a conduit. The tips may be received by the employer personally, with full authority to decide on the portion of the tipping pool which will be distributed to employees and the amount that a particular employee will receive. The employer may also agree in advance that employees will receive a higher hourly wage rate and that all tips will accrue to the employer.
In the case where the employer acts as a conduit they have no controlling authority in relation to the payment of or the amount of the tip, and there is no responsibility or obligation on the employer to manage the tip in the best interests of the recipients. The owner is merely holding the funds for the recipient and performing a distribution role for the patron. Accordingly, in these circumstances the employer would not constitute an 'employer' as defined for the purposes of Employees Tax. PAYE would therefore not be deducted.
In the situation where the owner receives the tip for his own benefit and subsequently decides to pay the recipient a tip in his own capacity as employer, the position is different. When paying the recipient the tip the employer is acting as a principal because he is acting in his own capacity and has exercised his own controlling authority in deciding firstly to pay the recipient a tip, and secondly in deciding on the amount of the tip. Accordingly, in these circumstances, the employer would constitute an 'employer' as defined for Employees Tax purposes and PAYE would need to be deducted.
It is important to note that in cases where the waitron receives a tip directly from a patron or from the employer where they are acting as a conduit for the distribution of the tips, these tips must be included in the recipient's 'gross income'. This means that the onus is on waitrons and other restaurant employees to declare the total amount of tips received to SARS when completing their annual tax returns. |
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| 7. Contact HRTorQue |
Head Office (Durban)
Phone: 031 564 1155 • Email: [email protected] • Website: www.hrtorque.co.za
Address: 163 Umhlanga Rocks Drive, Durban North, KwaZulu-Natal
Johannesburg Office
Ground Floor, West Wing, 6 Kikuyu Road, Sunninghill, 2191 |
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