October 2012
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HRTorQue REPORTER

Table of Contents

1. Closing for the Festive Season
2. Skills Development
3. Projected General Staff Increases for 2013
4. SARS Access to Third Party Information
5. Independent Contractors who Pay PAYE may be Excluded from UIF
6. Interesting Challenge - UIF Contributor Definition
7. New UIF Increase from 1 October!
8. BEE
9. Payment / Encashment of Additional Leave Benefits that Accrue
10. Taxing Employees Not in Standard Employment
11. Contact the HRTorQue Team

1. Closing for the Festive Season

As 2012 draws to a close, we'd like to thank you for your ongoing support during this challenging but very rewarding year! Melany, Karen and the whole team at HRTorQue would like to wish you a wonderfully relaxing holiday and an exciting 2013.
 
Please note that HRTorQue will close for the festive season on
21 December 2012 and will return to work on 7 January 2013.

 
Please contact Karen or Melany for urgent matters during this period:
Payroll: Karen van den Berg - 082 8911 722
Labour Relations: Melany Bydawell - 083 441 5618
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2. Skills Development

Author: Melany Bydawell

Would you like an independent assessment at no cost?


Aside from the monetary aspects, one of the major purposes of submitting a Workplace Skills Plan is to reflect the training/workshops that you have planned for the ensuing period. Ideally, this training should be planned with the intention to develop your employees' technical and other skills to enhance their individual performance and overall contribution to the organisation as a whole.

In our experience we discover that in many instances this process is not done objectively and employees are either given a list of training programmes/workshops to select from or the organisation makes a random assessment at what is required.

In an effort to assist you objectively for the 2013 Workplace Skills Plan and Annual Training Report submission we are offering you a free assessment of your existing HR practices around this topic.

If you would like our input please mail an example of the following documents that you are presently using to [email protected]:
1. Job Profile / Description
2. Appraisal Document
3. Individual Development Plan (this may already be included in the Appraisal Document)
4. Skills and self development analysis document

3. Projected General Staff Increases for 2013

Author: Melany Bydawell
The Bureau for Economic research reported that the outlook for SA GDP growth deteriorated over the past three months. The political uncertainty, decline on consumer demand and the recent strikes, will have a significant adverse impact on growth in the second half of this year. Added to this, recent economic indicators suggest that the global economy also remains fragile.

CPI is projected to average 6,0% in 2012 and 5,5% in 2013.

According to Andrew Levy Employment publications, the overall wage settlement rate in collective bargaining agreements amounted to 7,7 per cent in the first half of 2012, while the public sector settled on an increase of 7,0 per cent. However, there is a risk that the recent wage settlements in the mining and transport sectors could pose upward pressure on wages generally. Predicted average salary increases for the general sector range between 6.7% and 8.5% for 2013 however as stated above, the market is so volatile with the impact of recent strike action and wage settlements that this picture may change.

Salary increases projections for 2013 at this early stage, seem to suggest that 8% may be considered a reasonable estimation for budget purposes at this point in time.

Sources: Nedbank, Economics, October 2012; Statistics South Africa

4. SARS Access to Third Party Information

Author: David Beattie
Government Gazette Number 35090, issued on 29 February 2012, has fundamentally changed the access that SARS has to every person's bank account information. For many years tax advisors have been plagued by the question from clients not wanting to heed sound tax advice by saying "yes, I hear you, but how will SARS know?". The answer is now simple, the bank, including Postbank and companies listed on the JSE are required to send detailed returns on a 6 monthly basis to SARS.

These returns must disclose for all persons identity particulars and tax reference numbers, the closing balances of the accounts at the end of the relevant 6 month period, any interest amounts received or accrued by the persons from the "reporting institutions" and interestingly, monthly totals of all debits and credits to the accounts.

Contact [email protected] who is a registered tax practitioner, if you have any tax concerns.

5. Independent Contractors who Pay PAYE may be Excluded from UIF

Author: Karen van den Bergh
Independent contractors earn income for the services that they render, and SARS made changes to the Fourth Schedule of the Income Tax Act in 2000 to bring these individuals into the PAYE net if certain criteria are satisfied. To protect the fiscus as far as possible, labour law Independent contractors are not automatically excluded from being employees by tax law.

It is important to note that a labour law independent contractor who is deemed to be an employee for PAYE purposes, is still excluded from UIF by virtue of being independent in terms of labour law, which provides the same principles of the definition of employee for UIF purposes. An individual who is on the payroll as a deemed employee for PAYE purposes, could be excluded from UIF because of his status as a labour law independent contractor.

If you require a consultation to ensure that you are compliant in this regard, please contact [email protected].

6. Interesting Challenge - UIF Contributor Definition

Author: Karen van den Bergh
The Unemployment Insurance Contributions Act excludes employees who are employed by an employer for less than 24 hours a month, as well as a number of other employees. This exclusion is consistent with both International Labour Organisation principals and with our own BCEA and LRA provisions.

However some points of interest (and difficulty) arise from this exclusion, if you run a weekly or fortnightly payroll. If the employee is employed for less than 24 hours in the first week or fortnight of the month, then legally speaking the payroll may not withhold a pro-rate contribution amount from the employer and the employee. If the employee exceeds 24 hours in the remaining periods of the month a 'catch-up' contribution amount must then be withheld. Weekly payslips with varying UIF contribution amounts are issued, and this causes queries at the pay office.

In years past, verbal rulings have been given by the Fund to say that if contributions are made by employees who are employed for less than 24 hours per month and a benefit is applied for at a later stage, the benefit claim will be honoured and paid. While this is a verbal ruling, in my opinion it can be relied upon because there is nothing in the declaration that tells the UIF authorities that the individual was employed for less than 24 hours per month. Therefore, there is no basis for them to refuse the benefit claim which in any event will probably be for a small amount.

For this and other payroll challenges and queries contact [email protected].

7. New UIF Increase from 1 October!

Author: Melany Bydawell

How does this affect an employee?


South Africa has increased the Unemployment Insurance Fund Limit as from 1 October 2012. The new limit is R14 872.00 per month or R178 464.00 per annum. The old limit was R12 478.00 per month or R149 736.00. This means that employees earning R14 872.00 or more per month will now contribute R148.72 per month towards UIF and the employer will contribute the same.

Previously if someone were unemployed, they would receive 38% of their monthly salary, up to a maximum of R4 741.64 per month, for eight months. With the increase to the limit, a person would now receive a maximum of R5 651.36 a month, for eight months. This means an increase of R900 per month.

The calculation above is based on the number of 'credit days' that an employee has accumulated in four years. Employees have to work six days to receive one credit day and must accumulate 238 credit days (34 weeks) to receive the full benefit. This means that for every six days that an employee works, he/she can claim one day's pay if he/she becomes unemployed.

8. BEE

Author: Tony Kruger
The Department of Trade and Industry (DTI) on 02/10/12 opened a 60-day period for comment on the revised Broad-based Black Economic Empowerment (B-BBEE) Codes of Good Practice. Some of the preliminary information that was presented at the launch of these Draft Codes is as follows:

1. THRESHOLDS
The annual revenue thresholds to be measured as an Exempted Micro Enterprise (EME), or as a Qualifying Small Enterprise (QSE) have been adjusted:
•  EME's increasing from R5 million to R10 million
•  QSE's increasing from between R5 million and R35 million, to R10 million and R50 million

2. SCORECARD ELEMENTS REDUCED FROM 7 TO 5
The current generic scorecard contains seven elements and these have been reduced to five, with a total of 105 points assigned to the five elements.
NB: All companies, except EME's, are to comply with all the elements of the scorecard.

3. SOME SPECIFICS
Below are some challenges companies may have to address if these Draft Codes are gazetted unchanged:
•   Ownership:
This element is given greater recognition - points increase from 20 to 25.
Management Control (includes the old Management and Employment Equity):
Less points, 15 now, whereas previously the 2 elements were worth 25 points together. Also, the sub-category 'Junior Management' measured under Employment Equity previously, has been removed and only 2 levels, senior and middle management, are now to be measured.
Skills Development:
Still worth 20 points, but 5 bonus points can now also be scored. There is greater recognition for implementing Learnerships and Apprenticeships, i.e., a total of 8 out of the 20 points, and the 5 bonus points for "Learner Absorption" (presumably for employing them at the end of the learnership period).
Enterprise and Supplier Development (includes the old Preferential Procurement and Enterprise Development elements):
Together worth 40 points (previously 35). Significantly, 13 of the 25 points allocated to procurement are for buying from Black/Black women owned suppliers. Perhaps more importantly, recognition will only be for procurement from value-adding suppliers (i.e., to obtain value-added status, the sum of total labour costs together with net profit before tax must exceed 25% of total revenue). In addition, up to 6 bonus points can be obtained new venture and job creation.
Socio-economic Development:
Still worth 5 points on the Scorecard. There appears to be a shift towards emphasising training and mentoring persons to improve their capacity to work and for self-employment. Once we have the full draft Codes, we will elaborate on this.
For assistance with your BEE requirements please contact Melany Bydawell: [email protected].

9. Payment / Encashment of Additional Leave Benefits that Accrue

Author: David Beattie
We have recently become aware of an interesting ruling impacting on the tax treatment of leave pay on retirement or retrenchment.

When employees are retrenched or retire and there is leave pay owning, it is traditionally added to the amount that is sent to SARS for inclusion in the tax directive. If, however, any of the leave that was granted to the employee was in excess of what the employee was entitled to receive according to Basic Conditions of Employment, and that leave was allowed to be accumulated and paid out, this encashment is fully taxable and cannot be included in the amount sent to SARS when applying for a tax directive.

As an example, according to the Basic Conditions of Employment, a 5 day worker is entitled to 1 days leave for every 17 worked or 15 working days per annum. In terms of this ruling, if the employee is entitled to more than 15 days leave and is allowed to accrue those days and be paid those days, the value of this leave would not qualify to be included in the tax free portion for tax directive purposes. It will need to be fully taxed as is the notice pay.

10. Taxing Employees Not in Standard Employment

Author: Karen van den Bergh
We know that employees in standard employment must be taxed by reference to the tax tables or the official rates of tax. Those not in standard employment must be taxed at a flat rate of 25%, unless they are in possession of a tax directive. The tax so deducted must be classified as PAYE, not SITE. As such, casual employees must be taxed at 25%, which seems most unfair. Theoretically, they should submit a tax return to SARS at the end of the tax year, because they have had PAYE deducted from their remuneration. They would then almost certainly receive a refund of the tax they have had deducted, as their total earnings for the tax year would probably be below the tax threshold.

In practice, however, many such employees will be semi-literate at best, and certainly not aware of tax law. They will not submit returns to SARS and will therefore receive no refund.

The 2013 issue of the Guide for Employers in respect of Employee's Tax issued by SARS sets out some rules to be obeyed in taxing casual employees, which serve to modify the harshness of this situation. Paragraph 14.1 DEEMED STANDARD AND NON-STANDARD EMPLOYMENT sets out the following rule to be applied:

Where an employee does not fall within the definition of standard employment, and employee will be deemed to be in standard employment if:
•   The employee (including scholars and students) is required to work for less than 22 hours a week and the employee furnishes a written declaration that he/she will not render services to any other employer, for the period that employment is held; or
The employee works at least 5 hours a day and receives less than R261 per day
Under the sub-heading Employee's tax in the same paragraph, the following further rules are given:
•   Employee is not in standard employment and works at least 5 hours per day and earns less than R261 for that day - no tax to be deducted.
Employee is required to work at least 22 hours a week and is in standard employment - deduction tables.
Employee is not in standard employment and works less than 5 hours a day and earns less than R261 for that day - 25% deduction.
Employee is not in standard employment and works at least 5 hours a day and earns more than R261 for that day - 25% deduction.
The R261 per day is the tax threshold for the 2012 tax year and should change from year to year, but has not been changed for the 2013 tax year.

If an employee has a tax directive from SARS, his remuneration must be taxed in accordance with the instructions contained in the directive. These will normally be such as to cause less tax to be deducted than would result from a normal tax calculation.

11. 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 Dr, Durban North
 
FB
 
Sales
Melany Bydawell: 031 582 7425 / 083 441 5618
[email protected]

Payroll & HR Administration
Karen van den Bergh: 031 582 7413 / 082 891 1722
[email protected]

Human Resources / Employee Relations
Melany Bydawell: 031 582 7425 / 083 441 5618
[email protected]
 
Employment Equity & Skills Development
Melany Bydawell: 031 582 7425
[email protected]
Nicky Hardwick: 031 582 7418
[email protected]
 
Tax
Dave Beattie: 031 582 7410
[email protected]

Executive Coach and Team Interventions
Iole Matthews
 
Payroll Third Party Administrator

Kacey Chetty: 031 582 7409
[email protected]
 
Accounts
Cheryl Naidoo: 031 582 7408
[email protected]

Dispatch
Karl van der Merwe: 031 582 7407
[email protected]