Author: Karen van den Bergh
When it comes to payroll, retirement funds and employee benefits are often seen as “just another deduction”. In reality, they are one of the highest-risk and most important areas of payroll, both for employers and employees.
If these benefits are not set up and reported correctly from the start, the consequences can surface years later, often when an employee retires, resigns, or when SARS performs an audit.
Here, we explain why accuracy matters, what commonly goes wrong, and how we can help.
Payroll Is the source of truth
Your payroll system is the source of truth for:
- What is deducted from employees
- What the employer contributes
- What is paid over to benefit providers
- What is reported to SARS on the IRP5
If payroll is set up incorrectly, everything that flows from it will be incorrect, even if payments are being made on time.
Why IRP5 accuracy Is critical
The IRP5 isn’t just a tax certificate, it’s the record SARS uses to determine whether contributions were correctly taxed or exempt, whether deductions were allowed, and whether future benefits should be taxed or are tax-free.
If retirement or benefit contributions are reflected incorrectly on the IRP5, employees may lose legitimate tax benefits, SARS may disallow deductions, employers may face penalties, interest, and audit queries, and discrepancies may arise years later that are extremely difficult to correct.
Alignment with benefit fund certificates Is essential
Retirement funds and benefit providers also submit information directly to SARS. This means payroll data, IRP5 certificates, and fund submission certificates must all align.
If payroll and fund reporting do not match, SARS sees a discrepancy, queries or audits are triggered, and employees are caught in the middle – often at retirement or withdrawal stage.
Once these mismatches exist, resolving them can take months, sometimes years.
Approved vs unapproved funds: Why this matters
Not all funds are treated the same for tax purposes. Understanding whether a fund is approved or unapproved affects how contributions are taxed today, whether deductions are allowed, and how benefits are taxed when paid out in the future.
If this is misunderstood or set up incorrectly, employees may pay more tax than they should or unintentionally create future tax liabilities, and benefits that should be protected become taxable. These issues often only surface long after the payroll administrator or HR manager has moved on, but the impact remains.
The long-term impact on employees
For employees, payroll errors around benefits can mean reduced retirement savings, unexpected tax bills, delays in accessing benefits, and loss of trust in their employer. These are not “admin issues” – they affect people’s financial security.
Managing risk for the business
For employers, incorrect benefit setup creates compliance risk, financial exposure, audit findings, reputational damage, and employee dissatisfaction. Most of these risks are entirely preventable with the right expertise.
How we can help
At HRTorQue, we specialise in:
- Correct payroll setup of retirement and benefit funds
- Ensuring accurate deductions and employer contributions
- Verifying alignment between payroll, benefit providers, and IRP5 reporting
- Managing ongoing compliance and reducing audit risk
- Protecting both the business and its employees
We understand that HR and payroll teams are busy – and that these rules are complex. So, if you’re unsure whether your payroll and benefit setup is correct – or if you simply want peace of mind – we’re here to manage the complexity, reduce the risk, and ensure your payroll works for everyone involved.
Because getting this right from the start is far easier than fixing it later. Email us for more information.