Non-compliance with labour and tax legislation/regulations (such as paying employees correctly and on time after calculating statutory contributions/deductions) might have a financial impact, for example, paying penalties and interest. It can even impact staff morale which can adversely affect your organisation’s productivity. Moreover, it’s an area receiving greater attention from authorities such as the South African Revenue Service (SARS) and the National Prosecuting Authority (NPA), who joined forces to combat non-compliance with tax laws, including PAYE.
I’ve put together a series of tips to make sure you’re always on top of payroll compliance:
Ensure employee info is up to date
An accurate payroll depends on error-free employee records. Ensure details like contact information, addresses, new benefits, salary increases, and promotions are updated as they change. Certain fixed and financial information is submitted to SARS twice a year.
You can use employee self-service tools to let employees update their details, beneficiaries, apply for leave, file expense claims, and more, which removes a plethora of admin away from the HR and payroll teams.
Take care around compulsory employee benefits/contributions
Every business offers a selection of benefits to employees regarding paid leave, contributions towards retirement funds, medical aids, and making certain statutory payments. It is essential to know what is required by legislation and the additional non-compulsory benefits provided to employees.
You don’t have to contribute towards a retirement fund or medical aid unless specified in a regulating measure for that industry or agreed upon in the employment contract. However, you are required by law to contribute towards the Unemployment Insurance Fund (UIF). Two percent of the employee’s remuneration (subject to UIF) is payable every month – one percent is contributed by the employer and the other one percent by the employee.
Other legally required contributions include the Skills Development Levy (SDL) and payments to cover Compensation for Occupational Injuries and Diseases (COID). These contributions/payments are paid by the employer, not the employee.
There are, however, certain exclusions from these statutory contributions.
A solid audit trail should be a feature of your payroll software. Audit trails are beneficial because they can validate any unusual payments and can track changes to a payroll. Audit trails can also be used if there is any suspicion of fraudulent activities.
In addition to the audit trail, reports indicating variances from previous periods will highlight unusual changes made, which can be investigated further, especially if no changes were expected.
Get up to speed with payroll legislation
Payroll legislation is complex and changes regularly. You can keep track by watching webinars, attending industry conferences and seminars. Be careful, though, when joining social media groups to get advice about staying compliant. Instead, speak to industry experts and find out about payroll procedural changes that might affect your business.
To make things easier, consider using a payroll software provider that offers updates and advice about legislation changes. You can also visit the SARS website to find guides for employers, important notices, and interpretation notes. Talk to your accountant/tax practitioner, as they will have a clear understanding of payroll compliance and can help with any relevant changes or updates.
Payroll compliance can be more complex if your company is a multinational, as every country has its own rules and regulations regarding salaries, deductions, payments, and reporting. Make sure you understand international legislation to remain well-informed.
Don’t miss deadlines
There are penalties for companies that submit information late. Remember, when dealing with payroll compliance, you’re not just paying salaries. It would be best if you also considered things like:
- Employer reconciliation submission deadlines (e.g., EMP501),
- Other statutory reporting deadlines (e.g., EMP201’s, UIF monthly declarations, and the Compensation Fund return of earnings) and;
- Payment deadlines.
It’s critical to keep ahead of important dates to give yourself enough time to get things done. One way to do this is by creating a calendar to highlight important dates, including submission deadlines and when payments are due. Doing this will ensure nothing is missed, and you’re always on time. Employees will also know exactly when they’re getting paid, and your team will be able to carry out payroll tasks efficiently.
No excuse for non-compliance
SARS, other government departments, and regulatory bodies will not accept ignorance as an excuse for non-compliance. Each business owner is responsible for ensuring they meet their legal and regulatory obligations. Ask for help and support when you need it. Stay up to date with all legislation changes, ask questions, attend training and webinars, and you’ll always remain ahead of the game.
Yolandi Esterhuizen is a Registered Tax Practitioner & Director: Product Compliance, Sage Africa & Middle East.