Payroll and Employee Tax

Payroll and Employee Tax

To be a truly world class, long surviving payroll department, you had better have a fantastic understanding of all the elements that effect the employees net pay. The biggest of these is the tax deduction. You will be abused and sworn at if the employee is incorrectly taxed and has to pay in or pay off additional amounts to the Receiver of Revenue.

5 ways to make sure we tax our employees correctly:

1. Start with pro forma payslip
   When the new employee start work at your company, print a pro forma payslip that details what is being paid and what is being deducted. The net pay should be highlighted and the new employee should sign that he accepts this as correct. This gives you a chance to spend time explaining the payslip to the employee and spotting any errors that may have been made
2. The correct earnings and deductions codes must be used
   We all know that each earning and deduction has an IRP 5 code. The receiver will assess the employee based on those codes. Make sure your codes are correct or the wrong assessment can be had. Some payroll software programs have the codes automatically linked.
3. Car allowances, company cars and subsistence allowances and cell phone allowances
   Ah yes my favourite. Forever an issue. Make sure that you understand this legislation and that the employee clearly understands what is required. Get him/her to sign the pro-forma payslip that shows the car allowance or subsistence allowance as well the company policy that clearly spells out the responsibilities of the employer and the employee. If you are unsure, then ask someone you can trust.
4. Medical aid
   Make sure we have the right dependent entered onto the system and new borns are added.
5. Trust in your payroll software
   Make sure you are using trusted payroll software. Excel is great for spreadsheets but not ideal for payroll. Your payroll should be processed on a professional system. The cost of not doing so could be a lot higher than you think.