Company sponsored bursaries

Educational bursaries for your employees and their children

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Author: Ian Hurst — Managing Director, Paymaster Business Solutions

In these tough economic times, where affordable education is out of reach for a growing number of people, your company could make a meaningful contribution by offering bursaries to your employees (and their children). You can directly uplift them this way. A maximum of R20 000 per employee may be off-set as a tax-free benefit to them. In South Africa, a company may contribute R20 000 per year to their employee’s children too.

NOTE: a bursary is money paid by the company, to a recognised educational institution, on behalf of its employees and/or their children. Usually, this is intended for employees who cannot afford to pay the fees required by the academic institution.

Rules for granting a company-sponsored bursary

Bursaries article illustration

  1. In the bursary agreement, there must be a clause that states should the employee (or their child) fail to complete their studies, or fail the exams, the money will be paid back to the company, by the employee.
  2. Employees that earn less than R600 000 per year are eligible to receive a bursary.
  3. For Grades R – 12 or NQF levels 1-4, the bursary may not exceed R20 000.
  4. For NQF levels 5-10 ( this includes a university education) the bursary may not exceed R60 000.

PLEASE NOTE: In -house training (or on-the-job training) run by the company should be offered FREE of charge, and be NOT funded by the employee. Examples of these courses are;

  • computer courses
  • management and administration courses
  • bookkeeping courses
  • sales courses
  • language courses
  • courses on use of technical equipment
NOTE: where the bona-fide bursary does not qualify for tax exemption, the full bursary amount must be processed as a fully taxable benefit. For example;

Details:

  1. A low-interest or interest-free loan granted by the employer is not a bursary. Such educational financial assistance remains a low-or interest-free loan.
  2. Where the employee is not required to repay the loan, it is considered a taxable benefit. Therefore, employee tax must be deducted and the benefit processed as a PAYE annual payment.
  3. If an employer chooses to reward an employee for obtaining a qualification, it will be considered a taxable remuneration. However, if the company reimburses them for study expenses incurred, it is considered a bursary, of which R20 000 is not taxable.
  4. Only the taxable portion of a bursary paid to an employee (or their child), is subject to the deduction of employee tax.
  5. A bursary to be repaid by the employee because of non-fulfillment of stipulated conditions, is considered a bona fide bursary until the non-fulfillment conditions of the agreement are invoked.

Child educationExample

An employer grants a bursary of R24,000 to each of the employee’s two children — intended for their school education. The employee earns an annual salary of R390,000, a bonus of R18,000 and a housing subsidy of R8,000. The employer does not operate a bursary scheme that is open to the general public.

1. Although the employee’s remuneration does not exceed R600,000 per annum, the bursaries are paid in consequence of services rendered by him.

2. The bursaries of R24,000 each exceed the tax-exemption limit of R20,000 per individual. However, only the additional portion (i.e. R4,000 x2) is deemed taxable: in other words, only R8,000 (R48,000 minus R40,000) will be taxed.

However, if the employee’s remuneration exceeds R600,000 per annum, then the full amount of both bursaries (R48,000) will be taxable.

Paymaster recommendation: reconsider your company bursary policy and employee contracts.

GraduationBased on the above points, if you view your company as a progressive employer, consider offering a bursary scheme to your well-deserving staff ( and their children). This will facilitate their access to education they might otherwise never be able to afford.

And relook, and amend, the cost-to-company packages and employment contracts of employees who earn less than R600 000 per year.

Education is an investment into the future. Facilitating access to education for your employees and their children, will foster loyalty to the company, employee well-being and develop your human capital.

Email our helpdesk for more information. We will be happy to assist with any further inquiries that you might have.

References:

[1] http://www.saqa.org.za/docs/brochures/2015/updated%20nqf%20levevl%20descriptors.pdf

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Hrmaster Hats Series

Hat 7- The Payroll Professional as Counsellor

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Payroll administrators handle private, often very sensitive information. For this reason they are usually trusted by the staff of the company. They like to share their serious concerns, and trust us to give wise advice. Sometimes listening is enough. Or we will explain to them what the company policy is, and let them make up their own minds. Other times, when we give them advice , they go away knowing that we have their best interests at heart. We care. We want them to make the right decision. This is one of the roles of a Payroll professional.

Human Resources

On the financial side we might be asked questions like:

  1. What should my travel allowance be?
  2. What about medical aid?
  3. What plan should I choose?
  4. Pension fund decisions are made with advice from the Payroll administrators.
  5. We give advice on budgeting and how to balance a budget.
  6. We give advice on how to deal with garnishee orders.
  7. Advice when the Receiver of Revenue comes knocking? (ITA88 certificate)

Automated payroll

The Payroll professional really is a font of financial information.

So what do you need to know about giving finical advice?

A word of warning:

“To give financial planning advice you need to be a registered financial planner. To give tax planning advice you need to be a registered practitioner.” So please be aware of the regulations, and make sure that you cannot be accused of overstepping the mark. It is good to be helpful, but do so within the boundaries.

In the same way, as we listen to people asking for advice on dealing with garnishee orders, ITA88 certificates, or input on financial issues, make sure you deal with it from a base of Payroll knowledge.

 

5 steps to counselling an employee

  1. Listen carefully to what the employee is saying.
    • Take notes. Show that you are listening by maintaining eye contact, taking notes and above all clarifying your understanding of what is being asked.  Try and separate the facts from opinion. Do not be influenced by emotion.

businessman assessing colleague

  1. Summarise the issue/issues to check your understanding.
    • Briefly summarise the facts and if possible, list the questions or issues that need to be addressed. It is important to reach an agreement that we are all on the same page.
  1. Research the regulations/company policy or the laws of the land.
    • Now present the regulations, company policy or laws that govern the situation. If you know them and have them at hand, do it then. If you don’t, end the meeting and set up another time to continue. It is very important as payroll to base any advice you give on a firm foundation of facts.
  1. Give the employee feedback.
    • Show the employee the feedback and make sure that they understand it and are aware of the foundation that you are basing it on. Clearly explain your recommendations and why you believe the employee should take that route.
  1. Check the employees understanding.
    • Make sure the employee clearly understands what you have told him. We want to avoid the  “I said, you said” situation at all costs. This will seriously impact your credibility.

In all of this, please remember that any advice you give must be defensible when tested, either by management or by another third party. Make sure you keep notes of the interaction – just in case.

Paymaster Payroll software has a section to keep notes on each interaction. You can then upload any supporting documents to the employee’s profile. In this way you, the employee and management, have access to the interaction via the online Payroll platform.

Coming next… Hat 8: The Payroll Professional as Problem Solver