Hrmaster Hats Series

Hat 1- The payroll administrator as implementer of Legislation

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The Payroll Professional is driven by Legislation.

Accountable Payroll professionals do nothing unless it is prescribed by LAW. Based on Legislative prescriptions, they will calculate basic pay, overtime and sick leave. Everything they do should be guided by legislation.

Increasing Automation

As the world increases its’ reliance on Automation Software, it is touted as the solution to all our problems. And this is largely true. Modern Payroll Software programs “hard code” what legislation requires. Such as tax deductions tables and many other statutory deductions.

BUT…Exceptions!

While good software is essential to an efficient payroll department, there are exceptions where automation is unable to solve the problem. In this instance, a Payroll professional needs to interpret and implement delicate nuances embedded in legislation. For this reason, we strongly promote the skill and knowledge of the Payroll professional, who can make all the difference.
For example, when legislation requires an exception, resulting in a change to the payroll, the Payroll professional needs to check, and double check the new calculations being used. After this, they should explain the changes to their management team. They are now better prepared to implement and create earnings-and-deductions calculations. These must be in line with the most accurate interpretations of the legislation governing these calculations. Now the payroll is ready to be signed off, at the end of each month.

Conclusion

Payroll professionals are rightly held accountable for accurate interpretation and implementation of legislation relating to the employer/employee relationship.

6  Laws that Govern the Employment Relationship

In South Africa, there are 6 laws that govern the employment relationship, and more than 700 Department of Labour (DOL) inspectors that visit businesses to ensure full compliance with every aspect of these laws. When a DOL inspector arrives at a business premises, they are most likely to visit the payroll department first. Payroll administrators will be asked to produce the following records:

  1. that show the company complies with the Basic Condition of Employment Act (ie. leave days, working and lunch hours, overtime, notice pay, etc.)…
  2. that prove they comply with Industrial Council Agreements (ie. minimum wages, provident/pension funds and medical aid deductions).
  3. that the company has records of the prescribed monetary deductions for UIF, and that these deductions are submitted, on time, to the Receiver of Revenue (SARS). And not forgetting the monthly report that the DOL requires.
  4. that the company produces and keeps records of all employees’ work contracts, and that payments to all workers are accurate. The company must also produce records of required authorisations and instructions relevant to the processing of these employee salaries.
  5. that the company double checks relevant Skills Development Levy (SDL) deductions.
  6. that the company is fully compliant with all provisions of the Employment Equity Act (and that these records are kept by the Payroll department).

South African Receiver of Revenue (SARS)

In this country, SARS requires the following:

  1. All Emp201 submissions are accurately calculated and processed – ON TIME!
  2. There must be records that show the company’s bi-annual and annual submissions, that prove to SARS that they are adhering to, and implementing all relevant laws that govern tax deduction.
  3. The accurate interpretation and implementation of all laws relevant to car allowances, pension funds, medical aid tax credits, and employment tax incentives.

Payroll Professionals – the Implementors of Legislation!

The Payroll professional carries the responsibility to ensure that the payroll is set up, and managed correctly. If called upon by management, or outside organisations, they should be able to prove that their company is “legal” and complies with all aspects of SARS and other relevant employment legislation. Non-compliance CANNOT be blamed on Automation Payroll Software. The onus is on the Payroll professional to ensure that by using all their expert knowledge and experience, the payroll they manage is fully compliant with the laws of the land.

Coming next… Hat 2: Accurate keeper of records.

Garnishee Orders — Possible Legislative Changes on the Cards

by with No Comment Garnish OrdersLatest Payroll News

Spotlight On the Garnishee Order (Again!) — Possible Legislative Changes on the Cards


Speaking at a recent (3 October, 2015) two day Provincial General Council meeting at Coastlands Hotel, South Beach, KwaZulu-Natal (KZN) African National Congress (ANC) chairperson (also the KZN Premier) Senzo Mchunu, put the issue of garnishee orders (Emolument Attachment Orders, EAO’s) squarely back in the spotlight of South African labour issues. He said that garnishee orders affects policy.[i]  He alluded to the need for a review of the laws and regulations pertaining to Emolument Attachment Orders. Mchunu said that in order to address the burgeoning problem of SA’s growing consumer-debt nightmare, this proposed review is a necessary intervention, and that the government needed to help people in debt.

 

The renewed spotlight being cast upon the garnishee order system is in reaction to the spiralling debt crisis in South Africa. “There are many areas we need to look at. Like how the courts apply the law when it comes to garnishee orders” said the KZN ANC-chair. He further remarked that, “some people get garnishee orders even when they haven’t appeared in court. Sometimes money is taken without your permission, sometimes you are overcharged, sometimes there is duplication and other times once you have paid off the debt, they continue to charge you”.

 

“If we are to protect employees against what may seem to be unfair policy on garnishee orders, … then we need to look at every section of society that is affected by this policy. … We need to look at whether we have adequate policy, laws and regulations [to govern this]”, he maintained.

 

Mchunu’s statement should alert commercially oriented business enterprises to the ongoing necessity for prudent administrative and human resources management when it comes to following due process related to garnishee orders.

 

Employer administration of the garnishee order is not all that simple

As an employer, when it comes to garnishee orders, administration thereof is not all that simple to implement and manage.[ii]

 

Accordingly, in light of Mchunu’s broad national-standpoint, Ian Hurst, CEO of Paymaster Payroll, cautions employers not to lose the employee-wellbeing perspective on garnishee order ‘due process’ and administration. Hurst stresses that payroll departments “are dealing with people’s take-home pay”. As a result, in many cases, this frequently results in ‘surprise’ net “take-home pay” that shocks the employee. In many cases, these ‘surprises’ to the employee stem from EAO maladministration on the employer’s part. “This directly impacts an employee’s standard of living”, says Hurst.

 

Importantly, obligation remains with the employer to deduct stipulated monies and duly pay it over too the lawyer or collections agency.  Hurst advises payroll and HR departments to ensure that they comply with all aspects of the prescribed legislation pertaining to EAO’s.

 

“One way of assisting staff”, says Hurst, “… is to take a necessary compassionate approach towards the plight of the employee”. He suggests that payroll administrators can act as ‘soft’ (i.e. unofficial) financial counsellors to their staff[iii] by “encouraging the affected employee—having difficulty with an EAO—to go for debt counselling.”

Garnishee order issues are wide-ranging and complex

A short survey of recent media reports reveals solid evidence of the wide-ranging complexity that lies behind the implementation and management of EAO’s. These include liability for maladministration to garnishee order fraud, validity and invalidity of certain garnishee orders, to apparent flaws in the current garnishee order system. For a prominent recent case worthy of reminder, is to refer the reader to Wendy Appelbaum’s landmark judgement against illegally obtained EAO’s. These particular illegal garnishee orders were the work of embattled law firm Flemix & Associates, made on behalf of various microlenders.

 

A notable learning to be gained from the Appelbaum judgement serves as a warning to companies to “clear their payrolls of illegal deductions”.[iv] Seemingly, the trend is that debtors’ collective fight against the garnishee order system, in order to get rid of the “surprise garnishee order”, is a key issue that remains of importance to the ANC-led government.

 

Companies should be mindful of court judgements that are made in respect of EOA’s, by frequently scanning the media (ed.: and Specialist Company-blogs like this) for reports on these judgements. Precedents being set in these judgements may have a decided impact upon the manner in which new policy takes form in the future.

 

 

Industry expert — insights

Zak King, editor at Debtfree DIGI offers valuable insights[v] as to how current EAO-related legislation might change. “We may see increased judicial oversight, meaning that a judge or magistrate will have to consider each case, particularly if the debtor can afford the garnishee order. We hopefully will see greater enforcement of NCA Section 103(5), commonly called induplum.”[vi]

 

King advises that, should anticipated future change indeed be made to current EOA-related legislation, then HR and Payroll departments, and accountable management at all levels could be expected to remain alert, proactive and observant of ongoing EAO occurrences in the industry. An example of this, suggests King, is to factor in the tracking of the amount paid versus the Section 103(5) double-up limit so, as to prevent an overpayment. King said one thing was certain: that likely future changes to EOA-related legislation, in all probability, will spell out “more work” for the employer.

 

Therefore, it’s best for employers to remain on their toes by being proactive when it comes to the meticulous implementation and management of the garnishee order process. Prevention is better than cure! To save workers from surprise financial distress, it may be wise to consider building administrative checks and balances into the organisation’s relevant ‘admin’ processes. King suggests that, “since section 103(5) applies—regardless of other regulations or legislation—perhaps a note should be made of the original debt amount when a garnishee order (EAO) is received.” Thereafter, “a quick calculation-run could be made on exactly when the garnishee payment should reach the induplum[vii] (i.e. the basic double-up figure).”

 

Lastly, when closing the case on each garnishee order, King suggests that thorough enquiries first be made in order to ensure that the EAO is removed before closing the file on that particular garnishee order.

[i] Amanda Khoza, “ANC’s Mchunu Says SA Is Drowning in Debt,” News24, accessed October 5, 2015, http://m.news24.com/news24/SouthAfrica/News/ANCs-Mchunu-says-SA-is-drowning-in-debt-20151003.

[ii] Ian Hurst, “Why Is a Garnishee Order so Complicated & What Must You Check in This Order? – Hr Pulse,” Professional – Human Resources, HR Pulse, accessed October 5, 2015, http://www.hrpulse.co.za/employee-management/change-management/230287-why-is-a-garnishee-order-so-complicated-a-what-must-you-must-check-in-this-order.

[iii] “Payroll Administrators as Financial Counsellors,” Corporate website, Paymaster Payroll Solutions, accessed October 7, 2015, http://paymaster.co.za/financial-counselling/payroll-administrators-as-financial-counsellors/.

[iv] “Landmark Judgement Is Not End of Garnishee War,” Fin24, accessed October 5, 2015, http://www.fin24.com/City-Press/Landmark-judgement-is-not-end-of-garnishee-war-20150712.

[v] Zak King, Email Interview — Growing Consumer Debt, and Garnishee Orders Back in the National SA Labour Spotlight, interview by Adrian Baillie-Stewart, Email, October 7, 2015.

[vi] The common law in duplum rule holds that “interest stops running when the unpaid interest equals the outstanding capital.” — In Duplum Interest and the National Credit Act | Bentley Credit Management,” accessed October 15, 2015, http://www.creditmanagement.co.za/in-duplum-interest-and-the-national-credit-act/.

[vii] Ibid.

ENDNOTES and SOURCES

[1] Amanda Khoza, “ANC’s Mchunu Says SA Is Drowning in Debt,” News24, accessed October 5, 2015, http://m.news24.com/news24/SouthAfrica/News/ANCs-Mchunu-says-SA-is-drowning-in-debt-20151003.

[1] Ian Hurst, “Why Is a Garnishee Order so Complicated & What Must You Check in This Order? – Hr Pulse,” Professional – Human Resources, HR Pulse, accessed October 5, 2015, http://www.hrpulse.co.za/employee-management/change-management/230287-why-is-a-garnishee-order-so-complicated-a-what-must-you-must-check-in-this-order.

[1] “Payroll Administrators as Financial Counsellors,” Corporate website, Paymaster Payroll Solutions, accessed October 7, 2015, http://paymaster.co.za/financial-counselling/payroll-administrators-as-financial-counsellors/.

[1] “Landmark Judgement Is Not End of Garnishee War,” Fin24, accessed October 5, 2015, http://www.fin24.com/City-Press/Landmark-judgement-is-not-end-of-garnishee-war-20150712.

[1] Zak King, Email Interview — Growing Consumer Debt, and Garnishee Orders Back in the National SA Labour Spotlight, interview by Adrian Baillie-Stewart, Email, October 7, 2015.

[1] The common law in duplum rule holds that “interest stops running when the unpaid interest equals the outstanding capital.” — In Duplum Interest and the National Credit Act | Bentley Credit Management,” accessed October 15, 2015, http://www.creditmanagement.co.za/in-duplum-interest-and-the-national-credit-act/.

[1] Ibid.

LABOUR LAW : EMPLOYEES MUST PUT EMPLOYER’S INTERESTS FIRST

by with No Comment department of labour

South African labour law gives employees a plethora of rights against the employer. So much so that many employers wonder whether the resultant burden on them makes it worth continuing to run the business. For example, employees have, amongst others, the right to:

•    Join trade unions
•    Go on strike
•    Procedural fairness at disciplinary hearings
•    A fair reason for dismissal

•    Protection form unfair demotions
•    Be promoted under certain circumstances
•    Minimum wages in many cases
•    Sick leave, holiday leave, maternity leave and compassionate leave
•    Overtime pay
•    Consistent treatment
•    Protection from unfair discrimination
•    Representation at CCMA by a trade union representative

On the other hand labour legislation gives employers few rights; and those that they do have are very restricted. That is, employers may exercise limited rights as long as, in doing so, they do not infringe the numerous rights given to employees.

However, one area that employers can exercise their rights is that of fiduciary duty. This means that the employee has, in certain ways, the duty to put the employer’s interests first. This does not mean that the employee must, as a way of benefiting the employer, forfeit his/her rights to leave, legal working hours or fair discipline. It does mean that the employee may not advantage himself/herself unfairly at the expense of the employer.

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Specifically, this means that the employee may not:

•    Place him/herself in a position where his/her interests conflict with those of the employer
•    Make a secret profit at the expense of the employer
•    Receive a bribe or commission from a third party
•    Misuse the employer’s trade secrets
•    Give a third party the employer’s confidential information.

While this principle applies generally to employees it applies more strongly to senior employees. In deciding on the extent of fiduciary duty that an employee has the courts consider a number of factors including:

•    The degree of freedom that the employee has to exercise discretion in making and executing business decisions
•    The opportunity for the employee to exercise this discretion in his/her own interests
•    The extent to which the specific circumstances open the employer to abuse of the employee’s discretion
•    The extent to which the employer relies on the employee for expertise and judgement in conducting the business
•    The extent to which the employee is in a position of trust.

Clearly, the more junior the employee the less these fiduciary factors are likely to prevail. That is, with some exceptions, junior employees normally do not have the right or duty to make crucial business decisions or the opportunity to misuse decision-making power.

The line between who is a senior employee and who is not and the line between who is in a position of trust and who is not are blurred. Whether, for example, a junior salesperson is in a position of trust or not depends on the specific circumstances of each case. Therefore, in order to protect itself from employees acting against the employer’s interests every employer should:

•    Build in checks and balances that prevent the abuse of power
•    Inform all employees of their fiduciary duties in relation to their positions of trust
•    Make sure employees at all levels know the seriousness of breach of their fiduciary duties
•    Take swift, fair and consistent action against employees who breach their fiduciary duties
•    Obtain expert legal advice before acting against suspects.

 

FIRST PUBLISHED on 16 APR 2015  by IVAN ISRAELSTAM