From 1 September 2024, South Africa’s retirement landscape will change with the implementation of the Two-Pot Retirement System, affecting both payroll and taxes. Here’s what you need to know.
What is the two-pot retirement system?
From 1 September 2024, provident, annuity, and retirement support commitments will be split:
One-third to a savings pot
Two-thirds to a retirement pot for purchasing a pension product at retirement
Retirement Savings Components explained
Vested pot:
Contributions made before 1 September 2024 (vested rights as of 31 August 2024) will follow current accessibility and tax rules.
No further contributions are made to this pot.
Savings pot:
Starting 1 September 2024, 10% of the vested pot (up to R30,000.00) will be allocated to this pot, as an opening balance.
Employees can withdraw from the savings pot without resigning.
Minimum withdrawal of R2,000 annually, no maximum limit but subject to available funds.
Withdrawals once per tax year (1 March – 28/29 February) from 1 September 2024.
Remaining funds can be accessed as a lump sum at retirement or transferred to the retirement pot.
Retirement pot:
Funds here are blocked off until retirement.
Used to give wage at retirement through annuities (the current de minimis rule applies)
How does this system impact your payroll and taxation?
Savings withdrawals are included in PAYE remuneration.
The retirement fund or administrator will apply for a tax directive to calculate PAYE before making payment.
SARS source code 3926 will report savings withdrawals; source code 4102 will report the directive tax.
Taxed under normal Personal Income Tax (PIT) progressive tax tables.
Special Consideration:
Members of provident funds aged 55+ on 1 March 2024, are prohibited from the two-pot retirement framework unless they select in
Paymaster will adjust for savings withdrawals from 1 September 2024. Employers don’t need to calculate or report the contribution split; the retirement fund will handle it. Learn more about the Two-Pot Retirement System. For further details, contact your Fund or administrator.
In South Africa the employer-employee relationship is often strained due to a lack of clarity regarding rights and obligations. The Basic Conditions of Employment Act (BCEA) sets out minimum standards for working conditions and governs all aspects of the employment relationship. But navigating the complexities of the BCEA can be a challenge for both employers and employees. This often leads to misunderstandings and disputes.
Skillmaster’s HR Law series covers all Acts (including the BCEA) to empower you. From knowing ordinary hours of work to managing leave pay and sick leave policies, our course provides clarity and practical solutions.
Unsure about your rights when it comes to taking leave?
Worried about maintaining productivity levels during employee absences?
Understanding the BCEA will help you manage leave entitlements and build a positive employer-employee relationship.
Unfair working conditions impacting your job satisfaction?
But how do you navigate the complex workplace laws?
Skillmaster’s HR Law series helps you understand all the Acts – including the Basic Conditions of Employment Act (BCEA), which addresses working conditions in South Africa.
Our BCEA module covers topics such as:
Ordinary hours of work
Annual Earnings Threshold
Temporary employment services.
Who would benefit from this course?
Those struggling to balance their workload within ordinary hours.
If you’re worried about meeting the Annual Earnings Threshold for fair pay.
Are you confused about your rights as a temporary employee?
Empower yourself with knowledge!
Contact Skillmaster today and enroll in our HR Law series.
Your first step to creating a more equitable workplace environment.
Say goodbye to manual payroll entries! Streamline your payroll process with Paymaster’s automated system. Quickly and accurately with Paymaster’s Bulk Actions!
STOP filing employee paper records – paymaster offers electronic filing!
Tired of sifting through stacks of paper to find an employee’s records?
Paper records go missing or get misplaced!
Eeek! Can you afford the risk of losing important employee information?
And inefficiencies in your HR department?
Struggling to keep track of leave balances, attendance records, or performance evaluations?
Worried about the security of your paper records?
Lost or stolen documents put sensitive employee information at risk.
With Paymaster’s system, you can keep all your essential and valuable employee-records online (safely and securely stored in the Cloud).
Paymaster’s automated online HR administration system streamlines record-keeping processes – allowing easy access and management of employee information anywhere, anytime!
Read our article to know what records to keep, when and in what format – Employee Record Keeping
Stay compliant and organized…keep all your employee records at your fingertips with Paymaster.
The payroll department is often tasked with the responsibility to communicate the changes agreed on by management and the unions regarding conditions of employment or changes to legislation, that impact employees. This usually means interpreting the changes and making them real and meaningful to all customers. (This may also include sending out the actual notices announcing the changes.)
Payroll is the only department able to explain how the changes will affect the employees’ take-home pay, or their benefits (eg. leave days or pension deductions). We have a unique opportunity to interact with the employees, and make sure there is a complete understanding of how the changes will impact each one personally. What a privilege!
Here is an example. In March 2016, changes in retirement legislation were announced in South Africa. If you were including life insurance or disability in your one tax-free deduction, this could change, and now become tax deductable. This would reduce the employee’s take-home pay. And of course, the payroll department is the first stop when explanations are needed around this.
Five strategies to communicate change effectively
1. Use face-to-face meetings
Nothing is as powerful as sitting across the table from your employees (or customers), and explaining in detail how the changes will impact them. Use a dummy payslip (and alternative if you have them) as a visual example of the changes, and their impact. And be ready, and patient, to answer questions and concerns. This way they will be prepared for their changed payslip.
2. Identify champions
One champion has the power to convert many. Identify a leader ( shop steward, supervisor, line manager or senior manager), and make sure they have a thorough understanding of the changes. They can be the first line of explainers, and answer the basic questions. A detailed and clear question-and-answer sheet will be very useful. Speak to management for advice, if necessary, to approach these leaders, or be proactive and cultivate relationships with the leaders in the company.
3. Language and medium of communication
Important (and obvious), is the fact that home language is much more powerful for effective communication, compared to a 2nd language. Visual aids (eg. pictures) and simple explanations are always better than long, complicated and wordy descriptions. Ensure any hand-out pamphlets/documents are concise, and clear, and that the information is correct. Communicating the wrong facts is difficult to undo, and will negatively affect the organization and your reputation.
4. Honestly explain the benefits and downsides
It always pays to be 100% truthful, and convey ALL the facts, even if this might mean anger and outrage ( not your fault, you are only the conveyor of the facts). When explaining the benefits, do it in detail, and be sure NOT to oversell the upside. Be realistic. And in the same vein, don’t minimize the downsides.
5. Have an Action Plan
Make sure you have a clear action plan before starting the communication process. Decide WHO will communicate WHAT, and WHEN. Who will be available to answer questions, and when? Make sure everyone is up to date, and in the loop on what is to be implemented, and when. And what documents need to be signed, and by whom…
Remember: this is an opportunity to grow relationships, and enhance the reputation of the payroll department. So, be available to answer all questions. And go out of your way, if possible, to personalize every answer, and explain how this will affect the employee.
Coming next… Hat 5: The responsibility of What if?
Back in 1997, Ian Hurst and Karen Morrison worked for Bergers Stores, a large clothing retail chain owned by the Morkels Group. Ian was the Human Resource Manager and Karen was involved in the corporate training department. During that particular year, Ian was tasked with investigating the option of outsourcing the company’s payroll; or, alternatively, converting the existing rather cumbersome payroll for a significantly more streamlined inhouse option.
Bergers opts for a streamlined inhouse VIP Desktop solution
The outcome of Ian’s payroll investigation revealed that there weren’t any outsource companies that offered an easy payroll processing alternative. The only payroll solution proved to be rather complicated and cumbersome: the client was required to submit hand-written forms and documents to an outsource company for processing. In other words, this meant that, what the client ‘put in’ the client ‘got out’: errors and all. Consequently, the payroll solution that was decided upon, was for Bergers Stores to implement a desktop version of VIP. The implementation was successful.
Seeds of Paymaster’s beginnings germinate
It was during this time, the beginning of Paymaster’s history, that the seeds of the fledgling company started to germinate: In 1998 Bergers Stores was sold to Dunns clothing stores. This prompted Ian and Karen’s decision to cease their jobs with Bergers and their involvement in the corporate sphere if business. Instead, they recognised a gap in the market: namely, to use a desktop version of VIP to process clients’ payroll, but also, to add further value to their service offering by ensuring that their own payroll administrators checked for accuracy and compliance. This resulted in a truly unique outsource company being registered and established: An authentic payroll processing company that genuinely understood the importance of all things payroll. At the time, inaccurate and clumsy payroll departments fell guilty of regularly demotivating its employees because payroll-run mistakes and errors where happening during almost every payroll-run.
1 March 1999: Paymaster is born
Paymaster’s doors officially opened on 1 March 1999. It took just two months for Ian and Karen to sign their first corporate client with Aries Packaging. Paymaster had taken off and the company’s ascent to new heights had just begun.
Paymaster: Built upon an early well-researched solid foundation
One of Paymaster’s core beliefs was to build its business model upon a solid foundation: it’s founding members wisely took the time to research what was needed to build a solid foundation—A foundation that would ensure that Paymaster was suitably able to service its client base well into the distant future.
Since 1998 Paymaster has achieved consistent year-on-year growth
Since 1998, Paymaster has achieved slow, steady and consistent year-on-year growth. Every time Paymaster signed new clients, Ian and Karen (and the competent team of Paymaster payroll professionals) would patiently and professionally ‘settle them down’ and make sure that they were always happy with their payroll runs. An error-free payroll has always been, and continues to be, the benchmark that Paymaster People Solutions strives to achieve for its clients.
2002: Amber Stynes joins Paymaster
In 2002 Amber Stynes joined the Paymaster team. Amber soon became indispensable to the Paymaster team and in 2011, she was appointed as director. Today Amber heads up the day-to-day operations at Paymaster People Solutions.
2006: Paymaster procures an online payroll software platform
Since 1999 when Paymaster was founded, payroll software technologies continued to rapidly evolve. Accordingly, in 2006 Paymaster’s directors took the strategic decision to evolve with changing technologies by procuring an online payroll software platform. After a year-long investigation, it was finally decided that Paymaster would partner with PaySpace.
Paymaster uniquely branded PaySpace’s online payroll software platform and migrated all of its existing clients to the new online payroll platform. The strategic decision was a huge success. So too was the migration of Paymasters’ clients to the new online system.
Online payroll software platform an absolute winner
Paymaster’s online payroll software platform has been and absolute winner—An excellent move it has certainly proved to be. Online payroll allows Paymaster to offer its clients a rich assortment of online-specific benefits and features. Now, not only do Paymaster People Solution’s clients have full online access to their own payroll data and information, but they also benefit from being able to access and manage human resource functions such as leave, training and disciplinary action records.
2016: Paymaster rebranded to Paymaster People Solutions
Over subsequent years, Paymaster continued to show excellent growth of its client base. For this reason, in 2016, Paymaster was rebranded to Paymaster People Solutions. This change suitably represented the significant growth that had taken place in the rich collection of additional benefits and services that Paymaster was now offering its many happy clients.
2019: Paymaster People Solutions celebrates its 20th Birthday
This year, Paymaster People Solutions proudly celebrates its 20th birthday!
The staff team consist of 18 full-time employees servicing more than 700 clients. These many satisfied clients make use of a combination of payroll solutions: from fully outsourced ‘we-do-it-for-you’ services, to the basic ‘you-do-it-yourself’ online package. Additionally, over 80% of Paymaster People Solutions’ clients sign up for the empowering self-help Employee Self-service module.
Looking ahead: the next 20 years and beyond
Ian Hurst, CEO of Paymaster People Solutions believes that the payroll service and function will always be central to the success of any company or organisation. Hurst maintains that “the ongoing success of the companies that we offer services to, is based on the our ability to keep up with technology, whilst also being able offer our clients customised levels of service that they require in order to efficiently manage their payrolls.”
As Paymaster People Solutions looks forward to the next 20 years, Hurst believes that there will always be ongoing changes to legislation, changes in software technology, and changes to the way in which payrolls are processed. “What won’t change however” says Hurst, “is the expectation that to be successful we will resolutely and proudly continue to deliver exceptional customer service to our many happy and valued clients.”
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Speak to management for advice, if necessary, to approach these leaders, or be proactive and cultivate relationships with the leaders in the company.
1 March 1999: Paymaster is born