Understanding your e_mployment status on payroll LI

Understanding the revision of tax status updates on payroll

A labour broker – someone who provides and remunerates workers for a client (for payment)

  • may or not be and in possession of an exemption certificate.
  • The Fourth Schedule allows for an exemption certificate to be issued by SARS to a labour broker (if a set of conditions is met)
  • this absolves the employers from having to withhold PAYE from payments made to the labour brokers.
  • Employers must withhold PAYE from payments made to labour brokers WITHOUT an exemption certificate.
Foreign employment remuneration requirements
  • SARS PAYE Business Requirements Specification (BRS) – any remuneration received due to employment outside of South Africa must be reported on foreign services income codes.
  • irrespective of whether a portion of that amount may qualify for exemption.
  • if a tax resident employee works outside of SA on behalf of an employer, then certain remuneration is exempt from tax (up to a limit of R1.25 million per tax year).
  • IF the following conditions are met:
  1. the employee is working outside SA for a period exceeding 183 full days in total during any 12-month period, and 
  2. for a continuous period exceeding 60 full days during that period of 12 months.
What is standard employment?
  • an employee (including a scholar or student) works for a single employer for at least 22 hours per week.
  • (excludes temporary periods of absence due to exceptional circumstances or a temporary reduction in working hours).
  • is deemed to be in standard employment.
  • should be taxed according to the progressive personal income tax tables.
Tax statuses - how does it work?
  1. The following tax statuses have been renamed to an [Obsolete] tax status in April 2022. (Please refer to release note #29380 for more information).
  • Foreign Employment (No Tax) [Obsolete]
  • Labour Broker (Not Tax) [Obsolete]
  • Standard Employment (YTD) [Obsolete]

2. In future these tax statuses will no longer be available for selection.  Tax statuses available on the payroll that pertain to labour brokers, foreign employment and standard employment include:

  • Labour Broker: Remuneration paid to a labour broker without a valid exemption certificate (IRP30) is subject to employee’s tax. The basic salary will be converted to tax code 3619 if the employee has a valid exemption certificate. If not, the tax code will be 3617 and the employee will be taxed as per the progressive tax tables.
  • Foreign Employment: Apply this tax status for a South African resident employee who earns income in a foreign country. Normal progressive tax tables will be applied but 50 will be added to all tax codes, for example, the ‘Basic Pay’ component’s tax code will display as 3651.
  • Standard Employment (Normal): The normal progressive tax tables will be applied.
  • When adding an employee, the removed tax statuses will no longer be available to select. It will therefore be hidden on screen, when applying APIs and when uploading via bulk actions.
  • Existing employees linked to these removed tax statuses, will display blank in the tax status field.
  • The tax calculation and reports will still apply the tax status in the database.
  • When the user edits the screen, they will need to select a new status from the available list.
  • When accessing the information via APIs and bulk upload, the tax status of the employees linked to the removed tax statuses, will still display. However, when attempting to upload, an error will be returned, since the value does not exist.
  • Validate APIs if necessary.
  • Existing employees linked to an obsolete tax status should be converted to any of the available tax statuses.
  • If an employee’s tax status is changed in the middle of the tax year, a tax recalculation will take place.
  • If the newly selected tax status should be applicable from a specific date, terminate the employee on the Tax Profile screen and reinstate in the next open run selecting the option, Reinstate Starting a New Record.  As a result, the employee will receive separate tax certificates based on the two tax records in the tax year.

Please contact your Paymaster payroll administrator if you need more advice regarding these revised tax statuses. Email us at outsourcepayroll@paymaster.co.za

Secure cloud backup

Secure Cloud Backups with Paymaster Payroll

Ensuring the security and accessibility of your payroll data is paramount. Paymaster payroll software not only streamlines your payroll processes but also recognizes the critical importance of secure backup solutions in the cloud.

One of the primary advantages of using secure cloud backups with Paymaster is the unparalleled accessibility it offers. Cloud-based backups enable authorized personnel to access payroll data from anywhere, anytime, allowing flexibility in a world where remote work is the new norm. This accessibility ensures that crucial payroll information is at your fingertips, whether you’re in the office, at home, or on the go.

Accessibility
Data Security

The security of payroll data is non-negotiable. Because Paymaster understands this, we employ cutting-edge encryption protocols to safeguard your sensitive information. Cloud backups add an extra layer of protection by storing your data in secure, off-site servers. This redundancy minimizes the risk of data loss due to unforeseen events such as hardware failures, natural disasters, cyber threats, (even an international pandemic), and therefore ensures the integrity of your payroll records.

With Paymaster’s cloud-based backup solutions, the burden of manual backups and maintenance is lifted from your shoulders. The software automates the backup process, ensuring that your payroll data is consistently backed up without requiring constant attention. This not only saves time but also reduces the likelihood of human error in managing backups.

Automatic Updates and Maintenance
Scalability for Growing Business

As your business expands, so does the volume of payroll data. Paymaster’s cloud-based backup solutions are scalable, accommodating the evolving needs of your growing organization. Whether you’re managing a small startup or a large enterprise, the flexibility of cloud backups ensures that your payroll system can seamlessly adapt to your changing requirements.

Staying compliant with data protection regulations (POPI) is a top priority for businesses. Paymaster’s cloud backups are designed with adherence to regulatory standards in mind. By adopting these secure cloud solutions, you enhance your compliance, providing peace of mind that your payroll meets legal requirements.

Compliance Assurance

Paymaster payroll software goes beyond merely processing payroll; it prioritizes the security and accessibility of your data. Secure cloud backups play a pivotal role in this commitment, offering a reliable and efficient way to protect your payroll information. By entrusting your data to Paymaster’s cloud-based solutions, you’re not just investing in payroll management – you’re investing in the longevity and security of your business.


Contact Paymaster at 021 712 7333 or email Ian Hurst at ian@paymaster.co.za

Hrmaster Hats Series

Hat 10- The Interpreter of company policy

We, the payroll administrators, need to understand the policy process. Government passes legislation, and we are tasked with implementing that. Management sets company policy, and creates procedures to implement that policy.

The payroll department (among others) is tasked with bringing those policies and procedures to life. We study the rules and make them work. We explain to, and educate all employees regarding these policies. We implement the policy and make sure that the policy is adhered to.

“my heart says yes but my brain says no”

And the biggest challenge…we have to say NO to requests for exceptions.

Refusing these exceptions can cause a lot of pressure to be exerted on the administrator who understands the importance of sticking to policies. While management accepts that we can’t break the law around payroll, they sometimes think that certain circumstances allow one to bend company policy for a few individuals. Their arguments are so persuasive and they come from management, making it very difficult. But be warned, once you have bent the rules, it becomes easier to bend the rules in other situations. Have you noticed that some managers are more inclined to ask you to make exceptions than others?

I am trying to think of a example where bending the policies can be justified. I am finding it very difficult to come up with anything but here are two that may prove the point.
* We can’t give the employee more leave , but we can approve leave and process the leave outside of policy.
* We can’t change the rule on advancing an employee money from next week’s salary, but we can bend that rule, depending on the circumstances.

Tell us about the time you bent the rule, or the time you stood firm. And how did it turn out? Tell us in the comments below.

How to avoid compromising policy procedure:

  1. Make sure you understand the policy that management wants implemented. The payroll administrators are the people who interpret what needs to be done. So read it carefully, discuss it and make sure everyone in the department understands it. Make notes of what possible exceptions might be requested, and work out in advance the reasons why you can’t compromise.

  2. Make sure that you all (management team included) agree that there will be no exceptions. You need to know that your standing firm on this issue will be supported by management.
  3. Build a reputation for sticking to the rules. While you need to be considerate and aware of the issues, policy is policy, and the firmer you are, the less you will be challenged. It must be clearly understood “Payroll will never deviate from policy, so don’t even ask!”

  4. On the rare occasion, you need to make an exception, be sure that it is for a very good reason and ONLY under management’s authority. Have something in writing that allows you to deviate. (You do not want to end up being a scapegoat).
  5. Education, education, education is the key. Do everything you can to make sure line managers understand what the policy and procedures are. Use books, diagrams, videos and blogs to keep managers up to date. Make them your friends, your first line of defence and your supporters when you implement policy strictly.

Policy adherence is essential in a well-run, compliant business. And the payroll department plays a vital role in making this happen. Prepare to make a stand to always do the right thing and stick to the rules.

Hat 1- The payroll administrator as implementer of Legislation

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 allowancespension fundsmedical 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.