Subsistence Allowance_Travel

What to pay when your employee travels away from home

by with 5 Comments ArticleSubsistence allowance

What to pay when your employee travels away from home

Understanding the Rules of Subsistence Allowances for Travel Expenses

Author: Ian Hurst — Managing Director, Paymaster Business Solutions

Travel is, once again, becoming part of the workplace. Since travel involves expenses, companies can either pay for accommodation and meals ( and reimburse incidental expenses) or pay the employee an allowance that covers all these expenses.

At Paymaster People Solutions we regularly receive queries from our clients (either via email or our live website chat facility), to explain Subsistence Allowances. Based on these questions, the deemed rate and actual payment of expenses ( against submitted receipts) is the cause of much unhappiness.

It seems many employers consider processing travel-claim reimbursements (in excess of the deemed rate) as favouring the employee, even though this is tax deductible for the employer.

It seems SARS’s Subsistence Allowance document is the source of the confusion around this subject.

Travel AllowanceDEFINITIONS TO CLEAR THE CONFUSION

  1. Allowance – 

    An amount of money granted by the employer to the employee when business-related expenses are incurred ( without obligation for the employee to prove/account for these expenses to the employer). The amount of the allowance is based on the anticipated business-related expenses.

  2. Advance – 

    An amount of money granted by an employer to an employee to incur business-related expenses on behalf of the employer, with an obligation on the employee to prove/account for the business-related expenditure to the employer. The amount for this advance is based on the anticipated business-related expenditure. The employer recovers the difference from the employee if actual expenses are less than the advance paid (or vice versa).

  3. Reimbursement – 

    This occurs when an employee has incurred and paid for business-related expenses on behalf of the the employer, without receiving an allowance or advance. Therefore they are reimbursed the exact amount by the employer (after having proved and accounted for these expenses, to the employer).

ESTABLISH YOUR COMPANY’S POLICY

Regarding travel allowances:

Hotel expenseWhat is in your contract of employment, and what is your company’s policy regarding Subsistence Allowances. This will shape the basis on which payment is made to the employee for their away-from-home work-related expenses. For example, does your company pay for hotels, meals (stipulating a maximum value), and incidental expenses? Be sure to clarify details, such as: do they consider parking costs as incidental expenses. And what is their policy on the purchase of cooldrinks and/or chocolates? Making this clear will avoid problems during the reimbursement process.

Here follows 2 examples of possible company policy clauses:

You will be required to spend some nights away from home. The company will pay for your accommodation (up to the value of Rxxxx,xx) and meals (up to the value of Rxx,xx). In addition, an allowance of R 161 (per night) will be paid to cover incidental costs (eg, chocolates, cooldrinks etc). No additional reimbursement claim-documents need to be completed.

Another possible policy clause may look like this:

You will be required to spend some nights away from home. The company will pay for your accommodation (up to the value of Rxxxx,xx) and meals ( up to the value of Rxx,xx). In addition, all receipts from any incidental expenses need to be submitted to the company. You will be reimbursed no later than 7 days after reimbursement claims are submitted.

WHAT THE LAW SAYS ABOUT SUBSISTENCE ALLOWANCE

  • A Subsistence Allowance is given to an employee in respect of incidental costs incurred when away from home, on company business, for at least one night (sunset to sunrise).
  • Where the employer pays for the hotel and meals, a Subsistence Allowance of R161 per night may be claimed (deemed rate).
  • Where the employer only pays for accommodation, the allowance is R522 per night (deemed rate). If breakfast is included in the rate, it is regarded as part of the accommodation rate.

HOW TO PAY A SUBSISTENCE ALLOWANCE

PLEASE note the following WARNING: a Subsistence Allowance WILL NOT form part of the employee’s remuneration package and should therefore be paid over and above their normal remuneration. And no employee’s tax should be deducted from this amount (even if it exceeds the deemed rate). This should be indicated on the IRP5, and SARS will make the required adjustments.

There are 2 ways to pay this allowance:

  1. Ask the employee for the expense slips, and reimburse them. This is not subject to the employee’s tax.
  2. Pay out the Subsistence Allowance as prescribed by SARS – no expense slips are required. This is not subject to employee tax UNLESS the amounts exceed the deemed rate. In that case, the employee will be taxed on the difference, unless receipts for the full amount are produced.

There is nothing to prevent the employer and employee from developing their own method to process claims for each trip. But to prevent an administrative nightmare, we suggest using the following payslip codes:

  • When the deemed (claimable) rate is exceeded, use the code 3704 (local) and code 3715 (international).
  • Where the deemed (claimable) rate is NOT exceeded, use code 3705 (local) and 3716 (international).

The employee can then complete the IRP5, and submit their annual return. Based on the IRP5, SARS can make the necessary adjustments.

(Please note: supporting documents for any expense claim must be archived for 5 years.)

FINAL QUESTION ON EXPENSES CLAIMS

What if my expense claims are less than the deemed rate, or if my company reimburses me less than the deemed rate?

Answer: On your annual return, you need to submit the details to SARS. They will then make the necessary adjustments to your return. The company cannot make any adjustments or give any tax relief (via the company payroll system) for any unclaimed or under claimed Subsistence Allowances.

Sources:

[1] Source: Juta’s Compendium of Tax Legislation (2014 Edition, Volume 2)

[2] Download the SARS guide here: http://www.sars.gov.za/AllDocs/LegalDoclib/Notes/LAPD-IntR-IN-2012-14%20-%20Allowances%20Advances%20Reimbursements.pdf

[3] Download international deemed rates here: http://www.sars.gov.za/AllDocs/Documents/PAYE%20tables/2018%20tables/SUBSISTENCE%20REGULATIONS%202017.pdf

Paymaster People Solutions (Pty) Ltd

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Good HR software

by with 2 Comments ArticleTechnology

Staff engagement and good HR software

There are many ways HR can improve the workplace experience for employees today…good coffee, extra leave, fabulous desks etc. But in actual fact, an excellent payroll system such as the one offered by Paymaster, is the key to retaining skilled staff and improving their engagement with your company.

Employee engagement

Studies have shown that only a third of employees are really engaged at work ie. that they are working at 100% capacity, most of the time, to achieve the company’s goals and objectives. Half of the employees are considered “not-engaged”, and about 15% are actively disengaged, meaning they are working actively against the company’s goals. This results in a negative atmosphere in the workplace, which impacts productivity. It is obvious engaged employees mean greater efficiency. So investing now, means greater employee engagement, and significant gains in the future.

Simple is the answer

There are many reasons an employee may feel disengaged from the company. Sometimes simplifying a basic aspect of work – getting paid- can be an important step to greater transparency and trust in the company. The move to a paperless payroll system has not always resulted in increased access to their personal employee data.

Often employee benefits are unused, because employees are unaware of them, or don’t know how to access them.

Similarly, a complicated process to clock-in, or check their payslip, may mean a sense of alienation from their workplace for them.

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Keep updated

Jumping through hoops because of outdated technology, just to access your information, results in frustration and increased disengagement. Since the main reason for working is to get paid, the HR department has a pivotal role in making this process as simple, and accessible, as possible. This improves employee loyalty to the company.

Solution: Improve Employee Engagement and Trust with Cloud-Based HR Software

Cloud-based software allows employees to quickly and easily access their schedule, payslips, leave hours, and other important working information. This will result in greater sense of employee trust in their company as it illustrates concern in the essentials that impact their day-to-day lives. They will have more energy to focus on the actual work itself. The positive atmosphere also aids staff retention, as they will feel appreciated.

Remember the HR staff

An efficient Payroll system will also mean the HR staff will feel engaged, and able to play their part in the efficient functioning of the company with enthusiasm and enjoyment. They will have time and energy to initiate bigger projects and interact positively with their co-workers. Happier workers are productive, engaged workers.

Zen rooms and wellness packages can be enticing…but saving time, preventing frustration, and encouraging employee engagement as the result of cutting-edge Payroll software will improve a vital part of working life – being paid accurately, and on time!

Contact Glen 083 679 1311, glen@paymaster.co.za at Paymaster to find out about our excellent payroll software on offer.