Compliance with labour legislation is tricky at the best of times, especially when it involves remuneration and tax. Legislation that governs director’s PAYE for executive payroll is particularly complex and this is why we advocate outsourcing this responsibility.
This type of remuneration is often only finally determined towards the end of the tax year or even in the following tax year, which makes PAYE calculations and UIF deductions a challenge.
Typically, the director is required to work out a deemed monthly salary using the average remuneration earned during the previous year of assessment.
Business leaders also need to be aware of the relevance of deemed remuneration, as determined by a SARS formula, to overcome issues with collecting monthly PAYE for directors.
Specifically, deemed remuneration applies to all directors, including members of CCs.
Among the other terms related to this compliance is that directors will always be taxed on actual remuneration received each month. The tax on the actual remuneration is compared to that which is calculated on the deemed amount and, if the latter is higher, the company pays the difference over to SARS.
If we needed a reminder of the intricacies involved in compliance with this legislation, then consider that we are only now discussing the issue of executive directors.
We believe that outsourcing makes business sense and that is the message we are pushing to the market.