What you should know about Payroll legislation in South Africa

Everything you don’t know about South Africa’s payroll legislation could be costing your company money.

Managing payroll is complex – that’s a fact – and the list of regulations and submissions your business must comply with is a long one. One mistake could cost you a substantial amount in interest, fines and penalties, not only from the South African Revenue Service (SARS), but also the Department of Employment and Labour.

No fewer than ten acts regulate the employer-employee relationship in South Africa, and each one incorporates specific rules for payroll. The acts are:

• Companies Act
• Basic Conditions of Employment Act
• Labour Relations Act
• Income Tax Act
• Skills Development Act
• Unemployment Insurance Act
• Compensation for Occupational Injuries and Diseases Act
• Workman’s Compensation Act
• Employment Equity Act
• Protection of Personal Information Act

Besides the above legislation, industry sectors have their own conditions of employment, while the agreements reached between employers and bargaining councils further complicate the payroll process.

Here are the most important payroll legislation rules you should know about in order to ensure your payroll runs without a hitch.

Get registered

The first thing to do when setting up a business in South Africa is to register with the Companies and Intellectual Properties Commission (CIPC). Once a bank account has been opened, businesses must register with SARS and the Department of Labour. This must be done whether you have one employee (even if that person is yourself) or more than a hundred.

You need to register with SARS for:

• Pay as you earn (PAYE) tax that is deducted from your employees;
• The skills development levy (SDL) that is deducted and paid to the sectorial education training authority;
• Unemployment insurance fund (UIF) contributions.

You also need to register with the Department of Labour for UIF. And if you register your business as a company you also need to register with SARS for value-added tax (VAT) and company tax.

Employee contracts are a must

The Basic Conditions of Employment Act (BCEA) stipulates that all employers must provide their employees with a written contract of employment. The contract must include certain employment conditions such as notice period, annual leave and pay rates.

It is important to note that not all employees are covered by the BCEA. These include:

• Employees who work less than 24 hours a month (although there are instances where temporary workers have the same rights as permanent employees);
• Members of the South African National Defence Force, National Intelligence Agency and South African Secret Service;
• Unpaid volunteers who work for a charitable organisation.

Bargaining councils have their own set of rules

Some industry sectors are governed by bargaining council agreements in which a minimum wage, hours of work and overtime rates are dictated.

Employer declarations must be submitted monthly

Tax, unemployment insurance fund and skills development deductions must be paid over to SARS each month. The payment, along with a completed employer declaration (EMP201) must be submitted by the seventh day of the month. If this day falls on a weekend or public holiday, submissions must be made by the last business day before the weekend or public holiday.

There are no exceptions to this deadline and any late submissions will be subject to a fine of ten per cent of the total outstanding amount.

A monthly UIF return must also be submitted to the Department of Labour.

Don’t forget the other submissions

The annual workmen’s compensation fund return of earnings must be submitted in March, while the SARS PAYE annual reconciliation is due in April/May. The six month reconciliation must be submitted in August. Employee tax certificates are due once a year on 31 May.

Companies that submit late information will incur interest and penalties.

Large companies are also required to submit a six-monthly report to the Department of Labour regarding their employment equity planning and status. The same report must be submitted annually by smaller companies.

Keep comprehensive records

As an employer, it is your responsibility to maintain accurate records of your employees. This includes employment contracts, time sheets and payslips.

Most records, including SARS-related documents, only need to be kept for five years, but it is recommended that SARS documents  be kept indefinitely.

Going international

Payroll legislation compliance becomes even more complex if your company has a presence in more than one country.

This is because every country has its own rules and regulations for salaries, deductions, payments and reporting.

Add to this the intricacies of working across different time zones, currencies and customs and your international payroll becomes quite a challenge. Additionally, it’s not uncommon for payroll legislation to change frequently, sometimes at short notice, so it’s important to stay on top of things to ensure your business remains compliant.

While there is no doubt that payroll is complex, there is no excuse for non-compliance. The good news, however, is that you don’t have to do everything yourself.

You can opt to sign up for outsourced payroll services and allow a dedicated team of payroll experts to handle everything for you. This includes keeping track of all your required monthly, annual and bi-annual submissions and returns to SARS and the Department of Labour.

Enlisting the services of a payroll bureau will benefit your company enormously. Not only does a payroll bureau have a thorough understanding of payroll legislation compliance, but they can also assist with any relevant updates or changes, and help you maintain accurate and up-to-date records.

That being said, it’s important to choose a payroll service provider that understands your business needs. Take the time to fully investigate the various offerings available on the market before making your decision. This will give you the peace of mind that your payroll is in good hands.