Manage Payroll Legislation

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You can manage the complexity of payroll legislation with these tips.

Gone are the days when processing a monthly payroll was simply an act of deducting tax, pension and medical aid contributions from each employee’s salary, and paying them the remainder. Payroll processing has become more complex. Companies need to comply with so many legislative requirements that it is crucial to look at either an electronic payroll system or an outsourced payroll service.

A good understanding of the general Payroll Acts, for example, is required for businesses to come to terms with how legislation can affect payroll processing. Today, payroll software should is compliant with legislation and caters for all the major Payroll Acts, to ensure that businesses have confidence when it comes to processing their payroll. Legislation changes so dynamically that it is very onerous on the Payroll Administrator to keep up to date. The annual UIF threshold, for example, increased as of 1 October 2012. This has a material effect on employees and employers, seeing that the new maximum earnings ceiling is R14 872 per month or R178 464 annually.


Tax Tables change annually and employers are obliged to deduct the correct amounts of SITE and PAYE from their employees’ salaries for each pay period. Employers are required to submit tax certificates to SARS at the end of February each year. Failure to comply with this could lead to penalties of up to 200% on outstanding PAYE amounts. Businesses should invest in payroll software that allows them to electronically create the necessary information as required by SARS, thus saving a substantial amount of time, and giving employers peace of mind.


The BCEA sets basic guidelines for employers with regards to various issues such as Employment Contracts, Leave, Payment of Overtime, Termination and Retrenchments, and so forth. Payroll software can also offer companies the minimum requirements as set out in the BCEA. The calculation of Leave Pay has been changed to include variable income types such as Commission, Overtime and other Allowances. Failure to adhere to the minimum requirements could lead to costly CCMA Court Cases.


Employers are required to calculate and deduct the correct amount of UIF from their employees on a weekly, fortnightly and monthly basis. UIF requires employers to supply them with a list of all changes to earnings as well as new and terminated employees’ details each month. With an efficient payroll solution, an electronic file can be easily created and the Electronic UIF Declaration can be e mailed to the UIF without any further need to complete complicated manual forms.


Employers are obliged to contribute one percent of their payroll, with certain exclusions (amounts payable to persons for whom an exemption Certificate was issued by SARS, Pension and Retirement amounts as well as Pension Fund lump sums), to the Skills Development Levy on a monthly basis. This amount is paid to SARS, who then pays it on to the NSA (National Skills Authority). If the employer invests in improving the skills of their employees, they are able to claim amounts incurred from its specific SETA in lieu of contributions paid.


The Employment Equity Act focuses on Equal Opportunities and Rights within the workforce. This Act forces companies to employ and promote employees who fall within the previously disadvantaged groups such as women, Blacks (African, Indian and Coloured employees) as well as people with disabilities. Your payroll solution should allow you to print all these statistics straight from the application. Reports required for submission include the numerical Goal Plan, EEA2 and EEA4. Deadlines for submissions are as follows: > Employers with less than 150 employees were required to submit their Equity reports to the Department of Labour for the first time on 1 June 2000 and thereafter on the first working day of October annually; and > Employers with more than 150 employees were required to submit their Equity reports to the Department of Labour for the first time on 1 December 2000 and thereafter on the first working day of October annually.


The OID Act came into operation on 1 March 1994 and replaced the Workman’s Compensation Act (WCA). This Act compensates employees who are involved in work related accidents that result in disablement or death. These employees and their dependants are entitled to the benefits provided for and prescribed in this Act. Compensation is also granted if an employee contracts an occupational disease. All regular earnings paid to the employees must be included in the calculation of OID. The employer must submit a W.A58 form before the end of March each year. Running an accurate and efficient payroll is about far more than keeping a company in line with SARS requirements; it can also ensure that your company does not pay more than it has to in taxes and levies. Companies need to make sure that they are using payroll software that is regularly updated with the latest legislation and financial regulations, to ensure hassle free payroll processing. Employers should also have access to support and advice from skilled personnel on the use of their payroll application, as well as any legal queries.

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