For many businesses, the ever-increasing burden of legislation affecting the payroll has become very problematic. There has been a dramatic rise in penalties for non-compliance with current legislation as companies fail to keep up with the changes. Many businesses simply do not have the in-house resources to ensure continued compliance and efficient execution of the payroll function and are switching to outsourcing to relieve the burden. Outsourcing makes even more sense if one considers that payroll administration is not a core function of any business. Using valuable human resources to perform the largely repetitive tasks associated with this activity detracts from the ability to spend available time and energy on running a profitable business. Let us briefly take stock of current legal requirements and the associated administrative workload they impose on your staff Pay As You Earn (PAYE) All employers must be registered for PAYE with SARS. A monthly deduction is made by the employer towards each employee’s normal income tax liability. Unemployment Insurance Fund (UIF) All employers (with a few exceptions) are required to register with SARS for contributions towards the UIF. These contributions are calculated at 2% of the amount of the employee’s remuneration of which 1% is due by the employee and 1% by the employer. The contributions are paid to SARS who in turn transfers them to the UIF which is administered by the Unemployment Insurance Commissioner. Employers also need to register themselves and all employees for UIF purposes with the Department of Labour in order for the Department to accurately allocate the contributions collected by SARS. Skills Development Levy (SDL) Many employers are also required to register with SARS for the Skills Development Levy (SDL), a compulsory levy scheme for the purpose of funding education and training. Any employer (with a few exceptions) who expects that the payroll for the next 12 months may exceed R500000, needs to register for SDL. The liability of the employer towards SDL is 1% of the remuneration payable to each employee. Compensation Fund All employers are required to register with the Compensation Fund, administered by the Compensation Commissioner, so that their workers may claim compensation for occupational injuries and diseases. All registered employers (with a few exceptions) must pay an annual assessment fee. The extent of the work involved in complying with the above requirements becomes clear when one considers that, aside from ensuring that the necessary systems are maintained and the various deductions made monthly, payroll staff have to do the following:
- Declare all taxes and levies monthly on an EMP201 form ,submit this form to SARS and pay the liability by the 7th of the following month. Late submission or payment is subject to a 10% penalty of the liability amount for the period.
- Reconcile all forms and declarations six-monthly on an EMP501 form via SARS’s Easyfile system. The first reconciliation period is for August and the second is for February. At the February reconciliation the annual IRP5’s must also be produced and distributed to employees. Late submission of the EMP501 is subject to a 10% penalty of the liability amount.
- Complete in full and submit by 31 March of each year the return of earnings form (WAS.8) issued by the Compensation Commissioner. It is the responsibility of employers to ensure that they are in receipt of the form which is issued by 31 January every year.
- Submit all new registrations and changes in the payroll to the Department of Labour on a UI-19 form.
Ask yourself if time and effort really need to be spent on these activities if the staff involved can be used more productively in dealing with your core business. Increased productivity can ensue if you outsource your payroll administration. But that is not the only benefit. If you outsource you can rest assured that output won’t be affected by leave or illnesses and that the payroll will always be run on time. You will also have peace of mind about security since the risk of exposing confidential information to unauthorised personnel is eliminated, while you can also dispense with close supervision of payroll activities. Give outsourcing some thought. It could really be worth your while. For additional information, please contact Maryke van Wyk (Payroll), Andrea Vink (Tax Department) or Vanessa King (Tax Department) at 021 88 66 22 5.