While there are many obstacles to overcome in the payroll services and human resources departments (mainly ensuring employees are paid on time and receiving the correct salaries), one of the most significant challenge these company departments face is payroll compliance.
The South African Revenue Service (SARS) and the Department of Labour each have lengthy lists of documentation and submission requirements. No matter the size of the company or the number of employees – accurate and timely payroll processing is essential for legal compliance and avoiding fines.
By understanding the requirements for compliance, payroll and human resources departments can better meet their objectives and avoid legal penalties.
Let us discuss the importance of payroll compliance, including tips for developing an efficient payroll system that does the job flawlessly.
Payroll compliance in South Africa
The payroll process is a fundamental part of all businesses. Payroll plays an essential role in companies, not just because it pays salaries to employees but also because it is critical for the continued operation of a business under the law.
Companies that begin hiring new staff and expanding their workforce will see an increase in the amount of admin involved. This payroll administration process is critical to have a well-established payroll compliance framework to ensure that staff are paid correctly, on time and in line with regulations.
As a business grows, the payroll process becomes more complex, here are some of the basics that every company must adhere to in the process:
The EMP201 is a monthly declaration to SARS which summarises the taxes and statutory payments withheld from an employee’s salary, including Pay As You Earn (PAYE) and Unemployment Insurance Fund (UIF) contributions, as well as the amount payable by the company for the Skills Development Levy.
The EMP501 is the interim or annual declaration to SARS that reconciles the monthly declarations with the actual payments and the individual employee’s final tax position.
Return of Earnings (ROE)
The purpose of the ROE fund, also known as the Compensation for Occupational Injuries and Diseases Act (COIDA) or Workman’s Compensation, is to compensate employees for injuries, diseases or disablement sustained or contracted while working. The fund also provides compensation to the employee’s widow or dependants if a worker dies as a result of a work-related accident or disease.
Even though it is not required, it is recommended that you register for the SARS eFiling system to perform all of these tasks and make payments in a secure online environment. If you use eFiling, you may benefit from some small extensions on certain payments, such as VAT.
Each of the eFiling declarations has payment dates and other critical company and employee information that payroll managers must know and stay up-to-date on. Failing to keep this information current could result in the payment of incorrect amounts, the collection and withholding of incorrect tax amounts and late-payment penalties. This could affect team morale and overall company productivity.
Here are some tips companies can use to stay organised, compliant and successful with the payroll process.
Keep employee information up-to-date.
Always make sure that an employee’s records are accurate. The onus is on the company to maintain this information and keep it up-to-date throughout a person’s employment. Companies should ensure that they always verify new employee data and regularly update their current employees’ information, as it is bound to change over time.
Emphasise employee compliance
While payroll service providers and HR teams are responsible for maintaining the accuracy of employees’ personal information, employees can also be educated on the company’s policies and how they can help the business stay compliant. The HR Department can set up procedures to help them fill out forms and accurately record expenses and overtime. Doing this will allow your company to reduce payroll issues and control employee expectations.
Each employee should also receive a copy of the policies and procedures outlining everything that has an impact on their pay. This will educate them on how the company’s payroll system operates and they can refer to the document if they have any questions about deductions or additions.
Manage your mandatory employee benefits
Every business registered in South Africa has a list of compulsory benefits that it must pay employees to safeguard their welfare. Employers are required to pay into employee benefits like UIF and the SDL. In contrast, benefits like retirement funding and health insurance are only mandatory for companies that are regulated under the Bargaining Council Agreement.
Stay up-to-date on legislation
It’s important to stay current with the frequently changing payroll laws. You can learn how to remain compliant by joining social media groups, attending industry conferences and seminars or watching webinars. When you can, speak with industry experts and learn about any changes to payroll procedures that may impact your company.
Never miss a deadline
Payroll can be complicated, so there’s a chance that you could miss deadlines. There are penalties for businesses that submit information late, so you must be proactive about managing the process.
Remember that you’re not just paying salaries regarding payroll compliance. Additionally, keep in mind the following:
- Tax deadlines
- Shifting paydays
- Reporting deadline
This will ensure that nothing is missed and you’re always on time. Your employees will also know precisely when they’re getting paid and your team can carry out payroll tasks efficiently.
Outsourced payroll services
Payroll can be complicated and complex, but there is never an excuse for not abiding by all legislation. Companies must grasp multiple moving pieces to remain compliant and may need to outsource your payroll services to a payroll professional to take care of these details.
MASA is a leading payroll services provider in South Africa and beyond, delivering enterprise-grade payroll solutions to blue-chip companies in various industries. We process payroll for over 12,000 employees worldwide every month and are always up-to-date on the latest compliance requirements.
We have geared our payroll solutions to support your business by handling the vital tasks of the payroll process, such as:
- Payroll Administration
- Capturing and reporting on leave and absenteeism
- Transfer of salaries and wages to employees
- Preparation, printing and delivering payslips
Customised payroll reports for your business
- Ensuring statutory compliance by monthly preparation of the monthly EMP201: PAYE, UIF, COID, SDL, Union, bargaining council, garnishee and pension/provident fund deductions and payment to relevant bodies
- Preparation and submission of EMP501 and annual IRP5
Assistance with all payroll-related queries
So contact MASA today if you’re looking for a payroll services provider in South Africa or internationally to help streamline your payroll process. Our team of experts are ready to assist you with all your payroll needs and compliance requirements.