Ignore the Labour Law and Your Small Business May Be In Peril

Ignore the Labour Law and Your Small Business May Be In Peril


With frequent changes in labour legislation, entrepreneurs have to ensure that they are compliant or face significant financial penalties that could threaten the future of their companies, according to James McKerrell, CEO of Technologies South Africa, a human resources and payroll solutions company.

Stop using family and friends for labour advice 

“Through our research, we found that small entrepreneurs are the most at risk when it comes to labour legislation as they often lack the specialist knowledge required to be compliant. It is alarming to see how many of them use friends and family to help with certain administrative functions but do not meet the necessary legislative requirements,” he says.

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For example, if a small business deducts tax from employees but does not pay it over they are breaking the law. Employers must also take care to review the citizenship status of temporary workers. Using an illegal immigrant can mean a R15 000 fine which is very costly for a small business trying to position itself in a competitive market.

Get familiar now with the tax laws

Another thing to consider is what will happen to your employee if there is an accident at your premises. Questions to think about include what will happen to his or her salary and who will be liable for medical expenses.

“There are also tax rules to observe. For example, overtime and bonus pay use different formulas and only software that is approved by SARS can be used. Even if an entrepreneur invites his or her senior manager and his wife to a weekend away then it can be construed as a benefit which has to be taxed. So the wording of policy documents, regarding benefits from the company, is crucial,” he adds.

The management and administration of salaries and labour requirements have become specialised. Ignorance of the law is no excuse and companies can be liable for large fines and labour inspections.

DIY compliancy can be costly

Becoming compliant might sound difficult but that does not have to be the case.

“Yes, to try and do everything yourself by getting the knowledge and skills necessary could be very costly, especially over the long-term. But if you work with the right partner who understands the market and the regulatory environment, you are on the right track. Such a partner needs to provide the specialised services an entrepreneur requires,” he says.

A partner should also not care whether you have two payslips or 2 000 to process. The partner will ensure that systems are compliant with all the latest regulations and tax regimes. This means the entrepreneur can focus on his or her core business while much of the compliancy concerns are taken care of.

Related: The Best and (Worst) Advice You Will Ever Receive

James McKerrell
James McKerrell, Chief Executive Officer, CRS Technologies (Pty) Ltd. After qualifying in the accounting field and having run a Fund Raising entity, I became interested in technology and joined CRS as a consultant way back in 1991. I was tasked with starting the CRS Cape Town office, and later moved back to Johannesburg as Ops Director, where I took over the management of the business and until today I play an active role in development of our people, products, new markets and solutions. I am passionate about our products and services, not forgetting our people and customers. I have a wonderful and supportive family and enjoy fly fishing (fishing not catching!) in my spare time. As chairman of The South African Payroll Association, James has to strategically focus the efforts of the EXCO to enhance the profile of the Association, increase membership, and also engage with other international payroll Associations to form a“global body”.