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Labour Law

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

Addressing labour legislation concerns for small entrepreneurs.

James McKerrell

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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.

Related: Understanding Your Responsibility as an Employer

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, 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”.

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Unlegislated ‘Other’ Leave Not A Right Says CRS Technologies

Employers are free to offer staff various types of leave, not covered by legislation, but recognised and governed by company policy and contracts – however, as HCM experts explain, this ‘other leave’ is not a right and ought to be seen as a privilege.

CRS HR And Payroll Solutions

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Employers are free to offer staff various types of leave, not covered by legislation, but recognised and governed by company policy and contracts – however, as HCM experts explain, this ‘other leave’ is not a right and ought to be seen as a privilege.

Nicol Myburgh, Head of HR Business Unit at HR and HCM solutions specialist CRS Technologies, distinguishes leave covered by the Basic Conditions of Employment Act (BCEA) – including annual leave, sick leave, family responsibility and maternity leave – from ‘other leave’ including study leave, paternity leave and cultural leave, for example.

For employers, there are a host of issues that need to be kept in mind when regulating ‘other leave’.

As Myburgh explains, leave that falls into this category is not governed by legislation and therefore is at the discretion of the employer in terms of how it is structured and applied.

Related: Poor Sick Leave Management Is Affecting The Health Of Businesses – CRS Technologies

Additionally, HR and HCM experts agree that these types of leave must be regulated by company policy, particularly the reasons why it is approved and when it is approved, all of which must be substantiated to prevent any feeling of discrimination or bias treatment among staff.  It is also possible that these forms of leave may be viewed as benefits, and that the refusal of an application may give rise to claims of unfair labour practises, and or breach of contract.

“Another important factor to consider is that some of these leave types – especially study leave – are offered by so many companies, that many employers have come to believe this is a statutory type of leave, and employers are obliged to provide it. This is not the case, study leave is not compulsory and even if an employer provides for it, they can make their own determination thereon,” says Myburgh.

CRS Technologies advocates that before additional leave types are approved, companies conduct an in-depth analysis to identify business risk with reference to operational requirement and the amount of staff members necessary to achieve operational goals.

“For instance if an employee takes leave that keeps him/her away from the office for a long period of time, like sabbatical leave, would the employer still be able to meet its operational requirements,” Myburgh adds.

It is also advisable to keep abreast of legislative changes that impact on leave management.

Although ‘other leave’ is not covered by legislation, Myburgh reminds the market that there may be some changes on the horizon.

On 25 November 2015, a draft bill was published in the government gazette which proposes to amend the BCEA, and the Unemployment Insurance Act, 2001.

Significant proposed changes include:

  • 10 consecutive days parental leave when a child is born or adopted.
  • The right to claim payment of parental benefits.
  • 10 consecutive weeks adoption leave if the child adopted is below the age of two.
  • If there are 2 adoptive parents, one of the parents may apply for parental leave and the other adoption leave.
  • The right to claim payment of adoption benefits.
  • 10 weeks of ‘commissioning parental leave’ for employees in a surrogate motherhood agreement.
  • If there are 2 commissioning parents, one of the parents may apply for parental leave and the other parent may apply for commissioning parental leave.

Related: Family Responsibility Leave – Know The Law Says CRS Technologies

Myburgh emphasises that employers familiarise themselves with the differences between BCEA and Bargaining Council or Sectoral Determination regulations, particularly where it applies to the governance of other leave.

This can only lead to improved operational efficiency and a more focused, productive and balanced work environment.

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Labour Law

Will Minimum Wage Increase Boost Economic Growth In South Africa?

The increase in minimum wage comes as good news since it raises the amount of disposable income for the domestic workers.

Jeff Broth

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johannesburg-city

The South African government announced on Monday that it is going to raise the minimum wage for domestic workers in the country starting from December 1st 2016. Labour Minister Mildred Oliphant said that the new wage increase will be applicable until November 30th 2017. The increase in minimum wage comes as good news since it raises the amount of disposable income for the domestic workers.

With the higher levels of disposable income, the domestic workers can decide to spend it all in improving their living standards or save the surplus income. However, for the financially prudent domestic workers, they will find ways to invest the surplus income through easy to use channels such as Stern Options and other trading platforms.

In his statement, the Labour Minister added that “The minimum wage adjustment is in line with the Basic Conditions of Employment Act which is regulated through the Sectoral Determination. Domestic workers are by law classified as vulnerable‚ hence the Sectoral Determination governing minimum wage and conditions of employment.” According to the labor laws in South Africa, domestic workers include nannies, gardeners, domestic drivers, housekeepers among others.

Related: Increase For Hospitality Wages

The minimum wage increase will however not be applied uniformly in all places. The government has divided different locations into Area A and Area B. Area A consists of major cities, towns and metropolitan municipalities. For domestic workers in Area A working for more than 27 hours per week, their hourly rate will be increased from R11.44 to R12.42. This will translate to weekly earnings of R559.09 from R514.82; and a monthly increase in wages from R2230.70 to R2422.54.

Domestic workers working for less than 27 hours a week in Area A, their hourly wage rate was raised to R14.54, which adds up to a weekly wage rate of R392.58 and cumulatively sums up to a monthly wage rate of R1 701.06. On average, the change in minimum wage for the metropolitan areas represents an increase of about 8.2% in the net pay for domestic workers from the previous year.

Area B consists of non-metropolitan areas in South Africa. For domestic workers in Area B working for more than 27 hours in a week, their new hourly rates stand at R11.31, which translates to a weekly rate of R508.93 and cumulatively add up to a monthly rate of R2205.17. Those domestic workers working less than 27 hours in Area B will start receiving a new hourly wage rate of R13.53, a weekly rate of R360.54 and cumulatively receive a monthly wage rate of R1 562.21. Compared to the financial year 2015/2016, on average this represents a 10% increase the wages for the domestic workers in Area B.

cyril-ramaphosa

These changes are the first among several others that are expected to be introduced in the coming months by the government of South Africa. Early on in August this year the Deputy President of South Africa Cyril Ramaphosa launched the process of reviewing the national minimum wage for South Africa by appointing a seven member panel to initiate the deliberations on the same. The debate about minimum national wage has been in the media for quite some time now going back to first quarter of 2016.

Related: How To Structure A Fair Salary That Will Motivate Your Sales Team

One school of thought believes that the minimum wage is not the solution to economic development in South Africa. In their argument, they believe that setting a minimum wage will increase the cost of production for goods and services and leave employers with two options.

The employers will either reduce their headcount in order to curb the rising costs or increase their product prices and face the danger of reduced demand and falling sales. Both alternatives are detrimental to economic growth.

Another school of thought argues that with increased minimum wages, spending power for the consumers will be increased and they will buy more goods and services that they could not afford before.

This would then push demand up and translate to higher production to meet the increasing demand and hence result to an increase in GDP. Eventually South Africa would experience higher economic growth rates as higher revenues for businesses result to further increase in wages by the employers which sparks another round of increased production and the cycle continues.

The debate is still raging on whether the increase in minimum wage is the solution to South Africa’s economic development and the final judgment is yet to be arrived at. However, with the panel constituted to deliberate the matter being made up of the best brains in the discipline of economics, we can expect prudent results to emerge from their discussions soon.

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Poor Sick Leave Management Is Affecting The Health Of Businesses – CRS Technologies

Sick leave in business requires effective management; its mismanagement or abuse can be detrimental to any company in terms of financial and employee performance.

CRS HR And Payroll Solutions

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Sick leave in business requires effective management; its mismanagement or abuse can be detrimental to any company in terms of financial and employee performance.

A dictionary definition of sick leave is “an absence from work permitted because of illness and the number of days per year for which an employer agrees to pay employees who are sick”.

According to the Basic Conditions of Employment Act (BCEA) an employee is – during every sick leave cycle – entitled to paid sick leave equal to the number of days the employee would normally work during a period of six weeks.

The provisions for sick leave do not apply to:

  • Employees who work less than 24 hours a month
  • Employees who receive compensation for an occupational injury or disease
  • Leave over and above that provided for by the Act.

The BCEA prescribes that in the case of standard employment i.e. a 5-day working week, the employee would be entitled to 30 days paid sick leave during each sick leave cycle.

Related: Family Responsibility Leave – Know The Law Says CRS Technologies

A sick leave cycle is calculated from the date of engagement up to the 3rd anniversary of that date; in other words, for employees with a 5-day working week an employee is entitled to 30 days sick leave every 3 years. This sick leave does not accumulate from cycle to cycle, after each cycle. All unused sick leave is forfeited.

It is important to understand that sick leave is given by statute as an entitlement; it does not accrue.  It is also a form of contingency, so if, even early in their service, an employee requires extended sick leave, the whole thirty days may be taken. In the event that the employee leaves, the employer cannot claim the sick leave back.

However, the BCEA makes provision for this, by limiting paid sick leave during the first six months of employment to 1 day for every 26 days worked. The employer may thus draft the employment contract with this provision, whereafter the three year cycle will commence from day 1, month 7.

It should be noted that the BCEA protects the employer and makes provision for the employer to require proof of illness or injury when an employee has taken sick leave.

If, however, the employee has been absent from work for more than two consecutive days or on more than two occasions during an eight-week period and the employee is unable to provide a medical certificate on the employer’s request, the employer is not required to pay the employee for the absence.  The medical certificate substantiates a claim for paid sick leave.

This is applicable to most industries with some variations in industries regulated by bargaining councils, sectoral determinations or other agreement regulated by law.

The Metal and Engineering Industries Bargaining Council Sick Pay Fund (MIBFA) provides for additional sick pay-benefits for each completed day of absence from work through illness and injury which is in excess of the paid sick leave entitlement. Additional sick-pay benefits are payable at a rate of 50% of the weekly earnings of a member for each completed week of absence from work.

Furthermore where a member’s absence from work is not a complete week, sick-pay benefits shall be calculated PRO-RATA for each complete day of absence. This amount is payable up to maximum of 30 weeks.  In other words, once an employee’s 30 days paid sick leave has been depleted he/she is entitled to 50% of their wages paid by MIBFA up to a maximum of 30 weeks.

Although little has changed in terms of sick leave regulation (since the minimum was changed from 10 days per year to 30 days in 3 years in 1997), Human Capital Management (HCM) and HR experts are concerned about the efficiency with which this facet of HR management is being handled.

Related: Leave In Business – Critical To Understand Flexibility Says CRS Technologies

sick-employee

The issues

Nicol Myburgh, Head of HR Business Unit at HR and HCM specialist services provider CRS Technologies, says many employers either grant sick leave and never follow up to obtain a medical certificate or grant sick leave indefinitely without capturing and tracking this on a system to ensure availability of leave before granting it.

“Another mistake employers make is accepting a medical certificate as proof for sick leave without making sure if the employee was actually “booked off” for the full period of absence,” says Myburgh.

Again CRS Technologies points to the BCEA and specifically the clause which states that the medical certificate must be issued and signed by a medical practitioner or any other person who is certified to diagnose and treat patients, and who is registered with a professional council established by an Act of Parliament.

Another issue is that sick leave entitlement poses a risk to employers, Myburgh explains.

The key message from CRS Technologies is only an employee who is too sick to work, may claim paid sick leave. If the employer is in a position to prove that the employee was not sick, disciplinary steps may be taken against the employee.

“Sick leave abuse is difficult to determine and prove, many factors should be considered before an employer makes a claim of sick leave abuse for instance. The amount of time taken for each absence, the specific days that are taken (the day before or after a weekend or public holiday) or any inconsistencies for each staff member should be taken in to account, says Myburgh.

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