- Type of business entities
- Tax Registration
- What tax you need to pay
- Determining how much tax to pay
- Turnover Tax: Relief for micro business
- The importance of record keeping
- Use a tax professional
- Useful resources
Small businesses are required to follow the same tax processes as medium or large businesses, but small businesses often experience the tax process as stressful. The complex and strict nature of tax returns is often intimidating and quite a burden to small business.
Type of business entities
The tax requirements and considerations for small businesses is dependant on the type of business entity:
1. Sole proprietorship
A sole proprietorship also known as a sole trader is a type of business entity which is owned and run by one individual and where there is no legal distinction between the owner and the business. All profits and all losses accrue to the owner. The owner doesn’t need to register the business with SARS but does need to include the income from the business in their own tax return.
A partnership is also not a separate legal person or taxpayer. Each partner is taxed on his or her share of the partnership profits.
3. Private company
A private company is treated by law as a separate legal entity and must also register as a taxpayer in its own right. It has a life separate from its owners with rights and duties of its own.
Shareholders are generally not responsible for the liabilities of the company, however certain liabilities do exist. This includes where an employer or the person who performs functions similar to a director of the company, will be personally liable for employees’ tax, VAT, additional tax, penalty or interest for which the CC is liable (where these taxes have not been paid to SARS within the prescribed period).
As soon as you commence your business, you are required to register with your local SARS office to obtain an income tax reference number. You must register within 60 days after you have commenced business by completing an IT77 form (available from your local SARS office or from the SARS website).
A CC or private company must be registered with the Registrar of Companies and Close Corporations to obtain a business reference number. Your CC or private company will then be registered automatically as a taxpayer.
Depending on other factors such as turnover, payroll amounts, whether you are involved in imports and exports etc. you could also be liable to register for other taxes, duties, levies and contributions such as VAT, PAYE, Customs, Excise, SDL and UIF contributions.
What tax you need to pay
1. Provisional tax
As soon as you commence business you will become a provisional taxpayer and will be required to register with your local SARS office as a provisional taxpayer within 30 days after the date you become a provisional taxpayer. CCs and companies are automatically registered as provisional taxpayers.
The payment of provisional tax is intended to assist taxpayers in meeting their normal tax liabilities. This occurs by the payment of two installments in respect of income received or accrued during the relevant tax year and an optional third payment after the end of the tax year, thus obviating, as far as possible, the need to make provision for a single substantial normal tax payment on assessment after the end of the tax year.
The first provisional tax payment must be made within six months after the commencement of the tax year and the second payment not later than the last day of the tax year.
The optional third payment is voluntary and may be made within six months after the end of the tax year if your accounts close on a date other than the last day of February.
For a tax year ending on the last day of February, the optional third payment must be made within seven months after the end of the tax year.
2. Employees’ tax
Employees’ tax is a system whereby an employer, as an agent of government, deducts employees’ tax (PAYE) from the earnings of employees and pays it over to SARS on a monthly basis.
This tax serves as a tax credit that is set off against the final income tax liability of an employee, which is determined on an annual basis.
A business (an employer) that pays salaries, wages and other remuneration to any of its employees above the tax thresholds, must register with SARS for employees’ tax purposes.
This is done by completing an EMP 101 form and submitting it to SARS. The EMP 101 is available at all SARS offices and on the SARS website. Once registered, the employer will receive a monthly return (EMP 201) that must be completed and submitted together with the payment of employees’ tax within seven days of the month following the month for which the tax was deducted.
3. Directors’ remuneration
The remuneration of directors of private companies (including individuals in CCs performing similar functions) is subject to employees’ tax. Their remuneration is often only finally determined late in the tax year or in the following year. In these circumstances they finance their living expenditure out of their loan accounts until their remuneration is determined.
To overcome the problem of no monthly remuneration being payable from which employees’ tax can be withheld, a formula is used to determine a deemed monthly remuneration upon which the company must deduct employees’ tax.
A director is not entitled to receive an employees’ tax certificate (IRP5) in respect of the amount of employees’ tax paid by the company on the deemed remuneration if the company has not recovered the employees’ tax from the director.
Determining how much tax to pay
In order to prepare your income tax return, you will need to understand the basic steps in determining your business’s profit or loss. These steps are much the same for each type of business entity. Basically, net profit or loss is determined as follows:
Income – Expenses = Profit (Loss)
You will use this formula with some slight changes in determining your profit or loss.
Dig Deeper: How to Reduce Your Taxable Income
The IT Act provides for a series of steps to be followed in arriving at the taxpayer’s “taxable income”. The starting point is to determine the taxpayer’s “gross income”.
Receipts or accruals of a capital nature are generally excluded from gross income. However, “gross income” also includes certain other receipts and accruals specified within the definition of “gross income” regardless of their nature.
The next step is to determine “income” which is the result of deducting all receipts and accruals that are exempt from income tax in terms of the IT Act from “gross income”. Finally, “taxable income” or “assessed loss” is arrived at by:
- Deducting all the amounts allowed to be deducted or set off, in terms of the IT Act, from “income”; and
- Adding taxable capital gains to the net positive figure or deducting taxable capital gains from the net negative figure.
A sole proprietor or each partner in the case of a partnership is subject to income tax on his or her taxable income. Income tax (normal tax) is levied at progressive rates ranging from 18% to 40%. Unlike individuals, a company or CC pays 28% income tax on its taxable income for the tax year and 10% secondary tax on companies (STC) on the net amount of dividends declared.
Turnover Tax: Relief for micro business
To reduce the administrative burden on small businesses, SARS introduced a single tax system as a tool for small businesses to help streamline their tax obligations, known as Turnover Tax.
Dig Deeper: 8 Steps to Dramatically Increase Your Income
Turnover Tax is a simplified tax system for small businesses with a turnover of up to R1 million per annum. It is a tax based on the turnover of a business and is available to sole proprietors (individuals), partnerships, close corporations, companies and co-operatives.
Turnover Tax is a substitute for VAT, Provisional Tax, Income Tax, Capital Gains Tax and Secondary Tax on Companies. So qualifying businesses pay a single tax instead of five other taxes. It’s elective – so you choose whether to participate!
1. How does Turnover Tax work?
Turnover Tax is calculated by simply applying a sliding tax rate to the “taxable turnover” of a business. The “taxable turnover” consists of the turnover of the business for the year of assessment with a few specific inclusions and exclusions.
- R0 – R100 000: 0%
- R100 001 – R300 000: 1% of each R1 above R100 000
- R300 001 – R500 000: R2 000 + 3% of the amount above R300 000
- R500 001 – R750 000: R8 000 + 5% of the amount above R500 000
- R750 001 and above: R20 500 + 7% of the amount above R750 000
2. Will you pay less tax with the Turnover Tax system?
Whether or not you will pay less tax with the Turnover Tax system depends on the unique factors of the business including the profitability of the business and whether or not it is in a tax loss position in the standard income tax system. But remember that the Turnover Tax system is primarily designed to reduce your administrative burden – so you need to factor in all the costs associated with meeting your current or future tax obligations.
Like how many hours you spend completing and submitting VAT and income tax returns, and calculating the relatively involved income tax that is payable for provisional tax and final assessment purposes
Use the following quick analysis to see whether switching to the Turnover Tax will benefit you or not.
- Step 1: In one column take your estimated turnover for the financial year for which you want to register for the Turnover Tax.
- Step 2: Calculate the tax you will pay for the year.
- Step 3: Add your estimated cost of completing one simple Turnover Tax return and making two six-monthly interim payments for each year of assessment (if liable).
- Step 4: Now in another column write down the income tax, CGT, STC, your business paid for the last financial year (or estimate for the coming financial year).
- Step 5: Add all the costs associated with the completion and submission of your two or three provisional income tax returns, the final income tax return, STC returns, VAT Returns, and other tax obligations.
- Step 6: Now simply compare the costs in column A and B.
A small business that chooses to join the Turnover Tax system must remain in the system for at least three years unless it is specifically disqualified (for example if the turnover exceeds R1 million during this period).
Equally, a small business that exits the Turnover Tax system will not be allowed to re-register for a period of three years. This is to stop businesses from chopping and changing between the tax systems because of the administrative burden of registration and de-registration for the various taxes each time and the potential to abuse the systems to pay less tax.
3. Joining the Turnover Tax system
Existing small businesses that want to be registered for Turnover Tax must apply for registration by the last day of February so that they can be registered for the following year of assessment.
New businesses must apply within two months from the date of commencement of business activities. You apply by completing a Turnover Tax (TT01) application form which is available at any SARS branch or you can download it from the SARS website.
The importance of record keeping
You must keep records that will enable you to prepare complete and accurate tax returns if you are involved in a business. You may choose a system of record-keeping that is suited to the purpose and nature of your business.
These records must clearly reflect your income and expenditure. This means that, in addition to your permanent books of account or records, you must maintain all other information that may be required to support the entries in your records and tax returns.
Paid accounts, cancelled cheques and other source documents that support entries in your records should be filed in an orderly manner and stored in a safe place. For most small businesses, the business chequebook is the prime source for entries in the business records. It is advisable to open a separate bank account for your business so that you do not mix your private and business expenses. The records should include:
- Records showing the assets, liabilities, undrawn profits, revaluation of fixed assets and various loans
- A register of fixed assets
- Detailed daily records of cash receipts and payments reflecting the nature of the transactions and the names of the parties to the transactions (except for cash sales)
- Detailed records of credit purchases (goods and services) and sales reflecting the nature of the transactions and the names of the parties to the transactions
- Statements of annual stocktaking; and
- Supporting vouchers.
Use a tax professional
It is advisable to acquire the services of a tax specialist who can formulate an appropriate tax strategy that is aligned with your overall business strategy and the tax challenges facing your business. SARS tax consultants (either at their offices or via the phone) can help you calculate your tax and answer any questions that you may have regarding your business.
Large accounting companies or smaller firms can assist depending on your requirements, but will charge for their professional services. Contact the South African Institute of Chartered Accountants for more details. Be sure to choose someone sufficiently qualified, and who won’t leave you in trouble with the taxman. Do not assume that because a practitioner is registered with SARS, they are fit to advise you.
There are no requirements for those who register and registration is no indication of your tax practitioner’s competency. Call references to gauge service delivery or ask trusted associates for recommendations.
A company is required by law to appoint an auditor who will audit and sign an audit report in respect of its financial statements. Similarly a close corporation is required to appoint an accounting officer. Normally, the auditor or accounting officer will provide assistance in determining the taxable income and the amount of tax to be paid.
- South African Revenue Service: www.sars.gov.za
- South African Institute of Chartered Accountants: www.saica.co.za
Need To File Your Annual Tax Return Soon? This is what you need to know.
What You Should Include In The Partnership Agreement
How to create a formal written partnership agreement.
When taking on a business partner, it is critical to have a formal, written partnership agreement. While this is not a legal requirement, it does provide a framework for the partnership in terms of everyone’s obligations, settling conflicts, disagreements and other issues that could occur. The agreement is needed for the wellbeing of the business.
Create your written partnership agreement with the assumption that anything that can go wrong with your partnership will. Friction between partners over things such as money, power or ego frequently undoes business relationships.
Your partnership agreement should prepare you for all possible “what-if” situations, and set methods for resolving them.
You can save money by drafting your own version of the key parts of your agreement, then taking it to your firm’s attorney to be reviewed, clarified, modified and finalised. It is important to have an attorney review the contract.
These are some of the key areas you should include in your written partnership agreement:
1Partnership Agreement Basics
- What is the name of the partnership?
- What is the purpose of the partnership?
- What is the duration of the partnership?
2Responsibilities, performance and remuneration
- What is each partner’s role?
- What are each partner’s responsibilities within the company, and what level of performance is expected?
- Are partners expected to make a full-time commitment to the venture, or are business activities permitted?
- What will be the income of each partner, and how will profits or losses be distributed?
- What will each partner be contributing to the partnership in terms of cash, assets, loans, investments, and/or labor?
- If a partner loans the company money, what will be the terms or repayment?
- Will the business partners be expected to make additional contributions to the partnership, and if so, how will that be handled?
- Withdrawal of partners/admission of new partners
- What guidelines should be followed if one partner wants to leave the partnership?
- Will partners be allowed to sell their interests in the business to outsiders?
- On what grounds can a partner be expelled from the partnership (misconduct, non-performance of duties)?
- How will new partners be admitted to the partnership?
- What guidelines should be followed if one partner wants to retire or leave the business partnership?
- What happens if a partner is incapacitated or dies?
- Will the partnership take out “key man” life insurance to ensure the surviving partner is able to buy the deceased partner’s shares from his/her heirs?
- Will partners who leave have to sign a non-compete agreement?
- What methods will be used to settle disputes that can’t be otherwise resolved?
- What procedures should be used in the event of a tie vote between partners on crucial partnership decisions?
- Will you use mediation or binding arbitration?
- If disputes can’t be resolved, is there a mechanism in place for dissolving the business partnership?
- What banking arrangements will be made for the partnership?
- Which partners will have check signing privileges?
- Who will be authorised to draw on the partnership’s accounts?
- How will the books be kept?
7Method for dissolving the partnership
- When can the partnership be dissolved?
- What happens to the partnership if the partners decide they can’t work together?
- What methods will be used to determine the value of the business in the event of a sale, dissolution, death, disability or withdrawal of a partner?
- FreeLegalDocs: www.freelegaldocs.co.za
- LegalWise: http://www.legalwise.co.za/index.php/downloads/free-contracts.html
Do You Speak Start-up?
The start-up dictionary for every budding entrepreneur.
Venture capital in South Africa is starting to take hold. With a host of venture funds, section 12J companies, incubators and start-up clubs being launched, start-ups are becoming more popular and investors are encouraged to consider these new opportunities.
Chris Ball, an investment analyst at AlphaWealth and a co-founder of Fincheck.co.za, a financial comparison fintech start-up, explains the colloquial jargon of venture investors and start-up entrepreneurs.
Chris wrote this ‘dictionary’ initially to educate AlphaWealth’s high net worth clients about the start up world so that they could consider becoming investors.
An angel investor is generally someone who provides seed capital to a start-up in its infancy. In South Africa, there are a few well known angel investors. However, most entrepreneur’s first funds are generally received from family and friends who believe in the idea.
B2B, B2C, P2P
Business to business – This describes a business that is targeting another business with its product or services. This type of service is also known as enterprise technology. Salesforce would be a great example of this technology.
Business to consumer – describes a start-up that sells directly to consumer.
Peer to peer – is a platform concept, where the technology matches buyers and sellers. One of the earlier peer to peer technologies was Ebay. Today, the peer to peer platform has evolved to incorporate finance institutions such as Lendico.
This is a concept where founders pool their own capital resources to get the start up as far as possible before looking for external funding.
The term comes from “pulling oneself up by one’s bootstraps”. This mindset links directly into the lean start up methodology.
Related: 6 Tips For Bootstrapping
Both technology and business models can be disruptive and is defined when a start-up disrupts the current market place by displacing old businesses and winning market share. Outsurance and Uber have disrupted the insurance and personal transport businesses.
This is someone who starts a business or venture, assuming all potential risk and reward for his or herself.
This is the start of a venture where a founding team have enough to illustrate the concept but are yet to execute the initial steps of their plan.
Lean start-up methodology
The lean start-up methodology, is a business thesis that was founded by Eric Reis. The business methodology is based on the practice of testing multiple small iterations in an effort to find the product, design or user experience or even business model that is best adopted by the end consumer.
Read more on the Lean start-up methodology here.
An organisation that helps develop early stage companies. Generally this help is offered in exchange for equity. The Israeli start-up ecosystem has some of the best incubators where they offer workspace, networks and guidance.
‘Go big or go home’ – this is the impossible idea that a team wants to accomplish. The term was originally coined when John F Kennedy challenged American scientists to get a human to the moon.
A company that changes its business direction as a result of a dead end or the ability to use their technology in a more significant way. Instagram was originally a location check in service before pivoting to become a photo sharing application.
Pre-money and post-money
Post-money = Pre-money valuation + new funding.
Valuing a start-up has become a bit of an art, but more and more funds are starting to adopt a common methodology as the industry matures. In essence, the pre-money value is the monetary value of the company before a new investment is made.
Proof of concept
After the idea comes the execution. One of the first hurdles entrepreneurs need to clear is the proof of concept. This is a point where the start-up proves that the business model is feasible.
Software as a service. These businesses are hosted in the cloud and the software can be rented out as a service.
Seed, A Round, B Round…
Start-ups raise capital in several tranches because raising it all at once would dilute the founder’s share before they have even had a chance to build the business. The seed round is done to prove proof of concept. The A round is raised once proof of concept has taken place. There can be several rounds before an exit or IPO is achieved. Some of these companies have grown so large through several rounds of investment that they are termed a unicorn business.
Understanding Your Responsibility As An Employer
Now that you have your own employees, here is what you should know about your new responsibilities.
Hiring employees requires more work from you as the employer than simply placing a job ad, hiring the right person and training them on their role.
You need to be aware of the Labour Law requirements in terms of the various funds and other stipulated registrations. The law does not differentiate between different size organisations, and therefore it is imperative that SME’s fully understand the implications of all aspects of Labour legislation.
Related: 5 Factors That Make a Great Boss
Employers may only deduct money from a worker’s salary if the worker agrees or if they are required to do so. The provisions for deductions do not apply to workers who work less than 24 hours a month.
Employers may not deduct money from a worker’s pay unless –
- the worker agrees in writing to the deduction of a debt, or
- the deduction is made in terms of a collective agreement, law (e.g. UIF contributions), court order or arbitration award.
Deductions for damage or loss caused by the worker may only be made if –
- the employer has followed a fair procedure and given the worker a chance to show why the deduction should not be made,
- the worker agrees in writing, and
- the total deduction is not more than 25% of the worker’s net pay.
Employers must pay deductions and employer contributions to benefit funds (pension, provident, retirement, medical aid, etc.) to the fund within 7 days.
What is UIF
UIF stands for Unemployment Insurance Fund and you need to register for it, whether or not you employ staff. It applies to all employers and workers (except those working less than 24 hours a month), learners, public servants, foreigners working on contract, workers who get a monthly State (old age) pension and workers who only earn commission. The fund makes short-term provision for individuals who become unemployed, or are unable to work because of illness, maternity or adoption leave. It also provides financial relief to the dependants of deceased contributors.
As an employer it is your responsibility to register with UIF and make the monthly payments. These include a 1% payment from you (based on your employees’ individual salaries).
Each individual employee needs to make a further 1% payment, but it is your duty to deduct this amount from their salary and pay it to UIF, together with your contribution, on a monthly basis to SARS if you are registered for PAYE or directly to the UIF if you are not.
You can register your business by completing a UF8 form and each new employee needs to be registered using a UI-19 form. These can be obtained from the Department of Labour.
What is COIDA
COIDA stands for the Compensation for Occupational Injuries and Diseases Act and being registered for it works in your favour. It is based on a no-fault system which means employees are entitled to compensation regardless of who caused the injury or illness.
But it also exempts you from liability for injuries or diseases contracted by your employees in the course of their work. In other words, employees can’t claim damages from you in those events. Instead, COIDA allows them to claim compensation for total or permanent disablement and death as well as reasonable medical expenses arising out of injury for two years.
You are required to pay the employee 75% of their normal salary for three months during the time that they are injured or ill but the fund pays you back this entire amount and covers all the relevant medical expenses.
If you are not registered, however, you are not indemnified. Getting registered involves submitting a WAs2 form, together with a copy of the registration certificate from the Registrar of Companies, or your ID document, if you are a sole proprietor. Every year before 31 March you will need to submit a statement of earnings paid to your employees. You will also be required to pay an assessment tariff, which is fixed according to your class of industry.
If an employee gets injured during the course of their work or falls ill as a result of their work, they can claim from the Worker’s Compensation fund. Dependants of employees can claim if a family member dies from an accident or disease. Employees wishing to claim will need to be furnished with one of the WG30, WAs2 or WAc1(E) forms, which they need to submit to the Compensation Commissioner for compensation.
How Does Maternity Leave Work?
The law protects women against unfair discrimination arising from any form of prejudice. An employer may not ask a candidate who applies for a job if she is pregnant, nor if she is planning to start a family at any stage.
If you do, she could argue that you are discriminating against her. Equally, she is in no way obliged to disclose her pregnancy when applying for a position. The bottom line is that it has nothing to do with the candidate’s ability to meet the requirements of the position. And nothing stops her from resigning once she has returned to work after taking maternity leave. She has rights regardless.
The Basic Conditions of Employment Act stipulates that an employee is entitled to four months unpaid maternity leave. All that is required is a notification by the employee that she is pregnant, accompanied by a doctor’s certificate. This leave should start four weeks before the expected date of birth, or when a doctor or midwife certifies that leave is necessary for the health of the mother or child. An employee must notify her employer in writing of the date on which she wants to start maternity leave. She may not work for six weeks after delivery, unless she is declared fit to do so.
An employee who has a miscarriage during the last three months of pregnancy or who bears a stillborn child is also entitled to six weeks maternity leave, whether or not she has started maternity leave at the time. Companies in South Africa are not obliged by law to provide paid maternity leave. A female employee who works for a company that does not offer maternity benefits can claim from the Maternity Benefit Fund if she has been contributing to the Unemployment Insurance Fund (UIF).
An employer who pays maternity leave does have some rights, however. Paid maternity leave is a benefit, and the company is within its rights to conclude a contract with the employee stating that if she does not return to work for at least one year following her confinement, she will be obliged to return the salary she earned during her maternity leave.
South Africa has no paternity leave provisions in place, but workers who have been employed at a company for longer than four months may take three days’ paid family responsibility leave during each year of employment.
Family Responsibility Leave
Workers may take up to three days of paid leave a year to attend to certain family responsibilities. The provisions for family responsibility leave do not apply to workers who work less than:
- Four months for their employer
- Four days a week for one employer
- 24 hours a month.
Family responsibility leave expires at the end of the annual cycle. Employees may take family responsibility leave:
- when their child is born
- when their child is sick
- in the event of the death of a:
- spouse or life partner
- parent or adoptive parent
- child or adopted child
Employers may require reasonable proof of the birth, illness or death for which a worker requests leave.
Related: What Young People Want From Work
The amount of overtime a worker may work is limited. Workers must get 1,5 times their normal hourly pay or paid time off in exchange for overtime. Alternatively, a worker may agree to receive paid time off or a combination of pay and time off.
The section of the Basic Conditions of Employment Act that regulate working hours does not apply to:
- workers in senior management
- sales staff who travel and regulate their own working hours
- workers who work less than 24 hours in a month
- workers who earn more than R115 572 per year
- workers engaged in emergency work are excluded from certain provisions.
Workers may not work:
- overtime, unless by agreement
- more than 10 hours’ overtime a week (collective agreement may increase this to 15 hours per week for up to two months a year)
- more than 12 hours on any day.
Employee Pay Slips
Each time workers are paid, employers must give them a pay slip containing certain details. Employers must give workers the following information in writing when they are paid:
- Employer’s name and address
- Worker’s name and occupation
- Period for which payment is made
- Total salary or wages
- Any deductions
- The actual amount paid
- If relevant to the calculation of pay:
- Employee’s pay and overtime rates
- Number of ordinary and overtime hours worked
- Number of hours worked on a Sunday or public holiday
The total number of ordinary and overtime hours worked in the period of averaging, if a collective agreement to average working time has been concluded
Workers must get paid time off for public holidays, but if they agree to work, they must be paid double their normal daily wage. The provisions for public holidays do not apply to –
- senior management
- sales staff who travel
- workers who work less than 24 hours a month
Workers must get paid time off for any public holiday that falls on a working day. Working on a public holiday is by agreement only. A public holiday can be exchanged with another day by agreement. A public holiday cannot be counted as annual leave.
Employee Sick Leave
Workers may take the number of days they would normally work in a six-week period for sick leave on full pay in a three-year period. Employers may insist on proof of illness before paying a worker for sick leave. The provisions for sick leave do not apply to:
- workers who work less than 24 hours a month
- workers who receive compensation for an occupational injury or disease
- leave over and above that provided for by the Act.
During the first 6 months of employment, workers are only entitled to one day of paid sick leave for every 26 days worked. An employer may require a medical certificate before paying workers who are absent for more than two consecutive days, or who are often absent (more than twice in an eight-week period).
Staff Working Hours
Basic Conditions of Employment laws set maximum working hours and minimum rest and break periods for workers. The section of the Act that regulate working hours does not apply to:
- workers in senior management
- sales staff who travel and regulate their own working hours
- workers who work less than 24 hours in a month
- workers who earn more than R115 572 per year
- workers engaged in emergency work are excluded from certain provisions.
The maximum ordinary hours per day for someone who works one to five days per week is nine, the maximum amount of hours per week is 45. For those who work more than five day per week should work a maximum of eight hours per day and 45 hours per week. Workers may agree, in writing, to work up to 12 hours a day without getting overtime pay. However, these workers may not work more than:
- 45 ordinary hours a week
- 10 hours’ overtime a week
- five days a week
Workers must have a meal break of 60 minutes after five hours’ work. A written agreement may:
- reduce meal intervals to 30 minutes
- eliminate meal intervals for workers who work less than 6 hours a day
Workers must have a rest period of 12 hours each day; and 36 consecutive hours each week (must include Sunday, unless otherwise agreed).
Workers working between 18h00 and 06h00 must:
- get an allowance, or
- work reduced hours, and
- have transport available to them.
Skills Development Levies
Employers must pay 1% of their workers’ pay to the skills development levy. The money goes to Sector Education and Training Authorities (SETAs) and the Skills Development Fund to pay for training. The Skills Development Levies Act applies to all employers except–
- the public service;
- religious or charity organisations;
- public entities that get more than 80% of their money from Parliament; and
- whose total pay to all its workers is less than R 250 000 per year; and
- who do not have to register according to the Income Tax Act
Employers who are required to pay the skills development levy must register with the South African Revenue Services (SARS). Employers must pay 1% of all their workers’ pay to the skills development levy every month. Employers must pay the levy to the South African Revenue Services (SARS) by the seventh day of each month. Employers who do not pay will have to pay interest on the money they owe and may also have to pay a penalty.
What is PAYE
All employers are required to deduct Employees’ Tax from their salaries. The amounts deducted must be paid by the employer to SARS on a monthly basis. The process of deducting or withholding tax from remuneration as it is earned by an employee is referred to as Pay-As-You-Earn (PAYE).
Employers are required to:
- Deduct the correct amount of tax from employees’ remuneration.
- Pay this amount to SARS monthly, ensuring SARS receives a Monthly Employer Declaration (EMP201).
- Reconcile these deductions and payments with the completion of the interim and annual Employer Reconciliation Declarations. During the reconciliation periods, employers are required to submit an Employer Reconciliation Declaration (EMP501) confirming or correcting the PAYE, SDL and UIF declarations per EMP201s submitted, the payments made and the tax values of the Employee Tax Certificates [IRP5/IT3(a)].
- Issue tax certificates to employees
- An employer must issue an employee with an IRP5/IT3(a) where remuneration is paid or has become payable and from which Employees’ Tax was deducted. The IRP5/IT3(a) discloses the total employment remuneration earned for the year of assessment and the total deductions. IRP5/IT3(a) certificates must be issued to employees during the annual Employers tax season.
Seek professional advice
There is a lot to keep track of once you become and employer. It is advisable to call in an expert. You can use the services of a suitable experienced and qualified HR consultant who can help to set up the principles and processes of the above, and then work on an ad hoc basis only as and when needed reducing the cost of a full-time HR manager.
- The Department of Labour: www.labour.gov.za
- SARS: www.sars.gov.za
- uFiling: www.ufiling.co.za
- Commission for Conciliation, Mediation and Arbitration (CCMA): www.ccma.org.za
- The South African Labour Guide: www.labourguide.co.za
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