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SA’s Labour Laws: Key Changes And How They Will Affect You And Your Business

Commentary by Rob Cooper, tax expert and Director of Legislation at Sage.

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Our labour laws are constantly evolving as the South African government seeks to balance stronger protections for employees with the need to create a business-friendly investment climate. We can expect to see a number of amendments to the country’s core labour law acts – the Basic Conditions of Employment Act and the Unemployment Insurance Act – over the next couple of years.

Some of them promise to improve the lives of millions for the better, while others will bring about new complexities for businesses to manage.

Let’s run through a few of the most important changes:

Unemployment Insurance Benefits

Parliament has amended the Unemployment Insurance Act to increase benefit values, simplify their administration, and clarify that foreign national employees and learners employed on a learnership agreement are eligible to claim benefits. It also amended the Unemployment Insurance Contributions Act to make it compulsory for foreign national employees and people on a learnership to contribute to the Unemployment Insurance Fund (UIF)—which makes sense since you need to contribute to an insurance fund to benefit from it.

The changes to the Contributions Act took effect from March 2018, but there is not yet a concrete date for the changes to the benefits offered under terms of the Unemployment Insurance Act. Until the legislation is synchronised, the Fund promises to honour benefit claims from the affected employees.

Rob Cooper, discussing the UIF legislation:

Related: Alternatives To Traditional Legal Services – What Options Do Entrepreneurs Have?

Labour Bill

This member’s bill is a wonderful example of our parliamentary democracy in action, with MPs from most parties aligning behind a piece of legislation that will make life better for many South Africans. It was proposed by a member of the African Christian Democratic Party in 2016 and approved by the National Assembly towards the end of 2017. This law introduces three new forms of leave for employees: parental leave of 10 days, adoption leave of 10 weeks, and commissioning leave (where a surrogate mother is involved) of 10 weeks.

It’s rewarding to see an Act that gives parents the right to take family time off, even if they are not the person giving birth. It’s also welcome news that adoptive parents and parents working with a surrogate will be entitled to time to bond with the new member of their family.

However, the changes will require further amendments to the Basic Conditions of Employment Act and the Unemployment Insurance Act. For now, we are not sure about the impact on the payroll, but the new types of leave will have to be recorded, and employers will most likely need to provide some information to the UIF to facilitate the approval of the new benefits.

Rob Cooper, discussing the Labour Bill and Paternity leave:

National Minimum Wage Bill

The implementation of the National Minimum Wage has been postponed from 1 May 2018 to an as yet undetermined date—the latest delay in a controversial law that the government has worked on for many years. I’m hopeful that the differences between labour, government and business will be resolved soon because the country needs clarity around this law. Though some critics believe it will harm employment and job creation—and others say it is not a true living wage—it is a step in the right direction. It could change living conditions for millions for the better.

That said, there is still some work to be done. Parliament has introduced amendment bills to align the Basic Conditions of Employment Act and the Labour Relations Act with the National Minimum Wage Act. The implication for the payroll is that we will have a minimum wage administered on an hourly value and that other minimums set by current wage regulating measures will move up to the National Minimum Wage level if they are less.

Employment Tax Incentive (ETI) Act

For an employee to qualify for the Employment Tax Incentive, the employer must pay the employee at least the minimum wage. Where there is no wage-regulating measure (such as a sectoral Bargaining Council), the Act specifies that the employer must pay a minimum wage of R2 000 per month.  There is no hourly or weekly minimum wage option in the Act, making it difficult to apply this test fairly in a weekly payroll where some months have 4 weeks and others 5 weeks.

If the life of the Act is extended, it will need to be amended to replace the R2 000 monthly minimum with the proposed R20 per hour national minimum. I strongly believe in this Act, but it has not reached its full potential because employers and SARS alike find it complex to administer. I hope that government extends it beyond February 2019 and uses the next round of amendments to streamline the compliance requirements.

Provident Fund Annuitisation

Subject to recommendations from the Minister of Finance, from March 2019, legislation aligns the rules for pay-out of a provident fund benefit with those governing a pay-out by a pension and a retirement annuity fund, with provisions to phase in the change and to overcome hardship situations.  Broadly one third of the total benefit will be paid as a lump sum and two thirds will be reinvested to provide monthly annuity income.

For some people, the result of receiving a monthly annuity income could be that they earn above the means-test level for a social security grant.  Hopefully, policymakers are looking at this issue. The same applies to the new minimum wage — an employee’s wage could be increased above the means test threshold for a social security grant.

Related: Master The Ins And Outs Of South Africa’s Labour Laws

Rob Cooper, discussing the Provident Fund:

 

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Global Guide For Entrepreneurs, Innovators Launches In Johannesburg

Startup Guide partners with SAP Next-Gen, Tshimologong Precinct to bring global guidebook to Johannesburg innovation ecosystem; calls for nominations.

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Calling all entrepreneurs, accelerators, innovators, co-working spaces and experts in the City of Gold: Startup Guide, the leading global guide for start-ups in high-growth innovation hubs in Europe, the US and Middle East, is open to nominations in Johannesburg.

Founded in 2014, Startup Guide is a creative content and publishing company that produces guidebooks and tools to help entrepreneurs to connect to communities and resources in the leading start-up cities around the world. Its global footprint covers some of the most innovative and thriving start-up ecosystems in the US, Europe and the Middle East, including those of London, New York, Berlin, Tel Aviv, and Stockholm. After launching in Cape Town earlier in the year, Startup Guide now moves to Johannesburg.

According to Sissel Hansen, Founder and CEO of Startup Guide, South Africa’s largest city is emerging as a key innovation hub for start-ups.

“Johannesburg has recently emerged as a growing ecosystem for start-ups and entrepreneurs in Africa, particularly in the tech industry. We’re thrilled to have the opportunity to create a comprehensive guide of resources for aspiring founders wanting to do business in South Africa’s largest city.”

Startup Guide Johannesburg was launched at Wits University’s Tshimologong Precinct, one of Johannesburg’s newest high-tech addresses in the vibrant inner-city district of Braamfontein. Tshimologong, which means “new beginnings” in Setswana, focuses on the incubation of digital entrepreneurs, commercialisation of research and the development of high-level digital skills for students, working professionals and unemployed youth. Lesley Williams, CEO of Tshimologong Precinct, says: “South Africa is fast-becoming a go-to source for innovation, especially in the tech sector. We believe the introduction of a dedicated resource for the startup ecosystem in Johannesburg will unlock significant opportunities for innovation hubs such as ours to more easily connect with entrepreneurs, experts and other roleplayers, ultimately providing a more supportive environment for growth.”

Related: Watch List: 50 Top SA Black Entrepreneurs To Watch

Startup Guide has partnered with SAP Next-Gen, a purpose driven innovation university and community for the SAP ecosystem enabling companies, partners and universities to connect and innovate with purpose linked to the UN Sustainable Goals for Development. Ann Rosenberg, Senior Vice President and Head of Global SAP Next-Gen says:

“We strive to connect digital innovators in an open innovation community to drive the future success and growth of industries through the use of technology. As we have witnessed in other high-innovation cities around the world, the introduction of knowledge resources – supported by opportunities for collaboration and partnership in an open ecosystem – enhances the overall success of entire start-up communities. Johannesburg’s world-famous energy and business acumen will greatly benefit from the launch of Startup Guide Johannesburg and the support of industry partners, including SAP Next-Gen and the Tshimologong Precinct.”

Cathy Smith, Managing Director of SAP Africa, adds that the partnership with Startup Guide aligns well with the company’s commitment to the UN Sustainable Development Goals. “As an organisation we are committed to achieving the high ambitions set out by the SDGs. However, it is virtually impossible to do so alone: the concept of partnership with likeminded purpose-driven organisations and initiatives is vital not only to realising the SDGs but to foster a greater and more inclusive innovation ecosystem in Johannesburg and across the African continent.”

Nominations for the Johannesburg edition of Startup Guide are now open. If you know a start-up, entrepreneur, programme, space, accelerator, or experts and would like to see them featured in the book, please visit https://startupguide.com/shop/startup-guide-johannesburg and submit your nomination.

Visit the SAP News Center. Follow SAP on Twitter at @sapnews.

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Aspirations For SMMEs In South Africa

Research released earlier this year, revealed that there are only 250 000 formal SMMEs in South Africa.

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Entrepreneurs who have started up a business over the past 10 years have done so in an environment that has been largely negative, with slow economic growth and an unstable political landscape. “So, all in all, a very difficult setting to launch, grow or even maintain a business,” says Bizmod MD, Anne-Marie Pretorius.

Pretorius says that many entrepreneurs who operate in South Africa can be forgiven for often wondering if the slog is worth it. Yet they continue – despite economic uncertainty, strikes, retrenchments and downscaling.  “It is this tenacity that sets entrepreneurs apart, and I often wonder how much more successful they would be in an easier and more supportive environment.”

Below, Pretorius shares her ideal pro-entrepreneur outlook for the future:

  • Greater policy certainty on all key government policies from land reform to regulations surrounding labour broking.
  • Being able to do away with bad policy faster. An example of where this did not happen was in the changes of visa requirements; leading to an unnecessary dent in our tourism industry, an industry that should be targeted for growth.
  • Lower compliance requirements for companies with a turnover under R50 million. The cost of compliance for smaller enterprises is significantly higher in comparison to their income and the cash they have available. Smaller companies need simpler frameworks where compliance is required. A portal similar to SARS e-filing, which makes compliance across various pieces of legislation clear and simple, would be ideal.
  • The Labour Relations Act is a key piece of legislation that has done a lot to protect the rights of the employee. It has attempted to balance the power relationship between employee and employer. Some innovation is however required in labour practices, allowing for mutually beneficial flexible working relationships that keep pace with the changing work environment.
  • Buy small, buy South African! A framework whereby large corporations and government would have to allocate a certain minimum percentage to buying from smaller local companies. There are encouraging signs that this is happening more, however this is still not an ingrained practice. In addition, consumers should be more informed on what items are South African produced, in order for them to be encouraged to purchase locally.
  • Easier access to funds enabling entrepreneurs to grow their businesses. There are currently a few options available, but all of the options require significant governance and red tape. Whilst this is understandable from the lenders perspective, it does hamper the agility and growth of companies.
  • Make good financial governance aspirational, attractive and easily accessible.
  • The process for tenders to be corruption free and fair, enabling more companies to add value.
  • Pay SMME’s on 30 days or less. Enormous pressure exists on smaller companies when not paid on time. They simply do not have the cash flow to carry a debtor’s book of 90 days and this inevitably hampers their growth.
  • Tax SMME’s at a lower tax rate. Profit tax should be lowered in order to drive entrepreneurship.
  • Creating a platform that makes it simpler to employ young individuals with potential and create support programmes for SMMEs to upskill them. There is a significant financial and time investment required to train a young person, which can make SMME’s sometimes wary to do so.

“If we are able to make only some of these ideals a reality, there is no doubt that we would see economic growth, entrepreneurial growth, and more employment opportunities,” concludes Pretorius.

Related: A – Z Easy Small Business Ideas

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South African Students Win R50 000 In The Universities Business Challenge

Students from Mangosuthu University of Technology beat 500 students from 13 different universities across South Africa.

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The Overlings from Mangosuthu University of Technology are the 2018 winners of Cognity Advisory’s Universities Business Challenge (UBC), sponsored by General Electric (GE). The winning team of four students are walking away with R50,000 to turn their business idea into reality.

Launched in July this year, the UBC has seen 500 students from 13 different universities across South Africa participate in a business simulation competition designed to develop entrepreneurship skills.

When the competition launched, all teams were challenged to form virtual companies and to virtually manufacture and sell bicycles.

The final 10 teams were from the University of Limpopo, Mangosuthu University of Technology, Vaal University of Technology, University of KwaZulu-Natal and North-West University.

During the two-day final, the teams played six rounds of simulations. Each simulation gave the teams a chance to re-evaluate their progress and better certain areas that needed improving. The winning team realised during one of their simulations that in order to maximise profits they would need to introduce two new products and market it differently from their initial product. They paid special attention to their customer’s needs. 

The aim of the UBC was designed to tackle South Africa’s high level of youth unemployment. Statistics South Africa (Stats SA) announced that South Africa’s official unemployment rate increased by 0.3 of a percentage point to 27.5% in the third quarter of 2018.

Nkosinathi Sokhulu from the winning team said, “Even though we didn’t have a great presentation we made the most profit. This experience taught us a lot about ourselves and business. Most of the decisions that we made came from serious debates. We learnt that market research is crucial when starting a business. We learnt that marketing starts and ends with the customer.”

Related: 20 South African Side-Hustles You Can Start This Weekend

“Based on this market research information we realised that it was important for us to introduce two new products and this, in addition to the main product we were selling, helped us to maximise profits. We saw an opportunity to add more products and it paid off” said Mbali Tshozi.

Tope Toogun, development advisor and CEO of Cognity Advisory said, “All the teams showed tremendous promise and I was very impressed by their levels of engagement with one another and their tenacity.”

“We really want to ensure that students are equipped with the necessary skills to not only start a business but to run it effectively. While we have selected one winner, our hope is that each team has benefitted by having learned the skills needed in the workplace.”

“The competition is designed to develop the ‘soft skills’ that are important for those wanting to set up their own business or simply be successful at work. With rising unemployment and ongoing talent shortages, having these skills is crucial for those wanting to get a job.”

The UBC, now in its second year in South Africa, will continue into its third year in 2019 and will run as the Africa Enterprise Challenge (AEC).

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