Are You Ready for a COIDA Employer Site Visit and Audit?

“The main objective… is to provide compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees, or for death resulting from injuries or diseases…”

Compensation for Occupational Injuries and Diseases Act

Most employers – and particularly smaller businesses and domestic employers – are not able to provide cost-effective medical or insurance cover for their employees, even though the vast majority would want their employees to be compensated if they are injured, become ill or die at or because of their work. 

This is the objective of the Compensation for Occupational Injuries and Diseases Act also known as COIDA: to ensure that anyone who is employed under a contract of service, whether full-time or on a casual basis, and receives wages or a salary, whether on a weekly or monthly basis, can claim compensation in terms of the Act and, where an employee is fatally injured, the dependents can claim compensation.

What are the benefits of registration?

Employers are obliged by the Act to register and to take out this insurance, because it provides a means to assist employees who are injured on duty or contract occupational diseases with medical costs and loss of earnings, and also protects against civil claims. The Compensation Fund is a no-fault system, which means there is no need to prove that an employer was at fault. 

Employees who are injured on duty or contract occupational diseases are not left destitute and unable to work but have the means to cover the necessary medical expenses and rehabilitation costs, as well as to claim compensation for the loss of earnings. Where an employee is fatally injured at or due to work, the dependents will receive a pension. The compensation awarded does not form part of the deceased employee’s estate and can also not be attached to satisfy a debt.

COIDA prevents employees from suing their employers for occupational injury or disease, instead giving them this statutory insurance cover. So the Fund will still process claims from employees whose employers have not registered with it as required. But the Fund can then recover from the unregistered employer all the compensation it pays out, plus it won’t refund the employer for any medical costs the employer has paid. In other words, if you don’t register you risk having to pay out of your own pocket the full compensation claim, in addition to fines and penalties for non-registration. The total could be substantial, incorporating medical costs and compensation for loss of earnings, permanent disablement, death and even pension payments. 

What is covered by COIDA? 

The compensation is money paid by the Compensation Fund to employees who were injured on duty, to replace loss of wages and/or to pay medical expenses. The compensation is only paid if the employee is off work for three days or more but cover for medical expenses is not limited by this provision. The Fund does not cover pain and suffering.

Medical Expenses: Immediately after incurring an injury or disease on duty, employees can get medical attention from any medical practitioner of their choice in their area. Emergency treatment does not require pre-authorisation from the Compensation Fund. Medical expenses are paid by the Fund where it has accepted liability for the claim, covering reasonable costs incurred for the first 24 months. All reasonable medication related to the employee’s injury and prescribed by the treating doctor will also be covered. 

Loss of earnings: If an employee is booked off from work for a serious injury, the employer is obliged to pay 75% of the employee’s earnings/wages (as at the time of the accident) during the time the employee is unfit for duty but limited to the first three months. This can be claimed back from the Compensation Fund. The salary/ wages of employees booked off work for more than three months must be claimed directly from the Compensation Fund.

Permanent disability: A permanent injury, such as deafness, blindness, amputation or permanent disablement, is assessed according to a percentage of disability specified in the Act. If a disability is assessed at 30% or less, an employee may qualify for a once-off lump sum payment for that injury. If the disability is assessed at more than 30%, the employee may receive a monthly pension for life, based on earnings at the time of the accident. 

Death: If an employee dies as a result of the injury or disease, the dependents may receive a pension for life. All children will qualify up to age 18 years unless still at school or attending a tertiary institution.

Should you be registered with the Compensation Fund?  

All employers who employ one or more part-time, casual, temporary or full-time employees for the purpose of a business, farming or organisational activities must register with the Compensation Fund within seven (7) days after the first employee was employed. 

Sole proprietors and partners, shareholders or “silent partners” who are only paid dividends or sharing profits, are not employees in terms of CIODA.

Following a Constitutional Court ruling that domestic workers should also have the right to access social security in terms of COIDA, all employers of domestic workers – including those employed before the ruling – must now register with and submit the necessary returns to the Compensation Fund. A “domestic worker”’ is defined as any employee who performs domestic work in the home of their employer, and includes gardeners, household drivers and care takers but not farm workers. 

Employers must also notify the Compensation Commissioner within 7 days of any change in the particulars provided when registering. 

What is required for compliance? 

An employer is regarded to be in good standing when: 

  • Registered with the Compensation Fund  
  • Records of earnings and particulars of employees are up to date and ready to be produced upon request
  • Accidents are reported timeously 
  • Annual Return of Earnings is submitted timeously
  • Assessments are paid up to date

For registration with the Compensation Fund, employers require Registration of Employer form (W.As.2); a copy of Companies and Intellectual Property Commission (CIPC) documents; and a copy of the authorised director’s ID document. (Companies with no employees who need to register to meet the requirements on tender documents, can request an exemption letter and do not have to complete the registration process.) 

Employers are also required to keep updated records of earnings and particulars of employees and must be able to produce these records on request.

Furthermore, an employer is mandated to report an injury on duty within 7 days of receiving notice or an occupational disease contracted on duty within 14 days as soon as receiving notice. Employers can register and use the online claims registration system called COMPEASY. 

The next requirement is to submit Employer Return of Earnings (ROE) forms as per the Government Gazette. These can be filed via the free online Compensation Fund ROE Online System. A penalty of 10% on the final assessment will be imposed if the ROE is submitted after the due date.

Once ROEs are submitted, assessments are raised before the financial year end on the basis of a percentage of the annual earnings of the employees. The assessment tariffs are fixed according to the class of industry, are reviewed annually and are calculated based on the risk related to a particular type of work. Annual assessments are paid by registered employers and cannot be recovered from employees.

Payment must be made within 30 days and a penalty of 10% of the assessment is charged if the account is not settled after the due date. Interest at 15% of the balance is then charged every month until the account is settled.  

Facing a site visit? 

The Department of Labour has on previous occasions encouraged employers not to be threatened by site visits or inspections, but rather to regard these as opportunities to achieve compliance, knowing that follow-up site visits may be conducted to ensure any non-compliance has been addressed.

Indeed, if the requirements for compliance as set out above are met on an ongoing basis, a site visit should be a quick and painless process. 

Facing an audit? 

The Compensation Commissioner suggests submitting the following documents if an assessment is referred for audit. 

  • Affidavit stating the reason for variance or credit assessment 
  • Signed audited or independently reviewed annual financial statement for the year under review 
  • Detailed payroll report for the assessment year under review 
  • SARS EMP 501
  • UIF Registration number
  • Manual Return of Earnings (W.As.8)
  • Power of Attorney if your company is represented by an accountant or consultant.  

If the required information is not received within by the date stated, an assessment based on estimation will be made.

Getting ready 

While these COIDA requirements may seem straightforward, small businesses may simply not have the resources to ensure continuous compliance. Failure to comply with the prescripts of COIDA constitutes an offense in terms of the legislation.

Having been pre-warned to expect site visits and audits by representatives of the Compensation Fund, you would be well-advised to seek professional assistance to ensure that the requirements for COIDA compliance are met at all times.


Five Tips for Improving Your Workforce Management

“It is equally important to know if we have a happy and engaged workforce as it is to have a profitable bottom line.”

Vern Dosch, Wired Differently

Managing any workforce, but particularly a large one across many units, sometimes in multiple countries, is far from easy. From your staffing levels and scheduling to making sure your labour costs are within budget and your forecasts are accurate, there are a number of elements involved in ensuring your workforce management is streamlined. There are however fewer areas of a business which are more important to get right if you hope to keep your workforce happy and ensure profitability. Here are 5 tips for efficiently managing your employees.

  1. Streamline Scheduling

Even if you have managed to hire a top team they can’t operate at their best if they aren’t in the right place at the right time. Scheduling where an employee should be, and when, is critical if processes are to be streamlined, costs reduced, and service maintained at the highest levels. Just as bad rotas will cost you money, a good schedule will empower employees and deliver business intelligence. This is not an area in which one should skimp on using technology and it is highly recommended that any modern company invest in good scheduling software.

Although you might be used to spreadsheet scheduling, modern employee scheduling software can save you time, and ultimately money, in your day-to-day operations. These tools allow managers to create schedules with intuitive drag-and-drop interfaces, send push notifications to employees, and update schedules in real time. By creating stability, it also delivers a more pleasant experience for managers and employees alike, which keeps morale high and work moving smoothly. 

Further, two-way communication is key. You should not be afraid to engage your staff on scheduling difficulties. Often, being on the floor can give them insights into just where things are bottlenecking. You may also be surprised at how willing staff can be to assist when there is a problem. Simply communicating the business needs to staff and encouraging their input into scheduling preferences can help identify and cover the gaps you are facing. It is also empowering for them.

  1. Codify your company policies

Rules are necessary for the functioning of any business or organisation, but having rules that aren’t written down and made abundantly clear may ironically make it difficult to maintain order and can lead to employees claiming they have been treated unfairly or even discriminated against.

To avoid these issues, it’s crucial that you clearly put all your policies and procedures in writing along with the related consequences for breaking them. This will ensure there aren’t any misunderstandings within your team, and new employees will immediately know what they’re getting themselves into. The stability and clarity brought about by doing this will also take pressure off employees who may feel additional stress if the boundaries are not clearly demarcated.

  1. Pay employees fairly and timeously

Nothing leads to more unhappiness in a business than poor pay or delayed salaries. Whether an employee is full-time or freelance it’s extremely important to make paying them a priority if you want to keep them happy and working at the best of their abilities. Being casual with when you pay your employees will only lead to resentment and underpaying them in terms of your industry will only see you experiencing high employee turnover.

Many companies with payroll issues experience them simply because the people responsible are not experienced, or don’t have the correct tools at hand. Delays can be caused when commissions are miscalculated, tax deductions are incorrect, or hours are input erroneously. The best solution is to bring on a trained and certified accountant or bookkeeper to handle these issues and to give them the right software to ensure the job is done correctly and accurately – your employees can’t focus if they are worried their bills won’t be paid.

Interestingly, recent studies have shown that what an employee earns is not as important for happiness as the benefits they get with that salary. For full-time employees, their salary is only part of their total compensation. The rest is what’s referred to as the benefits package, which typically includes health insurance, paid time off, and sometimes education opportunities. A recent survey conducted by The Harris Poll for the American Institute of CPAs (AICPA), found that 80 percent of respondents would choose a job with benefits over an identical job with 30 percent more salary but no benefits. 

If you want to attract top talent and retain your employees, it’s important to put together a benefits package that will bring candidates to your business over your competitors’. In fact, it’s so important that the Willis Towers Watson survey reported that more than two-thirds of employers surveyed (69%) “plan to differentiate and customise their benefit programs over the next two years.”

  1. Better Forecasting

Great forecasting is one of the key ingredients in your recipe for better workforce planning and management. You already know what your staffing levels should be based upon historic customer demand, but being able to accurately know what they will be in future is even more useful.  Building up accurate forecasts will help you to understand when your peak times of business will be, and whether the company will need more staff in future. Having staff trained and on hand to help when demand increases will mean you are better equipped to keep client service at the proper levels, and that your workforce is not overworked and unhappy. Plus, knowing you may experience a downturn can save money on future retrenchments by not hiring in the first place. 

Forecasting for workforce management should look at the number of sales broken down per hour and per employee, the percentage of salary cost compared to sales, your payroll costs and other more nuanced data such as your absence percentage, which encompasses sick leave and holidays, as well as the amount of time it takes to train staff, how large your on-call freelance staff contingent is, and how many part-time workers you have that could be bumped up to full time in a crisis.

When you balance your planned costs against your results, you create the most profitable resource plan. Better forecasting goes hand in hand with smarter scheduling and gives you the data you need to make sure you always have the right people in the right place at the right time. 

  1. Stronger Communication

Communicating with your employees is going to be the best way to ensure your company runs smoothly. Good WFM requires that all expectations, deadlines, and work requirements are adequately and clearly explained to avoid confusion and missed opportunities. With an increasing number of staff working remotely this has never been more important. 

A 2020 report on “The State of the Deskless Workforce” shows that 80% of the remote workforce are contacted by their employer outside of work hours. The report also found the majority of global workers were contacted by their employer via SMS, instant messenger or phone call, which is an easy form of contact, but disrupts employees’ personal lives and makes it harder for them to achieve a work life balance. 

Ultimately, it’s important to find a solution that works for you and your teams that allows you to effectively communicate requirements without crossing boundaries and causing friction. Many large corporates have turned to Zoom, or Teams for meeting purposes as email chains can cause information to become lost. Don’t be afraid to set up a work WhatsApp group or a Slack channel but undertake not to use them out of office hours. 


SMEs – Why You Should Consider Employee Benefit Packages

“Human resources isn’t a thing we do, it’s the thing that runs our business”

Steve Wynne, American real estate developer

An effective employee benefit strategy is more of an advantage to an employer than may at first meet the eye. Although providing benefits naturally comes at a price, it also comes with substantial benefits, plus you stand to regain a portion of your investment from SARS in tax deductions.

Moreover, providing benefits that employees can’t readily access on their own could position you as an employer of choice in your industry, affording you the best pick of available talent. This leads to better products and service, meaning your business wins. 

The year-old Africa Insights from the 2019/2020 Benefit Trends Survey shows that employers are getting more creative concerning the mental and physical wellbeing of their staff, as these companies are more aware of the benefits of a healthier staff. 

A report by Johannesburg based HR firm, Willis Towers Watson states “A third of African employers are planning/considering stress or resilience management programs. A quarter is planning/considering mental health or substance abuse programs. 23% is planning/considering health coaching.”

Employee benefit packages are not forced by law on business policy; however the World Health Organisation (WHO) has drawn a link between employee benefits and a physically and mentally healthier workforce. The organisation’s Healthy Workplace Framework and Model, which is a guideline to creating a healthier working environment, says “the mind and body are one, and what affects one, inevitably affects the other.” 

The document also advises that “If the insurance costs for health benefits in your enterprise keep increasing, even after implementing healthy workplace programmes, that does not necessarily mean the programmes have failed. Look at industry benchmarks for comparison. If health insurance costs have increased by 20% in similar industries, yet have only increased by 5% in your enterprise, that is an indicator of success.”

Five major reasons why SMEs should consider employee benefits 

  1. The tax advantages via tax deduction of contributions.
  1. Health insurance as an employment benefit translates to a healthier workforce, which translates to improved quality of production and efficiency.
  1. Improved employee retention, which is key in certain industries where employees have to maintain relationships with specific clients, who may view continuity as a vital consideration.
  1. It improves the work culture between employees and employer.
  1. Improved staff recruitment, as the employer would be better positioned in the job market.

Changing or initiating an employee benefits strategy involves new financial responsibilities so take professional advice on the best way to go about it.


Audit Your Employee Taxes, Before SARS Does

“One of our strategic objectives is to make it easy for taxpayers to comply with their tax obligations, and hard and costly for those who willfully do not comply”

Edward Kieswetter, SARS Commissioner

Earlier this year, SARS and the NPA (National Prosecuting Authority of South Africa) announced that they are joining up to deal with tax non-compliance, initially focussing on employers. 

Employers under intensified scrutiny 

While this enhanced collaboration covers a number of aspects, the immediate focus will be non-compliance by employers, who deduct employee taxes and levies, never turn those taxes over to SARS, and do not file their returns when required, as well as “other general corrupt activities”. 

To enable the collaboration, the Criminal Investigations Division within SARS will allocate dedicated capacity and work closely with the NPA in its Specialised Tax Units (STUs). Solid cases ready for prosecution will be prepared in a coordinated manner across the country. The SARS regional leaders in criminal investigations and the NPA regional directors of the STUs will enrol these cases on a specific date for each region.

Why audit your employees’ tax? 

The Tax Administration Act holds an employer liable for an amount of tax withheld and not paid to SARS, or which should have been withheld but was not withheld. The employer could also be held criminally liable for failure to withhold and pay PAYE. 

SARS’ Criminal Investigations Division has already handed over 30 non-compliant employers to the NPA in their new joint venture and are working to identify and prioritise more cases.

They are further enabled by recent changes to the tax laws that effectively lowered the threshold for criminally prosecuting taxpayers through removing the requirement to prove that the taxpayer’s conduct was “wilful and without just cause” for selected offences. While previously a mistake made by a taxpayer was only a crime when it was done “wilfully and without just cause”, taxpayers can now in certain cases be convicted of an imprisonable criminal offence even if non-compliance was due to negligence or ignorance. Offenses include, among others, failure to submit a return when required to do so; failure to retain all relevant substantiating records; failure to provide any information requested by SARS; or failure to disclose any material information to SARS. 

This, along with SARS’ and the NPA’s intensified focus on employers, as well as SARS’ increased abilities to draw taxpayer information from third parties, make an employee tax audit a necessity. 

It also protects employees. Employees’ tax is not a separate form of tax, but rather an amount that the employer is obliged to withhold in respect of the employee’s liability for normal tax. On assessment annually, the employee’s tax withheld is set off against the employee’s liability for normal tax. The correct calculations and deductions will certainly help protect employees from unexpected surprises on assessment, and will also ensure that the employer’s processes are not the cause of disputes or delays when, for example, an employee needs to claim UIF.  

How to audit your employees’ tax 

  • An employee tax audit is a deliberate process undertaken to review payroll taxes and records, with the intention of ensuring accuracy to protect your employees as well as to comply with regulations. It is also an important part of a payroll audit.
  • Verify the employee information on your payroll: Do you have the required information for each employee in respect of identifying and calculating the applicable taxes, rebates and more? For example, the employment relationship affects the classification of an employee, which in turn determines the tax rate that must be applied. 
  • Verify and review the remuneration for each employee: Remuneration, whether in cash or otherwise, includes any wage, salary, overtime, bonus, voluntary award, leave encashment, fee, stipend, commission, gratuity, pension, emolument, annuity, allowance, lump sum benefit payment, director’s remuneration, etc. Can the remuneration be structured more tax efficiently for the employee? 
  • Verify that the correct taxes and levies are deducted: 
  • Pay As You Earn (PAYE) must be withheld from the remuneration paid to employees, subject to thresholds and rebates.
  • Unemployment Insurance Fund (UIF) contributions, for which the monthly threshold recently (1 March) increased from a maximum of R14,872 pm (R178,464 pa) to R17,712 pm (R212,544 pa).
  • Skills Development Levy (SDL) is payable by employers with a payroll of more than R500,000 pa. 
  • Employment Tax Incentive (ETI) rebates incentivise employers to employ young workers – if your company has taken advantage of the ETI rebate, these tax deductions should be verified in respect of each qualifying employee. 
  • Verify that the correct amounts are deducted: Both over deductions and under deductions as well as any corrections to submitted returns will certainly flag your employee tax account at SARS for audit.
  • Make sure the correct tax rate is used to withhold the correct PAYE taxes from each employee’s wages, verifying that all tax thresholds, rebates, directives, tax credits, deductions, benefits, exemptions, contributions and allowances have been considered and correctly applied where appropriate. 
  • UIF is calculated at a rate of 2% of remuneration (1% employee and 1% employer contribution).
  • SDL is calculated at a rate of 1% of total remuneration paid to employees, excluding certain payments such as reimbursements or severance benefits.
  • The ETI allows “eligible employers” of “qualifying employees”, subject to specific criteria, to claim a rebate with a maximum value of R1,000 per month for employees earning up to R4,500 per month, with the rebate tapering to zero at the maximum monthly remuneration of R6,500. The ETI was recently extended to February 2029 and should be considered with the assistance and advice of your accountant. Employers will be able to claim the incentive for a 24 qualifying month period for all employees who qualify.
  • Verify that the deducted amounts are correctly declared and remitted: The employees’ taxes and levies deducted from an employee’s remuneration must be declared on the Monthly Employer Declaration (EMP201) return and paid to SARS within seven days after the month end, or the previous working day if the seventh day is on a weekend or holiday. Late filing is subject to newly-introduced penalties, and late payments are subject to an immediate penalty of 10% and interest at the prescribed rate will be charged monthly on the outstanding amount. 
  • Employment Taxes Validation – IRP5 Certificates: An employer must furnish employees from whom employees’ tax was deducted with an IRP5 certificate, within the prescribed tax period. From the 2020 year of assessment, SARS is performing tax calculations on the IRP5/IT3(a) certificates. Where the incorrect amount of tax was deducted from the employee, a letter will be issued to the employer. 
  • Verify compliant employee record keeping: Employers must keep a number of specified records for each employee for a period of five (5) years and make them available for scrutiny by the Commissioner.
  • Schedule regular employees’ tax audits: Ideally, employers should conduct a payroll and employees’ tax audit on a routine basis and certainly any time there are changes in the tax regime, the labour laws, in the business or in its internal processes. 
  • Professional processes: Much of a business’ employee tax risk can be mitigated by putting professional processes in place. Invest in SARS-compliant automated payroll software with training for the relevant staff members and regular legal updates; or outsource your payroll and its taxes to professionals such as your accountant or even a payroll specialist. 

Youth Day: Why Our Young People Are So Important to Your Business

“If [business is] not listening to the youth, they are not listening to their future competitors, employees, or customers”

Wadia Ait Hamza, head of Global Shapers at the World Economic Forum

Youth Day commemorates and celebrates the impact the youth of a country can have on the future – the Soweto Uprising on 16 June 1976 changed the course of history. 

The size of its young population is Africa’s huge asset and a strong competitive advantage, according to The African Development Bank: a large youth population, bigger than on any other continent, which is also growing rapidly, while populations in the rest of the world are ageing and contracting. 

Current estimates are that the number of youths in Africa will double to 850 million by 2050. They form part of the 1.8 billion global youth who, according to Deloitte, are between the ages of 15 and 29, accounting for more than 25% of the total world population. These are the future taxpayers, voters and leaders, as well as workers and consumers.  

The many reasons why these young people are crucial to the future of companies are briefly highlighted below, along with the ways in which your business can benefit directly from initiatives that encourage and incentivise youth employment and training.

The tax base of tomorrow

As Nelson Mandela reminded us: “Our children are the rock on which our future will be built, our greatest asset as a nation. They will be… the creators of our national wealth who care for and protect our people.” 

These future taxpayers are crucial in South Africa, with its very narrow tax base. A handful of taxpayers – just 3 million according to available data – paid 97% of total personal income tax collected in the past tax year, funding everything from hospitals and schools to roads and social grants for a population of 56 million! Tax on companies’ profits is only the third largest contributor (after VAT) – and its contribution decreased to just 16.6% by February 2019, compared to nearly 27% a decade ago. In addition, tax revenue growth has slowed, despite the increase in VAT to 15% and the marginal income tax rate to 45%, and despite the introduction of new taxes such as sugar tax and environmental levies. 

SARS has also highlighted the high youth unemployment rate in South Africa as “a serious threat to the tax base and the overall integrity of the tax system” in its annual performance plan for 2021/2022. According to Statistics South Africa’s unemployment numbers, the official unemployment rate for young people aged 15–24 years was 63.2% in Q4 of 2020.

It is in the interests of all South Africans to invest in our youth, given that the only alternative to widening our country’s future tax base is higher taxes on the few individuals and companies who are already carrying the tax burden of an entire nation. 

The market of tomorrow

The youth of today will be tomorrow’s consumer market – and in this respect, Africa is the place to be. Changing demographics and improving business environments across Africa are just two of the factors contributing to rising household consumption, which is predicted to reach $2.5 trillion by 2030.

This is according to The Brookings Institution, which also notes that Africa’s emerging economies will take the lead in consumer market growth, with one in five of the world’s consumers living in Africa by the end of the next decade, and more and more of these people falling into the category of affluent or middle-class.  

Knowing that today’s youth will be the consumer market of tomorrow creates an opportunity for companies to positively brand and position themselves in the minds of tomorrow’s consumers, even if only in their immediate community. 

How can your business connect with the young people who tomorrow will be your customers? Can your business sponsor a sports event or an academic prize at a local school? Perhaps you can provide opportunities for school tours of your facilities?  

The workforce of tomorrow

The youth of today are also the workers and employees of tomorrow. The African Development Bank estimates that more than 12 million youth enter the labour market across the continent every year. 

There are many benefits to employing young people in both the short-term and the longer-term. 

As Deloitte suggests in their recent publication Preparing tomorrow’s workforce for the Fourth Industrial Revolution, now is the time for the business community to reposition itself as a driving force for change – investing in new ideas and alternative approaches to skilling youth for the future of work, such as retraining; technical, vocational, education and training (TVET); career and technical education (CTE); as well as internships, apprenticeships and artisanships for on-the-job skills training.

Take advantage of the tax incentives

Fortunately, there are also incentives for businesses to promote youth training and employment. The employee tax incentive (ETI) is a SARS incentive to employ young South Africans valid until February 2029. In short, employers can claim a deduction from PAYE for qualifying employees: those who are younger than 29 and earn less than R6,500 a month. It is for a maximum of 24 months per qualifying employee and is not subject to broad-based black economic empowerment criteria. 

Think of asking your accountant for assistance – the requirements to claim ETI can be complex and the claims can differ month to month and from one employee to the next, as various criteria and formulas determine the amount businesses can claim. There are also a number of “ETI Schemes” being marketed at the moment and if you are offered one, ask your accountant for advice before committing to anything.

Another example is the “section 12H Learnership Agreement tax allowance” providing an additional tax deduction, currently until March 2022, to employers with learnership agreements registered with a Skills Education Training Authority (SETA). It comprises both an annual and a completion allowance. It can be implemented internally or through programs such as the NEASA (National Employers Association of South Africa) Youth Program, with qualified TVET interns available for 18 months, funded by FASSET, the Finance and Accounting SETA. With regard to the NEASA Youth Program, students receive a monthly stipend and travel allowance, while employers can access additional entry-level labour at minimal cost (R2,575 excluding VAT per month) without having to commit to employment thereafter.

The leaders of tomorrow 

It was also Nelson Mandela who said: “The youth of today are the leaders of tomorrow.” 

Businesses that will operate in the environment created by these future leaders have a vested interest in their development.  

As the World Economic Forum points out, cultivating non-traditional talents such as soft skills, critical thinking and empathy is increasingly important, as is teaching young people to be entrepreneurial thinkers.

Forward-thinking companies could, for example, offer mentorship to promising young leaders, invest in established leadership development programmes, host conferences or learning events, or provide bursaries to impact positively the young people who will be tomorrow’s leaders.


New National Minimum Wage and Earnings Thresholds From 1 March 2021

(N.B. The increases highlighted below are extracted from the Employment and Labour Minister’s announcement of 9 February 2021, and emphasis has been supplied where helpful in enabling quick identification of your employment sector. Comment is in square brackets)

  • “The National Minimum Wage (NMW) for each ordinary hour worked has been increased from R20,76 to R21,69 per hour [a 4.5% increase] for the year 2021 with effect from 1 March 2021

It is illegal and an unfair labour practice for an employer to unilaterally alter hours of work or other conditions of employment in implementing the NMW. The NMW is the amount payable for the ordinary hours of work and does not include payment of allowances (such as transport, tools, food or accommodation) payments in kind (board or lodging), tips, bonuses and gifts.

  • Following a transitional phase, the farm worker sector has been aligned with the NMW rate of R21,69 per hour [a 16% increase]. 
  • The domestic workers sector will be entitled to R19,09 per hour [a 23% increase] and could be expected to be aligned with the NMW when the next review is considered [i.e. 2022]. [Use the Living Wage calculator to check that you are paying your domestic worker enough to cover a household’s “minimal need”].
  • In line with the Basic Conditions of Employment Act (BCEA), the increase in the NMW will mean that wages prescribed in the sectoral determinations that were higher than the NMW at its promulgation, must be increased proportionally to the adjustment of the national minimum wage. Therefore, the Contract Cleaning; and Wholesale and Retail Sector will also have their wages upwardly adjusted by 4,5 percent.
  • In another development, the Minister has also, in terms of the BCEA earnings threshold, revised the rate from R205 433.30 to R211 596.30. Chapter 2 of the Act deals with the regulation of working time, limit on the duration of an employee’s working week and to prescribe a rate at which an employee should be paid to work outside normal working hours among others.
  • Employees that earn in excess of this rate per annum are excluded from sections 9, 10, 11, 12, 13, 14, 15, 16, and 17(2) and 18(3) of this Act from 01 March 2021. These sections protect vulnerable employees and regulate amongst others, hours of work, overtime, compressed working time, average hours of work, meals interval, daily and weekly rest period, pay for work on Sundays, night work, and work on public holidays.”

A Remote Working Danger: Independent Contractor or Employee?

The prevalence of remote working since the start of the national lockdown in March has brought to the fore the need to distinguish between an employee and an independent contractor. This topic has both labour and tax law implications.

Anli Bezuidenhout, a Cliffe Dekker Hofmeyr employment lawyer, said during an interview that a situation could arise where an independent contractor started working for a company, but ended up operating as an employee.

“It is important that both parties manage the relationship because the lines get blurred. Companies need to classify people correctly and manage the relationship properly,” she said.

Tertius Troost, a Mazars tax manager, said during an interview that small businesses could avoid an administrative burden if they dealt with an employee as an independent contractor.

“Small businesses battle with Pay-As-You-Earn (PAYE) tax, especially with complicated employee fringe benefits,” Troost added.

Having an employee defined as an independent contractor means that the employer would not need to pay the person either annual or sick leave or overtime pay, nor would the employer be required to make pension or medical aid scheme contributions.

In addition, an independent contractor cannot enforce a claim against the company for unfair dismissal, nor hold the employer to any of the many other employee rights provided by our labour laws.

The company would also not need to contribute on behalf of the contractor to the Skills Development Levy, Compensation Fund, and the Unemployment Insurance Fund.

Bezuidenhout said some companies like to have employees classified as independent contractors, because they then do not have to comply with the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA). 

Often employees agree (or pro-actively request) to be independent contractors in order to avoid PAYE and to make expense deductions against their business income.

Bezuidenhout said that individuals were often happy when companies classified them as independent contractors because that gave them flexibility.

However, the South African Revenue Service (SARS) and the Department of Labour look at the actual relationship between a company and those that work for it – it is a factual enquiry and an employer that incorrectly classified an employee as an independent contractor would be liable for the employee’s tax that the company should have deducted plus penalties and interest.

However, the employer could (at least in theory) recover the tax paid to SARS from the employee.

How tax law defines an employee versus an independent contractor

SARS requires a company to withhold employees’ tax when three elements are present, namely an employer, the payment of remuneration and an employee.

SARS also provides two tests to determine whether a person is to be regarded as an independent contractor for employees’ tax purposes.

If an employee meets both parts of the first test, then the person is an employee and any earnings paid to that employee will be subject to employees’ tax.

The first part of this test is that the employee performs over 50% of the services or duties at the client’s premises.

The second part of the test is whether any person controls the employee or his or her work hours.

The second test determines whether a contractor is trading independently.

Where an independent contractor rendered services to more than one client, then the contractor needed to apply these tests in respect of each client to assess whether the contractor was an employee at each engagement.

Another test is the common law “dominant impression test” that SARS applies to determine whether an employee is an independent contractor or an employee.

How to apply the common law “dominant impression” test

The “common law dominant impression grid” sets out 20 of the more common indicators.

These indicators take a detailed look at the relationship to determine if it is an employer and employee relationship or a client and independent contractor relationship.

There are three categories of these indicators, namely:

  1. Near-conclusive, which relate most directly to the acquisition of productive capacity;
  2. Persuasive, which relate to the control of the work environment;
  3. And resonant of either an employer-employee relationship or an independent contractor or client relationship, whichever is relevant.

SARS said in an Interpretation Note that it would use the dominant impression to classify the relationship as either an employee or an independent contractor relationship.

Personal service providers, labour brokers, and expatriate employees

SARS introduced anti-avoidance measures about personal service providers or labour brokers to clamp down on those trying to avoid employees’ tax.

SARS uses common law tests to determine whether a personal service provider or labour broker is carrying on an independent business.

Mazars’ Troost said that tax law required that when a company engaged a personal service provider or a labour broker, without a SARS certificate of exemption, that company had to withhold PAYE as SARS deemed such a person an employee.

SARS would only issue an exemption certificate if the labour broker or personal service provider conducted an independent business, according to a SARS Interpretation Note.

A personal services company has to have at least three employees who were not family members in order to be considered an independent contractor, Troost added.

Expatriate employees working in South Africa may need to pay employees’ tax on local income, subject to any double tax agreements which may be in place between South Africa and the expatriate employee’s home country.

In terms of the definition of remuneration in the Fourth Schedule of the Income Tax Act, a person who is not a resident cannot qualify as an independent contractor.

A quick comparison of employee versus independent contractor

Indicative factors in determining where a person is an employee or an independent contractor, according to the South African Guild of Editors.

EmployeeIndependent Contractor
Works for only one employer at a time.Provides services to more than one person or company at a time.
Works the hours set by the employer.Sets his or her own hours.
Usually works at the employer’s place of business and uses their equipment.Works out of his or her own office or home and uses his or her equipment.
Entitled to annual and sick leave.Not entitled to any leave.
Often receives employment benefits, such as medical aid or bonuses.Does not receive employment benefits from the employer.
Works under the control and direction of the employer.Works relatively independently.
Receives a nett salary after the employer has deducted income tax and UIF.A provisional taxpayer and responsible for paying his or her own taxes.

How labour law handles the distinction between employees and independent contractors

The major pieces of employment legislation, the LRA, the BCEA and the Employment Equity Act (EEA), apply to employees and not independent contractors.

The law defines an employee to mean any person, excluding an independent contractor, who works for another person or the government, receives remuneration, and conducts the business of the employer.

There is no statutory definition of the term “independent contractor”.

As a result, several tests have evolved through case law, the presumption of employment provision in the LRA and BCEA, and the Code of Good Practice on “Who is an Employee”.

To ensure that employees do not lose their labour law protections, section 200A of the LRA and section 83A of the BCEA introduced a rebuttable presumption that everyone earning under the earnings threshold of R205,433.30 a year is an employee until proven otherwise and regardless of the contract concluded, according to an article on the EE Publishers website.

An employer who disputes that an independent contractor is an employee must provide evidence about the working relationship.


The Feasibility of a Freelancing Business in Uncertain Times

Business start-up planning has been extensively covered over the past twenty years and longer, and without understating its importance or re-inventing the wheel, perhaps it has been overplayed. Much training is available on the Internet, including templates and guidelines provided by banks and the SA Department of Trade and Industry. To start a freelancing business can be a challenge – and then some. Thus, following a business plan infrastructure with the use of a project planning tool is the best route to follow.

Why perform a feasibility study?

The feasibility study is a vitally important step in the well-known business planning process, not only pre start-up. In fact, it is the most important step because, if the business idea is not feasible, there is no point continuing with it. There are often more reasons for the business to fail than to succeed. Many renowned business analysts believe that only one in forty new businesses succeed and materialise in accordance with their original plan. Another good time for doing a feasibility study is when a business needs to be restructured to increase profitability, improve production, reduce production costs and overheads, increase sales/services income, expand the market reach, and many other valid reasons.

In the normal scheme of business planning, one deals with deciding on what type of business entity one wants to set up such as a Sole Trader, a Partnership, a Private Company, a Close Corporation, and then the drafting of various reports are needed in order to gauge the feasibility and to make the right decisions going forward.

What information do you need to prepare a feasibility study?

The list of matters to be decided and the necessary analyses needed follows, such as are usually covered in the typical business plan.

  • The services or products to be offered.
  • Establish the professional standards and qualifications required to operate as a freelancer in your field of expertise.
  • The equipment and tools needed.
  • Start-up expenses, including legal and business analysis services.
  • Initial capital requirements.
  • The target market to be accessed and establish whether there is space for you in it.
  • The economy relating to that market, current demand, future growth opportunities.
  • Determine what barriers exist at present which may hinder your success.
  • How best to promote your products or services.
  • Distribution channels and agencies.
  • Operational plan.
  • Legal environment and statutory requirements
  • Establish a system of record keeping
  • Bank services needed – a separate bank account for the business is strongly advised.
  • If staff need to be employed, establish the Human Resource policies and SARS requirements.
  • Do the costing of each product and service very accurately.
  • Calculate selling prices based on all costs plus mark up.
  • Establish the total you personally need to earn per month. When an hourly rate will be charged for your work, you will need to calculate your hourly rate. 
  • Compare your prices to those pertaining to the freelance industry of your services.
  • Draft the projected financial plan, a detailed budget for twelve months.
  • Draft the projected cash flow for twelve months.
  • Draft a Break-Even analysis.
  • Draft a starting balance sheet.
  • Draft a SWOT Analyses – Strengths, Weaknesses, and Opportunities.

Some business plans have the feasibility study way down in a list similar to the above list, but perhaps a better view is that most of these tasks need to be done in order for the feasibility or viability of a business plan to be ascertained.

Assistance and collaboration

For an aspiring freelancer, these are all important steps to follow. It is also important to search for organisations and associations that provide vital services and advice for those in the various freelance fields. Let’s take as an example SAFREA (the Southern African Freelancer’s Association). They advocate for and support freelance workers in the communications fields. They also provide resources, tools, training, and networking to strengthen freelance careers. Their network includes hundreds of talented writers, editors, proof-readers, graphic designers, illustrators, researchers, translators, photographers, and other experts in media and communications. Another good example would be Project Management South Africa for freelance and professional project managers.

Membership associations like these are great for collaborating with fellow freelancers and professionals for professional advice, current industry standards relative to their professional fields, the current going rates for different work, up to date market research, training courses, and to finding available work.

As noted earlier in this article, the Internet is packed with valuable information such as from the DTI, SARS, the banks, and other websites through which one can glean the necessary information and assistance in one’s quest.

Freelancing is normally a challenging type of business to operate, but as business start-up and functionality are even more so during the pandemic and state of disaster, it is very important to ask your accountant for guidance and for help in drafting an accurate feasibility study and business plan. Wasting time and finances in going it alone would not be the preferred route to take.

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Employee Health and Wellbeing: A Strategic Priority for COVID-19 and Beyond

It goes without saying that no company, small or large, can win over the long run without energized employees who believe in the mission and understand how to achieve it.

Jack Welch, former CEO of GE

The health and wellbeing (HWB) of employees has a substantial impact on business success and sustainability, and this has never been more pronounced than during the lockdown.

Employee HWB is vital for a company to sustain itself during the lockdown, but making your employees’ HWB a strategic priority creates a competitive edge that will be crucial for success now and beyond COVID-19.

Why is employee HWB a strategic priority?

Employee HWB delivers significant benefits, which are well-documented and widely-known. These benefits, some of which are listed below, provide a company with a competitive advantage in a very constrained economic environment.

Benefits of Employee HWB 

  • Decreased rates of illness and injury
  • Reduce direct costs, such as providing healthcare
  • Reduce indirect costs, such as absenteeism and reduced productivity
  • Enhanced recruitment and retention of healthy employees
  • Reduced absenteeism
  • Increased productivity
  • Improved employee morale
  • Improved employee loyalty
  • Improved employee resilience during organisational change
  • Improved employee motivation
  • Increased employee innovation
  • Positive impact on business performance
  • Achieved company objectives

“Most successful and innovative organisations today make employee health and wellbeing a key focus of their business strategies. It is not something to which they simply pay lip-service: they spend a lot of time, energy and money in developing workplaces that enhance wellness and consider those to be a crucial component of their organisational business strategies,” says Freeman Nomvalo, CEO of the South African Institute of Chartered Accountants (SAICA). “These companies would therefore probably be more resilient during the pandemic, as employees are able to remain productive due to a supportive workplace environment.”

Employee HWB also provides an opportunity to make a positive difference, playing a leadership role in our communities and in our country.  

According to SAICA’s Health and Wellbeing Advisory Group (HWAG): “Measuring employee health and wellness provides an indication of the wellbeing of the organisation. It is also a direct indicator of the wellbeing of a country’s workforce, making health reporting a national priority and not just a corporate one. Health reporting can help organisations create and promote environments for healthy behaviours, which will extend not only to employees but also to their families. This can result in healthier workforces, as well as healthier cities and countries.”

“Such reporting also meets the government’s call to action for the private sector to partner with the public sector in responding to the challenge of NCDs [noncommunicable diseases]. This helps organisations fulfil their shared value and corporate citizenship obligations, and will have profound positive effects on individuals, companies and societies as a whole.”

So how can a company go about tapping into all these benefits of an employee HWB? As the saying goes: What is measured is managed… 

Non-communicable diseases or NCDs, also known as chronic diseases, include cardiovascular diseases (like heart attacks and stroke), cancers, chronic respiratory diseases (such as chronic obstructive pulmonary disease and asthma) and diabetes, and are responsible for a staggering 41 million deaths each year, equivalent to 71% of all deaths globally.  

What is measured is managed…

Reporting on employee health has largely been neglected, but this element of company reporting has never been more important than it is now. 

HWAG believes that companies should report on the following components:

  • Occupational health and safety;
  • Provision of medical benefits for full-time workers;
  • A smoke-free workplace;
  • Mental wellness programme (e.g. Stress management, resiliency programmes, managing depression);
  • Employee assistance programme (EAP) access for counselling and intervention for those already at high risk (e.g. Stress, depression);
  • Family-friendly policies (e.g. Flexible work schedules or working remotely);
  • Access to healthy office design components based on special needs (e.g. Sit-stand desks in case of back pain);
  • Communal spaces where employees can eat, relax, interact with co-workers, or hold private conversations; and
  • Assessments of the health and wellness of its employees, such as a health risk assessment (HRA) survey or biometrics screening assessment or self-reported general health status of employees using a confidential survey or assessment tool.

This list of components also serves as a list of key focus areas. These components, many of which may have only received passing attention previously, may be prioritised and elevated as companies strive to ensure a safe and sustainable working environment for their employees during COVID-19 and beyond.

Integrating these components into the business is vital for sustaining the company and its employees.

Employee HWB: What works best?

A comprehensive survey conducted by HWAG was completed by 172 companies, of which more than 50% are involved in the financial sector, and approximately 70% had less than 500 employees.

What seems to work best for large companies are the core and more traditional issues, including occupational health and safety; medical benefits for full-time workers; having a dedicated person responsible for employee health and wellbeing; a smoke-free workplace; and communal spaces where employees can eat, relax, interact with co-workers or hold private conversations.

Programmes, policies and practices around a smoke-free workplace received the most positive response from smaller companies, followed by the same issues raised by larger companies: regulatory requirements and policies for occupational health and safety, as well as medical benefits for full-time workers.

The survey also points to room for improvement: the majority of companies do not believe it is necessary to get involved in the following areas at the moment: incentives for a healthy lifestyle, physical exercise, reduction of alcohol consumption, tobacco use cessation, sleep management, health coaching, health risk assessment, and the extension of available programmes to family members and other dependants. This is despite the fact that these areas are key to the management of NCDs, which poses a significant threat to workforce productivity.

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Tips and Ideas to Retain Your Best Staff and Skills During COVID-19

Small businesses across South Africa face the challenge of keeping their best staff and skills during the COVID-19 pandemic to ensure that they can survive these hard times and can thrive when the economy picks up again.

For small and medium enterprises (SMEs), keeping top talent is vital to ensuring that these companies deliver effective products as well as services to their clients.

This comment comes from a “thought paper” published in June this year about talent management and penned by six University of Pretoria master’s students.

The right talent is a differentiator

The right talent was a key differentiator for companies to gain a competitive advantage and attain future success, they wrote. They defined the right talent as “giftedness, individual strength, meta-competency, high potential and high-performance workers”.

“Employees are a crucial and valuable element of any organisation. They are the life force that drives innovation, profitability and sustainability,” they added.

Nishan Pillay, Gordon Institute of Business Science’s (Gibs) executive director for open programmes, said during an interview that it was vital for small businesses to keep their high-performing staff.

A quote to bear in mind

The master’s students’ paper included a quote that is worth bearing in mind when considering strategies to keep top people.

It comes from the former chairman of the Citicorp, Walter Wriston, who said: “Human capital will go where it is wanted, and it will stay where it is well treated.”

“In a time of…disruption, evolving technology, stiff competition, and increased demand for limited talent, no organisation wants to lose their top talent that they have invested so much in to acquire and develop,” the master’s students wrote.

Costly to replace staff that exit

Adding to the picture is that it is expensive and time-consuming to replace staff.

Alex Nieuwoudt, manager of recruitment firm Michael Page’s finance and legal team in Johannesburg, said during an interview that it could cost between R150 000 and R350 000 to fill a middle to senior role.

“Hiring people, getting them to know your culture and systems, is hugely expensive. Recruitment costs aren’t just about the agency costs of bringing someone in, it’s about the training, development and the cultural assimilation,” Gibs’ Pillay said.

Changing candidate questions

It is also worth noting that candidates that Michael Page interviewed before COVID-19 focused their questions on the job in question.

But now the critical issue for these candidates was how the company doing the hiring was coping with COVID-19, Nieuwoudt added.

It was essential to answer these questions accurately, as a new hire would find the truth once he or she joined the company and could leave if what they discover wasn’t to their liking. Thus the company would have to incur all the hiring costs again, he said.

Given this, it is essential that when small businesses advertise for a post that they have their answers ready for this burning topic.

Four strategies to keep staff

There are many strategies that companies can use to keep staff.

Nieuwoudt suggested four strategies that SMEs can consider for keeping staff. These four strategies are:

  1. Allowing staff flexible working conditions,
  2. Empowering employees,
  3. Providing virtual wellness, which is where the company gives their employees the means to operate successfully remotely while maintaining staff motivation,
  4. Promoting staff and acknowledging their achievements.

Virtual wellness is also determined by a company’s reputation, including its corporate social responsibility schemes. This measure impacts on employee mood and decisions about whether to join and then stay with the company, Nieuwoudt said.

The desire for flexible employment

Michael Page ran a poll recently, and 84% of the respondents wanted their companies to give them a permanent option to have flexible conditions of employment, Nieuwoudt said.

“This gives you an understanding of how the mind-set of employees has changed in South Africa,” he added.

“Flexible working conditions are now at the forefront of hiring conversations. It is very critical to keep that in mind,” Nieuwoudt said.

Digital working is vital

Geoff Jacobs, president of the Cape Chamber of Commerce & Industry, advised that for companies to keep their staff, it was vital for them to move to the digital way of working, especially given the COVID-19 social distancing requirements.

Jacobs also suggested in response to questions that to allow for easier retention of staff, SMEs should review all expenses, especially rent.

A third retention tactic that he suggested was that small companies remodel the roles of their staff, so they take on extra duties or get the employees to help the company offer new services and products given the opportunities because of COVID-19.

If a company had to retrench staff, it was critical that the business part with its staff on the best possible terms so that when the economy grows again, these former employees would be keen to re-join the business.

Recruit from your pool of alumni

Karel Stanz, a University of Pretoria professor, said during an interview that hiring a company’s former employees or alumni was one of the most cost-effective ways of recruiting staff.

He is a professor in industrial psychology at the Department of Human Resource Management at the university.

Jacobs also advised that as part of the staff retention strategy, small companies should ensure frequent interaction across digital platforms.

“Build online communities that aid in social interactions for employees preferring flexible work arrangements. These online communities allow employees to interact with colleagues, superiors, and clients. It also allows the organisation to monitor the employees’ engagement levels and needs,” the University of Pretoria master’s students wrote.

These students in their paper also listed the following measures to ensure a company keeps its top staff:

  • Have a conducive company culture,
  • Provide staff with meaningful work,
  • Offer employees career advancement,
  • Provide staff with a sense of belonging.

They also referred to respect, recognition and rewards as necessary means to keep staff.

Opportunity to gain scarce skills

In a surprising turn of events, Stanz said that the COVID-19 pandemic had provided specific companies with a chance to gain scarce skills.

He said that a former student of his was working in a human resources role for a timber company in Nelspruit. Before the lockdown, it was difficult for this company to find people with technical skills such as artisans. But ArcelorMittal South Africa retrenched many people, including artisans, and this has provided the timber company with access to these skills.

Digital skills important

Dr Jabulile Msimango-Galawe, Wits Business School programme director for business and executive coaching, said in response to questions that during and after lockdown, some businesses would continue to work online.

“People in the digital space with the required skills will need to get businesses trading again, and marketing online will be in demand,” Msimango-Galawe said. These skills would include analytical and digital capabilities, she added.

Attitude is key

“From what we’ve seen in the past few months, it’s not so much skills that you need to keep, but the attitude of your staff that supports the values of the business,” Jacobs added.

Individuals with multiple skills would be in demand and the era of having one critical skill was over, Msimango-Galawe said.

Michael Page’s Nieuwoudt said that essential skills right now included candidates that helped companies achieve their employment equity targets.

Gibs’ Pillay identified types of people and critical areas of skill where small businesses needed to keep staff, and these included staff with high levels of creativity as well as those with strong people skills.

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Protecting your Company’s Reputation When Staff Work from Home

The number of staff working from home has surged with the lockdown, and many office-based employers now plan to keep most or all of their employees working remotely for the long term. There are of course many advantages to allowing those staff members who can work effectively from their own home offices to do so, but be aware also of the business risks that this “new normal” exposes your company to.

One of these is the increased risk of reputational harm to your business, particularly whilst the pandemic and its economic fallout continue to threaten staff morale and uncertainty is the watchword of the day. We analyse those risks and suggest some positive steps you can take to address them.

It takes a lifetime to build a good reputation, but you can lose it in a minute.

Will Rogers

Whilst many employees enjoy working from home, this is a time of uncertainty for them. They read of people being retrenched or furloughed and wonder if they are next. The isolation of working from home can fuel this uncertainty.

Yet it is these employees who daily interact with customers and other stakeholders. If staff have negative feelings about the company, this can be quickly picked up by customers. Social media can spread this quickly and suddenly management have to start undertaking damage control. Recently, an English business decided to not pay staff until the government’s wage subsidy kicked in. Following an outcry, management swiftly reversed this and paid the staff. Contrast this with Quickbooks who kept their cleaning staff on full pay despite empty offices and L’Oreal have made a point of paying small suppliers quicker than usual.

Don’t think short term

The decisions you make send out signals to your staff and they are much more likely to view you favourably if you are showing fairness to your stakeholders.

Think also of your investors – they tend to support businesses where carefully considered long-term decisions are made by management. Don’t forget having a holistic outlook and making the environmental, social and governance (ESG) criteria part of your strategies.

Communicate effectively

In a recent case, staff supported management putting them on furlough after they were persuaded by management that this was the best long-term strategy to preserve jobs in the business.

Staff are more motivated if they know they have commitment and active support from their bosses.

IBM have started a program of supporting employees who need to take out time to educate their children or look after family members. They have also encouraged their staff to raise any individual difficulties they have with their managers. Introducing this type of flexibility makes managers’ jobs harder to do and IBM have created separate online chat channels for managers to network with their peers and find solutions to employees’ problems.

Other companies with diversity in the workplace have openly supported Black Lives Matter and have made sure that when there are pay cuts or retrenchments, there is no discrimination against minorities.

The world has changed and become more uncertain and more flexible. You need to plan carefully and act to ensure you stay on top of the situation and keep the support of your staff.

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Retrenched or dismissed? You could qualify for UIF Unemployment Benefits

With the recent changes in the economy and with TERS benefits lasting an uncertain amount of time, we realise that retrenchments are sadly a reality.

The UIF’s COVID-19 and lockdown specific benefit, Temporary Employer/Employee Relief Scheme (TERS), has helped thousands of employers retain their staff and ensure staff earned some income during the period, however the financial strain that has been placed on employers has led to many having to lay-off their employees.

However, the UIF still offers relief to employees that have been retrenched, dismissed or whose contracts have expired through the unemployment benefits.

1. How does the Unemployment Benefits work?

The UIF will pay up to 238 days to those who have been working and contributing to UIF for 4 years. The UIF rates are determined by a scale of benefits that range between 30-60% of your salary for the first 238 credit days and another flat 20% from 239 days to 365 credit days. Low-income earners receive a higher UIF percentage.

2. Who can apply for the benefits?

Anyone who has been contributing to the Fund and has been retrenched, dismissed or contract has expired can claim. Furthermore, employees who have more than one employer and whose services have been terminated by one employer can still apply. Employees can apply up to 6 months after employment has been terminated.

We are now offering a new service for those wanting to claim for Unemployment Benefits.

Let us at Emma Pardoe Chartered Accountant (SA) assist, apply and advise you on UIF benefits available, if your employment has been terminated recently.

For businesses, it may be a goodwill gesture to assist your retrenched staff with starting these claims, else kindly please pass our details along to those employees so we can assist them directly in their personal capacities.

Should you be interested in our services or have any queries, contact us at  

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Tips for Managing your Staff Working from Home

One of our new realities in this topsy-turvy world of global crisis is the many businesses that have had to close their offices and work remotely.

The resultant explosion in the number of people working from their home environments brings with it many serious challenges for businesses. Fortunately however there is a lot of guidance available on how to maintain high levels of morale, loyalty and productivity amongst your work-from-home employees. For example, researchers at Harvard University have identified five main areas as key to achieving the best possible results from a remote working situation. Read on for some thoughts on them.

In this brave new world of COVID-19, many people are working from home. Even after there is a cure for the virus, this trend will likely continue. Researchers at Harvard University have come up with some good ways to ensure you get maximum productivity and loyalty from your employees working remotely.

Key Points

  • Both managers and staff miss face to face meetings – managers worry how effectively their people are working and employees miss the support and guidance they get from managers. Managers should introduce structure and discipline into their interactions with their staff – setting up a time each day (or whatever is needed) to connect to each other and, possibly, the team the employee is in. This can cover all the employee’s and team’s work requirements, bringing them up to date with events in the company. Not only does this improve productivity but it increases staff morale and loyalty.
  • Access to information can become difficult between staff members – for example, a relatively new employee asks a staff member for information who initially ignores the request until the new staff person starts sending out more aggressive emails. Managers need to be aware of this type of conflict and focus on new employees to iron out any potential difficulties.
  • Employees get lonely and can over time feel they’ve been cut adrift which is bad for their stress levels and can lead to a drop in productivity. If managers don’t have good listening skills and empathy, then they need to add these to their armoury and be on the lookout for loneliness manifesting in people who report to them. In the initial stages, it may pay to also have Human Resources contact employees working remotely.
  • Home distractions. Working from home can lead to distractions of members of staff by spouses and family. The company needs to ensure that the employee has the required technology and IT security in his or her home. Having a separate office in their homes is also important.
  • Staff need time to catch up with their colleagues’ personal lives and the manager should allow time for this when there are video calls. This will reinforce that employees belong to and are part of a team.

There is much to learn in terms of skills and keeping staff morale and productivity at high levels, when employees work from home.     

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Employers: When Should You Sue Rogue Employees? A R33m Example

“It is the duty of an employee when rendering his or her services always to act exclusively in the interest of the employer … an employee is not entitled to use his or her employment relationship with the employer without the employer’s permission to make a profit or earn commission for his or her own account” (Extracts from judgment below)

Employees have very strong rights in our law, but employers also have effective remedies when employees “go rogue”.

A recent case, in which an employee was ordered to repay his employer R33m in “secret profits” including R9m in damages, provides a good example.

Diverted sales opportunities and secret profits

  • A manufacturer employed a “Key Accounts Manager” as its agent in dealing with customers. He was trusted with an “almost unlimited discretion” and minimal management oversight to act in his employer’s interests.
  • His employer sued him in the High Court on allegations that he breached both his employment contract and his duty to his employer, firstly by selling product to customers at below-minimum prices, and secondly by selling through his own companies to secretly profit thereby.
  • The employee’s denials of wrongdoing cut no ice with the Court, which held that he “was clearly under a general obligation to do his best for his employer and to conduct the plaintiff’s business in good faith and for its benefit” but “was in breach of his fundamental obligation of loyalty and good faith which he owed to … his employer”.
  • The secret profits claim. Ordering the employee to “disgorge” his secret profits of R33,291,599.24 (less any “amounts paid in making such profits” which the employee is able to prove), the Court held that the employer had proved the three elements needed to succeed in such a claim –
    • The employee owed it a “fiduciary obligation” (a duty to act honestly and in utmost good faith),
    • In breach of that obligation he placed himself in a position where his duty and his personal interest were in conflict, and
    • He made a secret profit out of corporate opportunities belonging to the employer.
  • The damages claim was for losses on product sold to customers at prices well below the employer’s base price “in order to further [the employee’s] secret profit-making activities.” Finding that but for the employee’s wrongdoing the customers would have bought product at no less than the base price, the Court awarded the employer R9,407,651.05 in damages (to be allocated, when paid, to the R33m claim).

Rubbing salt in…

To really rub salt into the employee’s wounds, he was ordered to pay costs, and the bill will be a big one, including –

  • Costs on the punitive “attorney and client” scale, an appropriate order said the Court “given the secret and unlawful nature of the scheme which the defendant ran for four years at the expense of his employer”,
  • The cost of audio visual equipment used in the trial, and
  • The (no doubt substantial) travel and subsistence costs of both the employer’s legal team and its six witnesses, all of whom travelled from Gauteng to Cape Town for the trial.
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Paternity Leave and Minimum Wages – How Will The New Laws Affect You?

Employers and employees need to know about four new Acts which will usher in important changes to our labour laws.

The summary below is a short one of only those changes likely to affect a significant number of people and businesses, so take advice on your specific circumstances.
In a nutshell –

Parental leave extended

Until now, mothers have been entitled to unpaid leave when welcoming a new child into the world, in the form of 4 consecutive months’ “maternity leave”. Plus they can claim maternity benefits from the UIF if they are contributors. New fathers, however, have been limited to at most 3 days’ family responsibility leave.

That will now be extended to –

  • “Parental leave”: “Parents” (i.e. including fathers and same-sex partners) – 10 consecutive days’ parental leave.
  • “Adoption leave”: Adoptive parents of a child under 2 years old – either 10 consecutive weeks’ adoption leave or 10 consecutive days’ parental leave (where there are two adoptive parents, they decide between them who gets 10 weeks and who gets 10 days).
  • “Commissioning parent leave”: Commissioning parents in a surrogacy agreement – same provisions as for adoptive parents.

Parents taking unpaid leave as above also become eligible for UIF benefits.
Employers with maternity leave policies, and those who offer paid as opposed to unpaid maternity leave, should take advice on reviewing these policies.

Minimum wages introduced

The new national minimum wage is set as follows –

  • Farmworkers – R18 per hour
  • Domestic workers – R15 per hour
  • Workers in an ‘expanded public works programme’ – R11 per hour
  • Other employees – R20 per hour.

Separate allowances apply to those in learnership agreements.
Employers who cannot pay the minimum wage will be able to apply for exemption for up to a year, but draft (at time of writing) regulations allow for only a 10% exemption.
Failure to pay the minimum wage will expose employers to fines of the greater of 2x the value of the underpayment, or 2x the employee’s monthly wage (going up to 3x for second or further non-compliances).

Strikes, lockouts and picketing

An “advisory arbitration panel” can be (and presumably will be) appointed to help resolve protracted or violent strikes or lockouts, and those causing or exacerbating an acute national or local crisis.
New picketing regulations are also in the wind.

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Spying On Employees Is Becoming A Big Industry

In a recent UK survey 72% of employees felt that their employers were eavesdropping on them.

Why are employers doing this?

A good example of how keeping tabs on employees can be beneficial is the destruction of the World Trade Centre on 11 September 2001, where many firemen died needlessly searching for people who were not in the buildings. Technology is available that pinpoints who is in an area and how long it will take to get everyone to safety.

It is also possible to determine when people enter sensitive areas or try to access confidential information.

An employer also needs to know if its staff are passing on business secrets or running down the company to friends, fellow employees and the public – damage to a firm’s business reputation is one of the biggest existential risks faced by a company.

Employer versus employee

The most important issue is to maintain trust between employer and employee. Once this is undermined the harm to both parties can be lasting and severe.

Management need to be open with their staff if they intend to monitor them. Tell the staff what you plan to track (emails, social media, telephone conversations etc) and that any employee can request the information you have gathered and how you will use it, and destroy it once it is no longer needed. Update staff contracts and conditions of employment with these measures.

An open process with staff will help to clear up uncertainties they have and will keep the trust between you and your employees. It will also enable your business to protect itself against reputational damage from employees leaking negative information about your business.

Protection of Personal Information Act (POPIA)

POPIA awaits the announcement of a commencement date before the one year grace period starts running and among other things will allow staff to compel employers to give their staff access to all the information that the business holds on them.

Technological advances have made it feasible to intercept and analyse your employees’ communications. In view of the arrival of POPIA and more importantly the relationships you have with your staff, think about this carefully, particularly as there will be harsh penalties for any material POPIA lapses.

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