The HRTorQue REPORTER

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1 HRTorQue Newsletter October The HRTorQue REPORTER Employment Equity (e-torque and non e-torque Clients) The HRTorQue Team Comply and avoid fines of up to R or 10% of annual turnover! Maximise the use of the e-torque system and save hours of manual record-keeping! We can assist you to set up your e-torque system and capturing! Contact Melany Bydawell to arrange an appointment for a specialist consultant to visit you: or melany@hrtorque.co.za Phone: Fax: Website: Sales: Melany Bydawell: or Payroll & HR Administration Karen van den Bergh: or Karl van der Merwe: Human Resources / Employee Relations: Melany Bydawell: or Nicky Hardwick: Total Cost to Company Basis of Remuneration Explained By David Beattie Employment Equity & Skills Development Melany Bydawell: Nicky Hardwick: BEE Consulting: Shirlee Caffyn- Parsons: What is a 'Total Cost to Company Compensation Package'? The concept of a Total Cost to Company Package is an alternative way of viewing remuneration. It moves away from the traditional, add-on approach of determining a basic pay to which a number of benefits is added. With a Total Cost to Company Compensation Package, the starting point is the Total Cost to Company remuneration figure from which employees have a choice to exchange cash for benefits relevant to their particular circumstances and within current legislation. Tax: Dave Beattie: Accounts Kacey Chetty: Cheryl Naidoo: Dispatch Karl van der Merwe:

2 Add-on Approach Total Package Approach BASIC SALARY (value determined by employer) TRAVEL ALLOWANCE OTHER FRINGE BENEFITS MEDICAL AID (cost to company may vary depending on choice & number of dependants) RETIREMENT FUNDING TOTAL COST TO COMPANY (cost inclusive of all benefits determined by employer, managed relative to market and individual performance) Less PRESCRIBED BENEFITS (such as Retirement & Medical Aid Funding, Group Life and PHI) Less CHOICE OF BENEFITS (based on individual requirements such as Travel Allowance, cell phone and other allowances) = CASH COMPONENT = = TOTAL COST OF EMPLOYMENT (total value not known prior to choice and utilisation) TOTAL COST OF EMPLOYMENT (total value known and managed for each employee) 2. Why change the way the employer manages pay? The change will ensure: Remuneration is fair and equitable Remuneration based on market rates as a package More effective recognition and rewards for individual performance Employer is better positioned to attract and retain critical employees Improved market intelligence 3. How do employees benefit from this approach? Transparency in full employment costs Structuring of Total Cost to Company Compensation Package to meet personal needs and circumstances, within current legal limits In other words, employees benefit by being able to use the flexible structure to optimise their take-home-pay both today and in the future, whilst at the same time meeting their lifestyle requirements, e.g. a person may wish to increased their pension fund contributions (within the existing rules of the fund) once their medical aid dependents decrease. The PPPFA has been Amended - How does it affect YOU? By Shirlee Caffyn-Parsons The Preferential Procurement Policy Framework Act has been amended and is due to come into effect on 7 December What this means is that anyone tendering for work with any government agency or department will no longer be adjudicated, as previously, as per their ownership demographic but rather according to their BEE level. The rules will be applied as follows:

3 1. For tenders up to R1 million in value, points will be awarded for BEE compliance up to a maximum of 20 points: 2. For tenders exceeding R1 million in value, points will be awarded for BEE compliance up to a maximum of 10 points: The other 80 and 90 points respectively will be allocated as is currently the case; financial soundness, pricing, functionality and the ability to deliver the goods or service. What does this mean for ALL business? Anyone doing business with government is going to be required to be verified and have a valid BEE certificate. Part of their compliance will be the compliance of their suppliers and so, the domino effect continues. The most likely result of this is that there is going to be greater pressure on ALL companies (whether they work directly with government or not) to be certified and have a valid BEE certificate to hand. Is this achievable for YOUR business? Yes! Despite the myths that surround BEE, achieving compliance is not as difficult as it would appear particularly for those companies turning over less than R35 million annually. To find out more, please speak to our BEE Specialist: Skills Development Registrations By Karen van den Bergh The Skills Development Act No. 97 of 1998 has as its purpose: To develop the skills of the South African workforce To increase the levels of investment in education and training To encourage employers to provide employees with the opportunity to learn new skills To encourage workers to participate in training programmes To improve employment prospects for previously disadvantaged persons To ensure the quality of workplace education and training Every employer as defined in Fourth Schedule to the Income Tax Act is liable for the levy, except for the following: Any public service employer Any employer for whom there are reasonable grounds for believing that the total amount of payroll (remuneration) payable to all its employees during the following 12 months will not exceed R

4 Any religious or charitable institution or fund of a public character whose income is exempt from income tax Any national or provincial public entity, if 80% or more of its expenditure is defrayed from funds voted by Parliament If you fell into any of the categories above at the time that you outsourced your payroll to HRTorQue, you will not be registered for, nor will your company be calculating SDL and if we are making payments to SARS on your behalf, we will not be making this payment on behalf of your company, because you fell outside the definition as above. Possible Action from you: If you anticipate at any time that your payroll remuneration will exceed R in the following 12 months, or one of the other conditions has changed within your organisation. Please advise your payroll administrator with immediate effect. Our tax department will contact you and make arrangements to register you for SDL, the payroll will be amended to calculate this amount and our payroll administration department will invoice and pay over this amount for you. We unfortunately cannot make this choice for you as we cannot anticipate your actual salary bill for the next 12 months. Please contact us if you don t understand what s required, or if we can assist you in any way: BEE ALERT! By Tony Kruger and Kim Odell (Beerated) New BEE Targets in 2012 for the Generic Dti Codes and for the Tourism Code 1.1 Dti Generic Codes Please Note: The targets will increase significantly from February 2012 for the Dti Generic and QSE Codes, so it important to start making provision now for the following elements: Employment Equity and Preferential Procurement. Targets in this 2 nd phase will be: BEE Element Generic Codes QSE Codes Employment Equity Senior Management: from 43% to 60% Middle Management: 63% to 75% Junior Management: 68% to 80% Disabled Employees: 2% to 3% Management: from 40% to 60% Total Employees: 60% to 70% Preferential Procurement Total BEE procurement: 50% to 70% QSE/EME procurement: 10 to 15% Black owned procurement: 15% to 20% Total BEE procurement: 40 to 50% 1.2 Tourism Sector Code If your organisation falls within the Tourism Sector, then very significantly increased new targets will apply as of May For example, targets will increase as follows: Ownership - from 15% to 20%, Employment Equity - all levels of Management from between 12 and 17% above the current target levels, Preferential Procurement between 5 and 20%. Going forward, other Sector Codes will also be faced with more challenging targets. 2. Interpretive Guide: Ensuring Proper Preparation for a BEE Verification and Rating There continues to be issues on interpretation of the Dti Codes, compounded by the introduction of the various Sector Codes.

5 To start with the Ownership element, did you know: The Codes allow for continued recognition of Black ownership, subject to certain criteria being met, even if the Black shareholder has already exited the business, e.g., through sale or loss of shares, death, etc. The bonus points for black new entrants, employee share schemes, and co-operatives only apply if the overall target of 25% black economic interest has first been met. Black family trusts do not automatically qualify as acceptable forms of Black ownership, but must first meet several qualifying requirements. In particular, that the trust deed must define the beneficiaries and the proportion of their entitlement to receive distributions; also, the Trustees must not have any discretion over the beneficiary s entitlement to distributions. Please contact Melany Bydawell for further information: melany@hrtorque.co.za The Tax Administration Bill 2011 By David Beattie On 24 June 2011 the Tax Administration Bill was introduced in Parliament for public comment. This Bill is an attempt to simplify, provide greater certainty and better coherence in South African tax administrative law. These administrative provisions are currently duplicated in different tax Acts. The Bill incorporates into one piece of legislation certain generic administrative provisions. Parallel to this Bill, the rewrite of customs aspects in the Customs and Excise Act, 1962, is at an advanced stage. The Taxation Administration Bill 2011 seeks to facilitate tax compliance, provide consistency in the application of tax law and to further improve the levels of tax compliance in South Africa. It aims to enhance tax compliance and SARS powers to effect this, recognising that to maintain confidence in the integrity of the tax system, SARS is duty bound to actively pursue tax evaders. Tax evaders will face stricter enforcement, assessment and collection powers. At the same time, the Bill will cut red tape and reduce the administration burden and cost for businesses and individuals to remain tax compliant. SARS provides the example of there being a single registration for multiple tax types such as Income Tax, Employees Tax and Value Added Tax. The proposed provisions in the Bill focus on the registration of taxpayers, return submissions, assessment procedures, objection and appeal procedures, information gathering, search and seizure provisions, provisions relating to the secrecy of the taxpayers affairs and the processes for the payment and collecting of outstanding tax. The Bill seeks to balance the powers and duties of SARS with the rights and obligations of taxpayers, in order to enhance equity and fairness in tax administration by providing a single body of law that outlines common procedures in a transparent relationship. The Bill also seeks to align current outdated tax administrative provisions with modern approaches, business, accounting, constitutional rights etc. The Bill further proposes the establishment of a Tax Ombud to deal with taxpayer complaints, provide for search and seizure without a warrant under limited circumstances, providing the collection powers of SARS. Whilst this Bill contains various provisions that will go a long way to improving the efficiency of the tax system and make the cost of doing business in South Africa cheaper, the critics of the Bill believe that it is merely aimed at extending SARS powers. Should you require any additional information regarding this bill, please contact Dave Beattie on or dave@hrtorque.co.za. New Service to Payroll Clients: Tax Retainer By David Beattie As a payroll client of HRTorQue Outsourcing (Pty) Ltd, there are a number of employee tax services that you automatically have access to, within reason, and without additional cost.

6 The existing support that you receive does not provide for any on-site consulting, but allows for access to telephonic and advice as follows: Limited Telephonic advice regarding Payroll and Employee Tax queries UIF and COIDA issues, administered by HRTorQue Outsourcing (Pty) Ltd Answering questions relating to operational payroll issues Limited interaction with SARS regarding PAYE / UIF / SDL issues However, there are a number of value-added services that this division can offer via a cost-effective monthly retainer. The retainer is primarily aimed at providing Employees Tax legislative support to Payroll Administrators, Managers, Accountants and HR Practitioners and our clients will have access to an experienced Tax consultant who provides a high level of expertise and service. The Tax Division has built up strong relationships with the Receiver of Revenue, Department of Labour and other authorities for many years to the advantage of the client. Monthly Tax Retainer Options: 1, 2 & 3 Inclusive of Retainer fee: Services as indicated Hour/s of attendance as indicated (hours are not accumulated and carried forward from month to month) Monthly Retainer Services include: This provides for telephonic and advice, and consulting done on-site. Includes services highlighted below up to a maximum of 1, 1.5 or 2.5 hours a month dependant on the selected option. Telephonic and assistance (this will be monitored) Salary structuring for new / existing employees (equivalent to 1 hour) Registration - max of 2 new employees per month for income tax numbers (this option does not require a certified Identity document, proof of residence or 3 months banking statements) Annual certificate of good standing from DOL in relation to COIDA Annual Tax Clearance Certificate from SARS Application for tax directives (retrenchments, fixed rate and fixed percentage) Changes to employment conditions Consultation on various legislations, for example PAYE, UIF, Skills Development Levy and COIDA Any legislative research necessary to provide an opinion on any PAYE/UIF/SDL or COIDA issue An Annual Employee Tax Review/audit service for compliance and best practice Telephonic consulting regarding the allocation of allowances and fringe benefits to employees COSTS: OPTION 1, 2 & 3 Option 1 (telephonic & on-site retainer) Option 2 (telephonic & on-site retainer) Option 3 (telephonic & on-site retainer) Hours per month 1 hr 1.5 hr 2.5 hr Cost per license R 500 R 750 R 1200 Additional Services: Tax Return Services: R 550 per return (we reserve the right to quote on the completion of these returns) All Travel charged at R 3.30 per km Ad hoc consulting or where the hours have been exceeded: R 550 per hour All costs exclude VAT. Should you require any additional information please contact Dave Beattie on or dave@hrtorque.co.za.