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Staying ahead of payroll and HR legislation and compliance

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Payroll and HR professionals have access to valuable – and sensitive – data that can increase productivity, aid in compliance, and help attract the best talent. Still, without a system that can help them tap into this data, they will never be able to access the insights it provides. 

In August 2021, Sage conducted its most recent study, payroll and HR in SA: Rising to the challenges of change. We interviewed 600 small and 400 medium-sized businesses on how they are handling the increasing complexities in HR and payroll while simultaneously dealing with the challenges of remote working and data security. 

The study revealed that 49% of respondents believe that the overwhelming reason for the complexity is the continual changes in regulations and legislation, which results in the biggest payroll challenge: staying compliant. 

The only constant is change 

Businesses that rely on manual or offline payroll systems struggle most with the continual changes. Since 47% of payroll and HR professionals handle compliance daily, they spend a disproportionate amount of time on manual, repetitive tasks and data management. This leaves little to no time to take advantage of important matters, such as applying for employee tax incentives or making their workforces more attractive to the incoming Gen Z. In fact, 77% of respondents admit to struggling with the complexity of payroll taxes. While most know the importance of staying up to date with new and changing legislation and regulations, many find it near impossible to do so. 

 This is not for lack of trying, with the top three sources of legislative information being: 

  • The South African Revenue Service (SARS) and the Department of Labour (74%) 
  • Professional activities, such as training, workshops, and webinars (48%) 
  • Reading and interpreting legislation or non-legislative compliance sources (47%) 

Compliance is key to running a successful business. Payroll and HR  professionals must understand these changes’ impact on systems and processes such as data security, UIF and PAYE calculations, and pension and medical aid fund contributions. 

Non-compliance: The dangers 

Every business operation is governed by local and international regulations to ensure that companies act responsibly. With the constant changes to regulations and complexities, many companies may be non-compliant and give little thought to repercussions.  

What’s more, as a result of the COVID-19 pandemic, the demand for workplace flexibility has increased exponentially, which adds further complexity to payroll and HR processes as businesses adopt remote and hybrid working arrangements. But with greater complexity comes an even greater risk of non-compliance and irrevocable error. 

Complying with relevant legislation and regulations is essential and, according to our research, is generally being achieved: 91% believe that their organisation is fully compliant with the Protection of Personal Information Act (POPIA) and the General Data Protection Regulation (GDPR).  

However, compliance remains a worry to HR professionals as 63% show concern in securely sharing personal employee information, 48% worry about being POPIA and GDPR compliant, and some worry about cyberattacks (12%), information theft or leaks (15%), and data protection (24%). To avoid non-compliance, keeping up to date with legislation is essential. In fact, 89% of payroll and HR  professionals find it critical to their role.  

That’s because non-compliance can result in hefty fines and sanctions but can also result in more damaging consequences, such as criminal charges, reputational damage, and loss of opportunities. Criminal charges are usually laid when a company fails to comply with regulations relating to workplace safety, staff management, corporate governance, stock management, due diligence, and marketing, to name a few. 

Keeping up with the acts and laws to remain compliant isn’t easy. Fortunately, there are ways that payroll and HR professionals can ensure that they stay compliant with minimal effort.  

Cloud software: Compliance made easy  

An effective payroll and HR compliance strategy starts with using the correct tools. Businesses that already had specialist cloud-based payroll and HR systems in place when the pandemic hit found it easier to adapt to hybrid working situations and manage change than those that still use manual, offline systems.  

Cloud payroll technology automates mundane, repetitive tasks improves reporting and compliance accuracy, supports data security, and frees up time for payroll and HR  professionals to focus on the things that have a tangible impact on the business. These include making the company a great place to work, strengthening organisational culture to create long-lasting team bonds in a hybrid environment, and paying attention to the social issues that matter most to Gen Z.  

The importance of the shifts that cloud software provides cannot be understated. We are in the middle of a digital era, and payroll and HR managers need to take note of the long-term trends that are beginning to emerge to help their businesses adapt and stay relevant. 

The most successful businesses will be those that embrace specialised technology and implement cloud-based software to manage many of the payroll and HR  functions, thereby allowing their professionals to place their focus on:  

  • Increasing productivity, motivation, and morale by driving employee engagement (48%) 
  • Freeing up HR’s time to focus on more important matters (44%)  
  • Supporting employees with increasing needs around mental health (43%) 
  • Growing employee satisfaction (40%) 
  • Retaining top talent (37%)  

With cloud-based software, payroll and HR data can be used effectively and in real-time, resulting in lower staff turnover, faster recruitment, higher employee competency, and increased engagement throughout the employee lifecycle. The correct use of data also improves recruitment, skills development, employee satisfaction, and compensation decisions.  

Over half (56%) of respondents in the study agreed that digitising payroll and HR data and employee information could save them time and effort. They believe that digitisation will provide real-time insights, improve data security, reduce the admin burden, and optimise payroll and employee information.  

Furthermore, 96% believe that specialist payroll and HR systems should be:  

  • Integrated with accounting software, 
  • Accessible from anywhere, anytime, 
  • Intuitive to use, and 
  • Offer online support 

Time management, data security, and the shift to remote and hybrid working are the biggest reasons why 70% of SMEs would move to cloud-based systems.  

Successful businesses will be those that introduce specialised cloud-based software, thus creating time for management to concentrate on understanding employee expectations, the cultural benefits that will make the business attractive to top talent, and putting in place the systems and processes that will engage and retain that talent. 

[White paper] Payroll and HR in SA: Rising to the challenges of change

The global shift to remote and hybrid working and regular legislative changes have resulted in payroll challenges of considerable complexity for many businesses. Learn how payroll and HR professionals and small businesses are adjusting to the new challenges.

Download the white paper

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