With the final payroll of the year and bonus runs around the corner, it’s easy to get flustered about everything your business needs to do and have in place before you can get to those long-awaited festivities.
As an HR and payroll professional, it can be a stressful time to make sure that employees are getting paid correctly for public holidays, annual leave, bonuses, and more.
Naturally, compliance remains key to a successful pay run, especially when you throw things like bonuses into the mix. To remain compliant, businesses must stay up to date with any legislative and regulatory changes that affect the industry.
This is certainly not easy, as according to the Sage Payroll and HR in SA: Rising to the challenges of change research report, 77% of respondents say they struggle to understand complex payroll taxes. Trying to figure out bonus payments, deductions, and staff information on top of that is a LOT. But, being prepared for it doesn’t have to be.
Here are some things that are important to know beforehand:
Now, we all like the sound of that, don’t we? But it’s not always as simple as it seems.
There’s nothing worse than getting a little extra money, which then pushes you into a new tax bracket, leaving you even more broke than you were before!
Payroll professionals need to understand the fundamental principles of additional compensation so that they are able to offer informed advice when creating policies so that employees are correctly compensated.
Bonuses and tax
Not all companies offer bonuses, but for those that do, the criteria for earning a bonus must be determined and communicated well ahead of time, either as part of company policy or as part of the employment contract.
As bonuses are considered remuneration, companies must process the bonus payment along with the employee’s regular salary, and then deduct the tax and pay it over to SARS.
Bonuses must be declared to SARS. Benefits other than cash bonuses must also be reported on the employee tax certificate.
These benefits include:
- Vouchers: These are fully taxable (subject to a few exceptions)
- Other non-cash benefits: There are numerous fringe benefits that employers can grant their employees, and these are all taxed in their own way.
It is advisable to check out SARS’s set of guidelines to accurately determine the tax on fringe benefits.
Getting tax right
You’re paying tax on everything from overtime and commissions to bonuses (and a whole lot more), and these all affect how much income tax an employee will pay and is factored into their remuneration.
Keeping track of all these taxes can be tricky and time-consuming, but with the automation incorporated into cloud HR and payroll software, you can run your payroll simply, quickly, and accurately—every time.
Other ways cloud-based HR and payroll solutions can help you include:
- Data accuracy: Automation allows you to calculate employee salaries and deductions quickly and easily, and will alert you to any errors or inaccurate information. The software can be configured to pay your employees according to their earning bracket.
- Reporting to SARS: Reconciliations and payroll data are easily submitted to SARS during the mid- and year-end tax periods.
- Payslip management: No need for manual payslips surreptitiously placed on employees’ desks (unless you want to, of course). Cloud-based software allows you to print or email payslips, or even make them available online.
- Compliance: This one we all know by now. Cloud-based software is automatically updated as legislation and regulations change, which means you can stay compliant and in the receiver’s good books all the time.
Ok, so what now?
Now we need to get to that payroll. Fortunately, there are numerous payroll requirements that employers can complete beforehand to help ease the burden of the final run.
To stay on top of these, we suggest using a checklist.
Success starts with a checklist. Yes, really. It’s all good and well to think you have all your ducks in a row, but if you aren’t ticking things off, you can quite easily lose track and forget about something important that will land you in hot water with the receiver.
Here is a good checklist to work from:
1. Confirm employee information
When it comes to processing payments, it’s vital to have the correct employee information. Verify their details with them, or, if you use a cloud-based HR and payroll solution, encourage them to update their details in the self-service portal.
Check that the following employee information is correct:
- ID or passport numbers
- Bank account numbers
- Income tax reference numbers
- Address and telephone numbers
Be sure to confirm and correct any details before you do your pay run.
2. Make sure you’ve recorded all payments
Was anything outside of the normal payroll paid to your employees? Things like commissions, bonuses, and the like? If you made these kinds of payments, it is time to update your records to reflect them.
3. Update your leave schedules
Without an automated system, it is nearly impossible to keep accurate records of leave.
Manual forms are at risk of getting lost, or of data being captured incorrectly. Having cloud-based HR and payroll software in place ensures that employees can submit and manage their leave through a self-service portal with built-in rules.
This data is stored accurately as the software factors in weekends and public holidays, as well as all the five- or six-day work week nitty gritty. This saves your business time, money, and recon frustration, and what’s more, you’ll have the full leave history of each employee, which will help you determine staff leave behaviour patterns.
Approving annual leave early will also help you manage your year-end pay run. Many employees like to take leave over the festive season, and some companies even have forced leave policies during this time. Regardless of how this leave comes about, it needs to be applied for in advance to ensure that leave requests can be approved, and employees can be paid on time.
4. Do your final payroll
Processing lump sum payments such as commission and bonuses can be done by aggregating the tax across a number of pay periods. If you’re paying staff a bonus at the end of the year, or paying out their leave in advance, you need to have a close look at how you process those payments.
It is always smart to harness the power of automation. Cloud-based, automated HR and payroll software will change your life.
Tailored to your specific business needs, it eliminates manual data entry and automatically updates legislative and regulatory changes too. It helps prepare your business for an audit, correctly classifies your employees and contractors, and ensures that payments are made on time, every time, which is pretty handy when you want to be chilling on the beach instead of sitting in the empty office releasing payroll.
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