HR: The Evolution Of the Payroll Administrator
Recent Gauteng Business News
The employees’ tax world is constantly evolving through legislative amendments and surrounding practical complications. Gone are the days when companies could hire data capturers to type in the remuneration paid to an employee and gone are the days when companies could only place reliance on the payroll software for compliance with company’s withholding tax obligations.
Knowledge of the Income Tax Act (‘the Act”) is crucial as the South African Revenue Service (“SARS”) continues to place an increased burden on employers to “administer the Act” e.g. to determine whether or not to tax an item, to classify an individual as an employee, to determine the fringe benefits rates that need to be applied.
As an illustration, the definition of an “employee” in the Act is extremely wide. It is left to the employer (by implication the payroll administrator) to decide whether or not a close corporation would, for example, be regarded as an employee and subject to employees’ tax withholding. A further example lies with the company car legislation. It is possible that where an individual is anticipated to use more than 80% of the vehicle for business purposes, the fringe benefits tax can be reduced to 20%. All of the above requires thought, knowledge of the Act and awareness of the changes in tax legislation. Unfortunately or fortunately, at this stage, the machine (being the payroll software) cannot make the decision for the employer.
History has shown that those who do not evolve will more than likely not survive. The days of the employees’ tax data capturers are numbered. The current tax environment demands that the administrators understand the various tax principles and are able to make decisions that will stand up to the scrutiny of SARS.
Payroll administrators can also no longer act in isolation when performing their duties. It is possible that the root cause of the employees’ tax exposure could be lack the in communication to payroll. There has to be a synergy between Human Resources (who hires the employees and communicates increases), payroll (which processes the information) and finance (which pays out the creditors and makes other payments). The synapse needs to be immediate as delays could result in an employees’ tax exposure.
At the end of the day, companies should be placing more emphasis on employees’ tax and arming their administrators with sufficient knowledge and advisory back-up to perform their duties as the guardians of the payroll.
Company executives should also be promoting teamwork between HR, payroll and finance and ensuring that sufficient controls exist to manage the tax risks stemming from the company’s withholding tax obligations. The on-the-job performance of the role players in these departments should be measured based on the success of their interaction with one another. After all, lack of teamwork will result in an increase in the tax risk.
The changes to the employees’ tax legislation and interpretive burden being placed on employers has created a wave that not only affects the world of payroll administrators but also of their colleagues in HR and Finance. Teaming and synergy are important. Processes to enable this are equally important. In the absence of these, an employees’ tax exposure for a company is almost guaranteed.
Business News Sector Tags: HR|