Running a legally compliant payroll department has become an increasingly difficult and time-consuming task for small to medium enterprises (SMEs) as mushrooming legislative requirements have resulted in a confusing heap of legal requirements contained in six Acts governing tax, HR and payroll.
“Business owners face a decision: do they devote time and energy to developing manpower and know-how to keep up with payroll legislative changes and all the administration and queries that go with it, or do they focus on managing their businesses, generating sales and achieving revenue growth?” asks Laurica Kok, GM of payroll and HR software developer, Pastel Payroll, part of the Softline Group and Sage Group.
Outsourcing payroll administration allows SME businesses to achieve compliant payroll administration without diverting resources and focus away from the core business to run a full-time payroll department.
Payroll Administrators can no longer just be on top of changes from a Payroll software and legislation point of view. They also have to keep up with changes that are implemented in the SARS e@syFile and e-filing electronic submission systems. An outsourced solution ensures that this is done and that the software is always up to date.
Kok points out that companies can include employee self-services (ESS) to complement and simplify an outsourced payroll solution. ESS is a secure, Web-based employee self-service tool that enables employees to easily manage, maintain and update their own information online.
“ESS has workflow capabilities based on the organisation chart or a specific workflow order per online form. As the organisation chart indicates the hierarchy and reporting structures of each department involved in any approval procedures, it streamlines the process while the administrator has sole access to create and amend workflow structures.
“Using the workflow capabilities, employees can submit online applications for leave, loans, bursaries and travel claims, among others. This makes the business lives of the payroll administrator and HR manager significantly easier, while also saving time on data capture and error elimination.
“ESS gives outsourcing service consultants access to online employee applications, relieving payroll administrators and HR managers of the burden of compiling and submitting this information to the payroll company.”
Over and above ESS, companies can also opt for an HR software and services extension to their existing payroll outsourcing service, giving management access to employee masterfile non-financial information.
It is a simple, highly effective way of ensuring performance reviews and disciplinary actions are executed correctly and timeously through standard HR formats and templates such as employment contract and disciplinary templates including verbal warning, written warning and final written warning, to name but a few.
Kok says users don’t need an HR degree.
“The software is easy to implement and control and it helps SME businesses avoid costly CCMA cases and wrongful dismissals where compensation comes into play. Companies can also update their employment equity information directly into the masterfile, enabling outsourcing service consultants to generate EEA2 and EEA4 reports for submission to the Department of Labour.”
Businesses can therefore focus on their strengths, knowing that for a set monthly fee, their payroll is efficiently, confidentially and legally managed by an experienced partner with the required knowledge base and expertise.
“It is a cost-effective and hassle-free solution. Companies considering outsourcing should ensure they consult the market to see what it has to offer. Doing so ensures an outcome focused on professional and reliable services,” says Kok.
The outsourcing service guarantees that the various employee payroll returns required by legislation are done accurately and submitted on time, every time, and that employees receive correct remuneration.
“It ensures that all branches or outlets produce legitimate payrolls that meet all of the legal obligations regarding income tax, basic conditions of employment, UIF, PAYE, SDL and HR aspects.”
The ongoing drive by South African Revenue Service (SARS) to ensure that businesses comply with legislation means that payroll outsourcing services have to ensure that all the mandatory data is obtained from the client so that submissions to e@syFile and e-filing are always accepted.
“Our Outsourcing Division will ensure complete accuracy of the client’s processes and information so that IRP5 tax submissions are accepted by SARS first time round,” says Kok.
She also points out that PAYE reconciliations used to be done annually, now it is bi-annually and eventually it will become monthly.
“This will place more pressure on the lives of Payroll Administrators and outsourcing is likely to become an even more attractive proposition. In a nutshell, we manage e@syFile for our customers, loading the IRP5 tax certificates and submitting via e-filing.
“The fact that SARS has also embarked on the appointment of companies as agents to collect outstanding tax owed to SARS by individuals in their employ, is another looming pressure for companies,” says Kok.
“As we manage customers’ e@syFile profiles for them, the outsourcing solution offers help if customers receive ITA88 Agent Notifications from SARS and we can advise on what steps to take and explain the implications of the short and long term payment plans.”
All companies using the outsourced payroll service are registered on the Pastel Payroll profile on e-filing, so that their EMP501 returns are retrieved to the profile, enabling the Pastel Payroll outsourcing service to submit the EMP501 from e@syFile to e-filing automatically.