Tight and efficient payroll management throughout the year can transform year-end complexities and minimise errors
When it comes to payroll, perhaps one of the biggest challenges is the fact that no organisation can afford to get it wrong. Mistakes can impact both bottom line and business reputation, and they can impact on how the organisation fares when it comes up against the South African Revenue Services (SARS) at year-end. While juggling multiple jurisdictions, employees, benefits packages, requirements, leave packages and roles is an intricate dance that demands attention to detail, it doesn’t have to be excessively complex or overwhelmingly difficult. As the General Manager of CRS, Ian McAlister points out that all it takes is to ensure that payroll remains a priority throughout the year and to use a system that empowers, not inhibits, payroll practitioners.
“That said, it’s still important to follow best practice steps to ensure that year-end payroll is as seamless and accurate as possible,” he adds. “The first step, particularly for large payroll systems, is to have a verification method in place that ensures every line in the EMP 501 is correct. In the past, checking these details was a time-consuming task that could introduce errors in and of itself; now companies can use automated and intelligent systems that check the data against specified formatting.”
Implementing this layer of technology and functionality into your payroll process can save practitioners hours of their time – time that can be better spent managing other processes – and it can run continuously throughout the year to catch errors as they occur, not when deadlines are pressing. Having this level of granular control can fundamentally change how the teams approach year-end, and remove the risk of unexpected errors creeping in.
“Another challenge is to ensure that bonuses are properly managed,” says McAlister. “A lot of companies pay a bonus to their staff and don’t deduct the tax in the month that the bonus was paid, amortising it over the period of the financial year. So, the tax is paid on the bonus on a monthly basis. But if the bonus is paid at Christmas, it can’t be paid over the next 12 months, it has to be paid in the financial year the benefit was earned. It’s important to be aware of this requirement when managing bonus payments and taxation.”
Another issue is that benefits have to be calculated properly, and these often introduce fairly complex elements across different ratios, amounts and benefit packages. It’s common for companies to get some of these calculations wrong, which is understandable, however, it can result in a massive tax bill for the employee as tax was deducted incorrectly over the year. To avoid the knock-on impact to the employee or the business, benefits packages need to be carefully curated using the right systems and software.
“There are still some companies using Excel to manage their payments and this is where expensive errors creep in,” says McAlister. “If tax is calculated incorrectly, benefits are not deducted properly, and information is missing – then companies can get into a lot of trouble, from both SARS and their employees. Today, with the plethora of solutions available on the market, it makes immense sense for companies to invest into payroll platforms that ensure accuracy across every part of the payroll process. And that removes the risks and the mistakes when it comes to year-end.”