U/S; 110008 -Determine individual and Aggregate Payments.

Identify and Record Deductions.

Compulsory deductions include tax and Unemployment Insurance Fund contributions.

Deductions related to benefits, such as pension, medical aid, life cover and income protection, are usually voluntary but can be compulsory depending on your employer’s policy.

Deduction forms and the remuneration of employees are addressed in section 34 of the Basic Conditions of employment Act.

“Deductions and other acts concerning remunerations. –

• An employer may not make any deduction from an employee’s remuneration unless-
  1. subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement; or
  2. the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award.
• A deduction in terms of subsection (1) (a) may be made to reimburse an employer for loss or damage only if-
  1. the loss or damage occurred in the course of employment and was due to the fault of the employee;
  2. the employer has followed a fair procedure and has given the employee a reasonable opportunity to show why the deductions should not be made;
  3. the total amount of the debt does not exceed the actual amount of the loss or damage; and
  4. the total deductions from the employee’s remuneration in terms of this subsection do not exceed one-quarter of the employee’s remunerations in money.”

4(1) “An employer may not make any deduction from an employee’s remuneration unless” 

This means that a deduction in terms of section 34(1) may not be made unless the requirements set out in 34(1)(a) and (b) are met. A deduction from an employee’s remuneration would therefore only be possible if the employee agreed to such a deduction in writing or the deduction is allowed in terms of legislation, a court order or an arbitration award.

34(1) and 34(1)(a) states – “An employer may not make any deduction from an employee’s remuneration unless, subject to subsection (2), the employee in writing agrees to the deduction.” 

In terms of subsection 2 an employer may deduct from an employee’s remuneration an amount equal to the damage suffered or a loss incurred as a result of the negligent or deliberate behavior of an employee. There are however certain requirements that must be fulfilled before such a deduction may be made. Section 34(2) clearly states “..only if-“, meaning that all of the requirements of subsection 2 must be satisfied. This is amplified by the use of the word “and” at the end of 34(2)(c).The requirements of subsection 2 are:

1. The loss or damage must have occurred in the course of employment.
2. The loss or damage must have been as a result of the fault of the employee.
3. The employer must follow a fair procedure and give the employee a reasonable opportunity to show why the deductions should not be made.
4. The total amount of the debt may not exceed the actual amount of the loss or damage.
5. The total deductions from the employee’s remuneration may not exceed one-quarter (25%) of the employee’s remunerations in money. 

In terms of schedule 8 of the Labour Relations Act a fair procedure means that:

• The employer should notify the employee of the allegations using a form and language that the employee can reasonably understand.
• The employee should be allowed the opportunity to state a case in response to the allegations.
• The employee should be entitled to a reasonable time to prepare the response (48 hours) and to the assistance of a trade union representative or fellow employee. 

Must there be a written agreement in terms of section 34(2)?

Section 34(1)(a) states “subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement”. The DoL’s interpretation of this is that the two sections cross reference each other. In other words, in addition to the requirements of subsection 2 an agreement in writing must be obtained from the employee in terms of 34(1)(a). This would mean that an employer will not be able to deduct without the employee’s permission even if all the requirements of subsection 2 have been met.

Deductions that an employer may legally make include:

• Tax from an employee’s salary to pay the South African Revenue Services (SARS);
• A contribution to the Unemployment Insurance Fund (UIF);
• Union subscriptions in line with a stop order signed by the employee, which is paid over to the union;
• Medical aid and retirement fund contributions if it is in the employer’s employment contract. The employer pays these amounts to the fund;
• Deductions in terms of a written agreement with the employee to pay back a debt. For example to pay back a study loan;
• Deductions in terms of a garnishee order; or
• If the employee was overpaid in error.

Learning Unit 2

The concept of SITE is explained orally and SITE calculations.

SITE – Standard Income Tax on Employees is deducted by the employer from an employee’s salary (usually at the end of every month). All employees are liable for this tax. Where an employee’s net remuneration is R87 300 (TYE 2022) or less, PAYE does not have to be deducted.

Employees’ tax, which comprises of Pay-As-You-Earn (PAYE) and Standard Income Tax on Employees (SITE), refers to the tax required to be deducted by an employer from an employee’s remuneration paid or payable. The SITE element is not applicable with effect from 1 March 2012. 

What is PAYE?

Employees’ Tax refers to the tax required to be deducted by an employer from an employee’s remuneration paid or payable. The process of deducting or withholding tax from remuneration as it is earned by an employee is commonly referred to as PAYE. See How to register for PAYE on eFiling.

An employer who is registered or required to register with SARS for PAYE and/or Skills Development Levy (SDL) purposes, is also required to register with SARS for the payment of Unemployment Insurance Fund (UIF) contributions to SARS. You can register once for all different tax types using the client information system.

Top Tip: The Employment Tax Incentive encourages employers to employ young workers by providing a tax incentive to the employers. Read more.

The amount withheld and paid by the employer to SARS is applied as a prepayment of income taxes and is refundable if it exceeds the income tax liability determined upon filing individual income tax returns.

Who is it for?

The amounts deducted or withheld must be paid by the employer to SARS on a monthly basis, by completing the Monthly Employer return (EMP201). The EMP201 is a payment return in which the employer declares the total payment together with the allocations for PAYE, SDL, UIF and/or Employment Tax Incentive (ETI), if applicable. A unique Payment Reference Number (PRN) will be pre-populated on the EMP201 and will be used to link the actual payment with the relevant EMP201 payment declaration.

How and when should it be paid?

It must be paid within seven days after the end of the month during which the amount was deducted. If the last day for payment falls on a public holiday or weekend, the payment must be made on the last business day before the public holiday or weekend.

Year-End / Mid-Year Submission Checklist

Common Errors on the IRP5 / IT3a exception report

A Warning Exception won’t stop you from generating and/or importing your IRP5 Electronic certificates.  You will not need to clear this exception as it is merely there to notify you of a change.

All transactions on the Exception Report that don’t have the word WARNING in front of the exception need to be cleared in order to generate your IRP5 Electronic certificates.

It is important to note, that your IRP.# may be generated once all exceptions are cleared, but can still be rejected by E@syfile.

In this case, view and export the error report which will contain the Employee Code and detailed error to be rectified before the file is imported.

One error will prevent your entire file from being imported into E@syFile.

Be diligent.

Exception: Tax Code 3615 is no longer allowed from 1 March 2018 as per SARS

This exception is merely a warning to notify you that code 3615 will no longer display on a director’s IRP5. The income that has been entered on transaction code 5007 (Directors Remuneration) during your periodic processing will be added to Tax Total 3601 and will no longer display under Tax Total 3615 on the employees IRP5. As a Warning Exception it won’t stop you from generating and/or importing your IRP5 Electronic certificates.  You will not need to clear this exception as it is merely there to notify you of this change.

Tax Total 3833/3883 not equal to Tax Total 4584

In the 2019 tax year, certain council contributions became taxable – therefore Payroll Software Systems created fringe benefits to align with this new legislation.

As each council is different, the resolution for each council is different. Please review the applicable Main Agreement Amendment and council resolution guide for a resolution and apply it accordingly to your benefit and deduction lines.

Tax Total 3696 + 3699 not equal to income sources

This exception is due to the fact that not all of your income codes are equal to correct tax total.

This exception can be due to various reasons, like a transaction template being setup incorrectly or a discrepancy in the database tables.

NOTE: In order to attempt any of the below resolutions, your employees will have to have a status of on Not Processed, so if your employees are processed you will have to do a clear run flags.

Check your Custom Templates:

The standard transactions in Pastel Payroll have been pre-set with their own relevant tax totals, so they shouldn’t be the cause of this exception.  You will have to double check that all your custom templates have been setup for the correct Tax Totals.

• Navigate to Setup, Transaction Templates.
• Click on the magnifying glass:
• Any code between 0030 and 5000 needs to be selected and checked (one by one)
• Any code after 9404 needs to be checked (unless you have council codes, then any code that appears after your relevant M,I,E,R or S codes)
• After you have selected your custom code, click on Tax Totals. Ensure that the correct tax totals were selected – please check with your Tax Practitioner what tax totals needs to be selected.

TIP: Usually tax totals for incomes will consist out of two codes. 3699 OR 3696 will be one of these codes.  Both cannot be selected.  In most cases you shouldn’t have more than two tax totals of the same type on a transaction – please confirm with your tax practitioner for more information.

Rebuilding database entries:

We would advise that you make a backup, complete a Pay Period Update into the next period and then run a rebuild totals.

Exception: Tax Total 4474 not equal to 3810

This exception states that the total value that has been paid by the company toward your medical aid does not match the fringe benefit of that value.  Therefore the total amount and year to date amounts on 9090 and the total amount on 6172 does not match.

NOTE: If you are doing your Bi-Annuals or Year End submission you will need to be in August (Bi-Annuals) or February (Year End) to do this correction.  If you are not in these periods, you can restore a backup to these periods but remember you will need to then recapture all of the months between the month you are restoring to and the one you are currently in.

• Click on View, Payroll Reports, Monthly Analysis.
• Filter the report to show only the employee in question.
• Ensure to run the report from the beginning of the tax year to the current period (6 months if you are in August, 12 months if you are in February). Click ok to print the report.
• In the Contribution section you will transaction code 9090 and in the Benefits section you will see the code 6172. Check the Total column for both codes and see which transaction is different.
• You will now have to check your records to find out why the fringe benefit and the Company contribution is not the same amount
• In an example where the code 6172 is the wrong amount:

If code 9090 has a total of let’s say R10000, but code 6172 has a total of R9000 and according to your records transaction code 6172 was processed incorrectly in one month, then you will need to fix code 6172 in your current period:

• In the current period, you will navigate to the Process, Payslip screen of the employee in question.
• Click on the contributions tab and check the YTD value for the code 9090 (in this case R10000)
• Click on the benefits tab and check the YTD value for the code 6172 (in this case R9000)

The difference between these two amounts are (R10000-R9000) a R1000.

As According to your records 6172 is wrong, you will have to change the current value of 6172 in order to increase your YTD to the amount that matches 9090.

You will make a note of the current amount for 6172 (Example a R500) then click on the override box next to code 6172 on the benefits tab. You will now add the amount that 9090 and 6172 differs with to the current amounts value (so 6172 will change to R1500).  This will push your YTD value for transaction 6172 up to R10000 that matches the YTD value on transaction 9090.

In an example where the code 9090 is the wrong amount:

If code 6172 has a total of let’s say R10000, but code 9090 has a total of R9000 and according to your records transaction code 9090 was processed incorrectly in one month, then you will need to fix code 9090 in your current period:

In the current period, you will navigate to the Process, Payslip screen of the employee in question.

• Click on the contributions tab and check the YTD for the code 9090 (in this case R9000)
• Click on the benefits tab and check the YTD for the code 6172 (in this case R10000)
• The difference between these two amounts are (R10000-R9000) a R1000.
• As According to your records 9090 is wrong, you will have to change the current value of 9090 in order to increase your YTD to the amount that matches 6172.
• You will make a note of the current amount for 9090 (Example a R500) then click on the override box next to code 9090 on the benefits tab. You will now add the amount that 9090 and 6172 differs with to the current amounts value (so 6172 will change to R1500). This will push your YTD value for transaction 9090 up to R10000 that matches the YTD value on transaction 6172.

Exception: Negative Tax Total 3697

This exception states that there are transactions linked to the calculation total “Retirement Funding Income” with negative amounts where the cumulative negative total for these transactions exceeds the cumulative positive total of the transactions with positive amounts linked to this calculation total.

• Click on View, Payroll Reports, Monthly Analysis
• Filter the report to show only the employee in question
• Ensure to run the report from the beginning of the tax year to the current period.
• Click ok to print the report. In the Income section you will see a code that has been processed as a negative (in most cases it will be the code 5020, 5018 or 5014). Also make a note of what transaction you are making use of to process the employee’s salary (code 5000, 5002, 5001etc). Once you have taken down the salary transaction and the negative income transaction you can close the Monthly analysis.
• Click on Setup, Transaction. Click on the Magnifying glass and select the code that is used as the Basic Salary (eg. Code 5000, 5002, 5001).
• Click on the Calculation Total Button. Scroll down and you will note that this code has been selected as Non-Retirement Funding Income.
• Click Ok on the Calculation Total screen.
• Click on the Magnifying glass again and this time search for the negative income code (Code 5020, 5018, 5014). Select this transaction.
• Click on the Calculation Total Button. Scroll down and you will see that this code is specified for Retirement Funding Income. Unselect Retirement Funding Income and select Non-Retirement Funding Income (If you can’t unselect or select these fields you have processed employees that first needs to be clear run flagged).
• Click Ok on the Calculation Total screen and close Setup Transactions

NOTE: A progress indicator will run through. If this does not clear the exception, your employee probably has a RFI profile. If this is the case, you will have to add the negative income code to your RFI profile with the same percentage as your Basic Salary.

TIP: The negative income transaction (code 5020, 5018 or 5014 etc.) must always match the RFI or Non-RFI of the basic salary used.  If both are the same, please check if the employee has an RFI Profile, and make sure to add this code to the profile.

Exception: Negative Tax Total 3698

This exception states that there are transactions linked to the calculation total “Non-Retirement Funding Income” with negative amounts where the cumulative negative total for these transactions exceeds the cumulative positive total of the transactions with positive amounts linked to this calculation total.

• Click on View, Payroll Reports, Monthly Analysis
• Filter the report to show only the employee in question
• Ensure to run the report from the beginning of the tax year to the current period.
• Click ok to print the report. In the Income section you will see a code that has been processed as a negative (in most cases it will be the code 5020, 5018 or 5014). Also make a note of what transaction you are making use of to process the employee’s salary (code 5000, 5002, 5001). Once you have taken down the salary transaction and the negative income transaction you can close the Monthly analysis.
• Click on Setup, Transaction. Click on the Magnifying glass and select the code that is used as the Basic Salary (eg. Code 5000, 5002, 5001).
• Click on the Calculation Total Button. Scroll down and you will note that this code has been selected as Retirement Funding Income.
• Click Ok on the Calculation Total screen.
• Click on the Magnifying glass again and this time search for the negative income code (Code 5020, 5018, 5014). Select this transaction.
• Click on the Calculation Total Button. Scroll down and you will see that this code is specified for Non-Retirement Funding Income (it will usually not be the same as the salary). Unselect Non-Retirement Funding Income and select Retirement Funding Income (If you can’t unselect or select these fields you have processed employees that first needs to be clear run flagged).
• Click Ok on the Calculation Total screen and close Setup Transactions.

NOTE: A progress indicator will run through. If this does not clear the exception, your employee probably has a RFI profile. If this is the case you will have to add the negative income code to your RFI profile with the same percentage as your Basic Salary

TIP: The negative income transaction (code 5020, 5018 or 5014 etc.) must always match the RFI or Non-RFI of the basic salary used.  If both are the same, please check if the employee has an RFI Profile, and make sure to add this code to the profile.

Exception: Negative Tax Totals Detected – 7008 ETI – Actual Wage Paid

This problem was mostly due to the fact that unpaid leave was processed, where the client used a different code for the basic salary that was not code 5000, 5001 or 5002. Because the transaction used for basic salary was not ticked for this tax total, but unpaid leave was, it created a negative of the total for 7008.

• Make a backup before proceeding.
• Ensure that there are no processed employees, if you have processed employees you will need to do a clear run flags
• Click on Setup,
• Click on Transaction Templates.
• Select your custom salary/wage code from the magnifying glass.
• Select ‘Tax totals’ and check the tax total for 7008 ETI – Actual Wage.
• Save the custom template

Exception: Tax Total 4120 has a value but 4005 does not have values

If you are doing your Bi-Annuals or Year End submission when you get this error/exception you will need to Restore back to the last period for that reporting phase. The last period will be August (Bi-Annuals) or February (Year End) to do this correction. If you restore you will need to then recapture all of the months between the month you are restoring to and the one you are currently in.

• Navigate Process, Payslips.
• Click on the Magnifying glass and select the relevant employee
• First ensure that codes 8008 and 8003 have been unticked for override.
• If an employee qualifies for additional medical aid tax credits, there needs to be one of the following medical aid transaction codes processed: 9090 Medical aid Company Contribution / 8090 Medical aid Employee Deduction / Medical Aid Private 7085. Add the relevant medical aid transaction for this employee.

If this employee does not have medical aid and the codes have been processed in error, this will need to be reversed on the payslip.

If you wish to not restore a backup and rather have a consultant do a data fix for you.

Exception: Tax Total 4472 has a value but 3817 & 4001 do not have values

This exception states that the total value that has been paid by the company toward your pension fund, but the fringe benefit was never processed.

If you are doing your Bi-Annuals or Year End submission when you get this error/exception you will need to Restore back to the last period for that reporting phase. The last period will be August (Bi-Annuals) or February (Year End) to do this correction. If you restore you will need to then recapture all of the months between the month you are restoring to and the one you are currently in. If you do not wish to recapture, then you can have a chargeable data fix done.

• Click on Process, Payslips.
• Navigate to the employee in questions payslip. Make sure there is either an employee deduction or Company contribution in regard to the Pension fund on the payslip (This is dependent on the Employee’s structure and agreement with the fund). The codes that could be used: 9000 9002 9003 9001.
• The Code 6410 should also be processed.

If the code 6410 does not populate with a value, please check the Setup of the funds tab on this employees Edit, Employee Masterfile screen.

NOTE: It is important to note that 6410 won’t automatically back calculate. If you are only adding in this code in the August/February period, but you have been using it from the March period, you will have to override the amount on the benefits tab and calculate what the value should be in order to take in all of the months from March up to the current period.

Exception: Tax Total 4473 has a value but 3825 & 4003 do not have values

This exception states that the total value that has been paid by the company toward your Provident fund, but the fringe benefit was never processed.

If you are doing your Bi-Annuals or Year End submission when you get this error/exception you will need to Restore back to the last period for that reporting phase. The last period will be August (Bi-Annuals) or February (Year End) to do this correction. If you restore you will need to then recapture all of the months between the month you are restoring to and the one you are currently in. If you do not wish to recapture, then you can have a chargeable datafix done.

NOTE: If this is for a Terminated employee, you will have to either restore back to the period that the employee was terminated in and recapture, exclude the employee from the IRP5 export and create a manual IRP5 in the e@syfile system for the employee, or reach out to your business partner to get a data fix done.

• Click on Process, Payslips.
• Navigate to the employee in questions payslip. Make sure there is either an employee deduction or Company contribution in regards to the Provident fund on the payslip (This is dependent on the Employee’s structure and agreement with the fund). The codes that could be used: 9004 or 9005 or 9006 or 9007.
• The Code 6411 should also be processed. If the code 6411 does not populate with a value, please check the Setup of the funds tab on this employees Edit, Employee Masterfile screen.

NOTE: It is important to note that 6411 won’t automatically back calculate. If you are only adding in this code in the August/February period, but you have been using it from the March period, you will have to override the amount on the benefits tab and calculate what the value should be to take in all of the months from March up to the current period.

If you wish to not restore a backup and rather have a consultant do a data fix for you, you can make a booking using the online platform here.

TIP: If this is for a Terminated employee, you will have to either restore back to the period that the employee was terminated in and recapture, exclude the employee from the IRP5 export and create a manual IRP5 in the e@syfile system for the employee, or reach out to your business partner to get a data fix done.

Exception Report – Tax Total 4116 has a value but no 4005 exists

If you are doing your Bi-Annuals or Year End submission when you get this error/exception you will need to Restore back to the last period for that reporting phase. The last period will be August (Bi-Annuals) or February (Year End) to do this correction.  If you restore you will need to then recapture all of the months between the month you are restoring to and the one you are currently in. If you do not wish to recapture, then you can have a chargeable data fix done.

• Click on Process, Payslips
• Click the Magnifying glass and select the employee that you are getting this exception for.
• This can be fixed in one of 2 ways:
• Add the medical aid codes to the payslip.
• Check the default tab to see if code 8000 and/or 8002 have been processed. If it has been processed, then you will have to add in the correct medical aid transactions that is applicable to your employee. Depending on the medical aid structure you use your PAYE, UIF and SDL might change
• Remove the incorrect codes from the payslip

If the codes have been processed incorrectly and this employee does not have medical aid these codes will have to be removed from the payslip. Click on the deductions tab. Click on the code 8000. Click to override checkbox and make the period value for 8000 a zero.  Make a note of the YTD (Year to Date) value. Process a negative YTD (year to date) of code 8000 under period amount.  If the nett salary has already been paid to this employee, you will have to counter the amount processed on code 8000 against code 8005.  Changing the amount of 8000 will change the PAYE amount on your EMP201 and you will have to file for a correction.

NOTE: If the initial amount processed on the code 8000 was a negative, you will have to process the corrective value as a positive. If this person is terminated a data fix can be done to correct this exception at a chargeable fee. You can make a booking using the online platform here.

Exception: Income Received for code 3703 may not be reflected on IRP5 / IT3A together with 3702 or 3701

This is an exception on your Statutory Exception report that needs to be corrected before you can continue with your Bi-Annual or Year End process.

This is caused by the transaction 5540 (Reimbursive travel non-taxable) being processed along with the code 5501 (Travel Allowance) or 5520 (Reimbursive travel taxed on assessment).

If you are doing your Bi-Annuals or Year End submission when you get this error/exception you will need to restore back to the last period for that reporting phase. The last period will be August (Bi-Annuals) or February (Year End) to do this correction.  If you restore you will need to then recapture all of the months between the month you are restoring to and the one you are currently in. If you do not wish to recapture, then you can have a chargeable data fix done.

• Navigate to the income tab of the employee’s payslip (Process, Payslips, click on the magnifying glass and select the employee).
• Make the period value for code 5540 ‘0’ and make a note of the value in the YTD column
• Then process the Year-to-Date value you just noted as a negative amount in the period amount field which would then in turn change the Year-to-Date value to ‘0′
• You will now add 5520 to the income tab of the employee’s payslip (click on the first available white line on the income tab and type in 5520) and capture the value that was reversed in the above step on this transaction as a positive.

Example:

The code 5540 has an amount of R200 in the period amount on the income tab and an amount of R1500 in the YTD tab.  Make the period amount a 0 and your YTD would have changed to R1300.  You will now capture an amount of –R1300 (Negative R1300) in the period value tab that will change your YTD to 0.

You will now add the code 5520 to the income tab and process the amount or R1300 in the period value.

Note: If this person is to receive Reimbursive Travel in this period you will have to add it to the amount on 5520.

If this is due to a Bi-Annual/Year End Exception and you wish to not restore a backup and rather have a consultant do a data fix for you, you can make a booking using the online platform here.

TIP: If this is for a Terminated employee, you will have to either restore back to the period that the employee was terminated in and recapture, exclude the employee from the IRP5 export and create a manual IRP5 in the e@syfile system for the employee, or reach out to your business partner to get a data fix done.

Exception: Tax Total 4142 has a value, but SDL exempt is checked

You have been processing SDL but during the year your company has become SDL exempt.

NOTE: If you are in March or your first processing period – please ensure that you have checked the SDL Exempt has been checked.  This will ensure that even if transaction code 9150 is on the payslip it won’t calculate a value.

How to remove the SDL if the transaction code has been processed throughout the year:

TIP: If you are removing this for a Bi-Annual submission, please restore the August backup and recapture the periods in between.  If you are removing this at year end for the entire year, please restore the February backup and redo the Year End Company if necessary.  If you restore you will need to then recapture all the months between the month you are restoring to and the one you are currently in. If you do not wish to recapture, then you can have a chargeable data fix done.

• Click on Process
• Click on Payslips
• Click the magnifying glass to view the employee to be corrected. Select the employee and click OK.
• On the Default tab locate the SDL code – code 9150
• Click on the override button and make the amount zero
• Click on the contributions tab
• Take note of the YTD amount recorded on the YTD column:
• Click on the override button and process a negative amount of the YTD amount
• Ensure that the YTD reflects a zero amount
• Click save and close the payslip:

NOTE: Roll over into the next period and ensure that you tick SDL Exempt by navigating to Setup, Company Parameters.  Click on the statutory tab (remove the SDL Reference number if applicable) and check SDL Exempt.

Reconcile balances to produce year-end returns?

Reconcile balances to produce year-end returns

The definition of Reconciliation: “an accounting process that compares two sets of records to check that figures are correct and in agreement. Account reconciliation also confirms that accounts in the general ledger are consistent, accurate, and complete.”

• When you click ‘Request for Reason’ button, the following screen will be displayed: complete the Tax type and the period you want to file/lodge a dispute.
• Click ‘Next’
• Note: Go green principles will be applied

End