This original article was published on LinkedIn, read it here.
You have grown your business to the point that you need to employ people – congratulations! But do you know what your responsibilities are as an employer?
As the accountant for small businesses, I am very aware that too many business owners are missing a rather vital piece of information regarding their status as employers.
There is a general misconception that in order to be a fully-compliant provider of employment, all you need to do is to register with SARS.
Unfortunately, this is not the case.
While registration with SARS does take care of the payment of three important taxes: PAYE, UIF & SDL, it sadly does not cover the full requirements of compliance with the law.
I constantly come across small business owners who are happily going about their day completely unaware that they are actually non-compliant and in danger of being fined by the Department of Labour for something they did not know about.
If this is you, please read this article and quickly set out to get your paperwork in order!
In order to legally operate as an employer in South Africa, you need to be registered with the following three authorities:
For most small businesses, this is done and dusted. You submit your monthly returns, you make the required payments and you submit your bi-annual EMP501 and dutifully send your employee’s their IRP5s every year.
Registration with SARS is vitally important and a very definite legal requirement that every small business owner knows about and is quick to comply with.
The name of SARS can elicit a very decent amount of fear and they do indeed have quite painful penalties for late returns and payments. Because of this and, perhaps, because they are the noisiest of all government agencies, they are generally the only one people know about.
But while the SARS registration enables payment of PAYE, SDL and UIF, it is unfortunately only one step in a series.
2. The Department of Labour for UIF
This is where a lot of confusion comes in, because if you are registered with SARS you are already paying UIF. Naturally, you therefore assume that you are fully compliant with the Unemployment Insurance Fund.
Unfortunately, you are not. You are also required to register directly with the DOL and to obtain a UIF number from them. Your monthly declarations and payments are indeed done via SARS, but none of your employees will be able to claim UIF benefits (including maternity pay!) if you are not in possession of a DOL UIF number and have not maintained your list of employees with them.
Registration is very easy – you can email them the relevant forms and the supporting documents and you should receive a UIF number in a matter of days.
In order to remain compliant, you just need to submit a new U-19 form to them every time you add or remove an employee to your payroll. Most electronic payroll systems will even do this submission for you with the click of a button, but the UIF number is required first!
3. The Department of Labour’s Occupational Accidents and Compensation Fund
Now known as COID (Commission for Occupational Injuries and Diseases), registration with this authority is also a legal requirement for any business in South Africa employing one or more people.
There is an annual assessment and payment, and the amount due to the fund is dependant on your total payroll and your industry’s claim percentage.
Some industries are far more likely to incur injury than others: factory workers have a much higher likelihood of lopping off a finger than do accountants. As a result, every industry has a different rating and a different claim percentage applied to them. The lower the likelihood of your employees being hurt on the job, the lower the amount you pay to COID.
Once registration with all three bodies is complete, you will also need to bear in mind the record-keeping requirements for employers – but that is an entire post on its own.
If this information has shocked and surprised you, do not despair, you are not alone! You are one of many small business owners who didn’t know – but now, you do!
There are a lot more responsibilities relating to the employment of staff, this post just covers your three most important registrations. If you would like more information about the funds or how to register, or, if you would like us to arrange the registration for you, then please drop a mail to firstname.lastname@example.org, we would love to help you!