Getting payslips correct for your staff carries legal responsibilities for both you and the staff member. Payslips are of course often used in the public domain, such as for getting bank loans, and so they are a public reflection of your business.
What to look for in a payslip
There are many items to verify and check:
- The employee’s name and job title (if one is specified). The employer’s name must be the same as the one the employee contracted with.
- The salary paid is as per the letter of employment and subsequent annual earnings announcements.
- Pay careful attention to deductions, particularly tax deductions. If they are incorrect, SARS will look to employees and employers to make good any shortfalls which could attract penalties.
Good employers will have satisfied themselves that fringe benefits are lawful and will withstand any scrutiny from SARS. Employees should similarly satisfy themselves to avoid paying in extra tax and penalties.
The UIF deduction is small but can help laid off workers, and should be agreed to Department of Labour tables.
Bonuses should be tied up to correspondence with the employer.
- Retirement funding – 27.5% of a salary package is tax deductible. If this is incorrect, it can adversely impact retirement amounts (don’t forget the power of compounding over the years). In the event of untimely death, payouts to family members could be affected.
- Other deductions, such as repayment of loans should be checked against the loan agreement.
- Garnishee orders. Remember that since September 2016, garnishee orders need to be approved by a Magistrate (no longer a Clerk of the Court) who must be satisfied that the order is fair, equitable and affordable. Ensure the order has been approved and the amount deducted on the payslip is as per the garnishee order.
Getting payslips right will save both you and your employee time and frustration – no one wants to get into after-the-fact arguments with SARS or retirement funders. The employer/employee relationship involves trust on both sides and errors on payslips could jeopardise this.