Payroll is typically the single biggest expense for most businesses, and it can be hard to get it right consistently.
Below are some common errors in payroll:
1. UIF not capped
It is not a simple one percent allocated to employee and one percent allocated to employer. For some cases this applies. However there is a monthly cap of the maximum amount of UIF payable.
2. Taxes paid by staff independently
Arriving at a client to learn that her employee pays tax directly, but requests for the employer to record this on the monthly return to SARS. In theory this should work well, but human error in typing the incorrect amount or simply forgetting to pay PAYE tax, results in a risk that the employer carries. Such errors could result in short payment and penalties and interest charges from SARS, for these mistakes.
3. Taxes not worked correctly for employees older than 65 years
Whether working with monthly deduction tables, software or from the individual tax tables, there is always the risk of not getting the employees age correct or selecting the wrong column of taxes.
4. Benefits not included
Often fringe benefits like the use of an employer car, allowances etc, are not included in the total package for employees.
5. Bonuses not taxed
Payroll administrators coding bonuses as non-taxable.
6. Payroll vs independent contractors
A complicated and complex area of expertise, differentiating between the two categories of staff. The employer is responsible for the taxes of all staff on payrolls, but not the case for independent contractors.
7. Incorrect dependents and medical scheme credits
Just getting the number of dependents wrong will result in incorrect medical credits for tax and incorrect tax. This is an area of high interest from SARS and needs to be emphasized in the context of getting it right.
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