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Savvy, talented and reliable employees can take your business to remarkable heights. The founder of the Virgin Group, Richard Branson, attributes much of his success to “hiring the right people and, as a result, building unstoppable teams.” He calls his employees “the greatest asset and the lifeblood of the brand.” As a business owner, it is imperative that you look after these ‘greatest assets,’ and that you are aware of your legal obligations towards your employees.

It is understandable that some new business owners may not have heard of Employers liability insurance, or that not complying with UIF requirements can result in hefty fines or even jail time for employers! All business owners need to familiarise themselves with their obligations to employees, some of which include:

UIF, Skills Development Levy and PAYE deductions

  • UIF

All employees are required to contribute to The Unemployment Insurance Fund (UIF) which is managed via the Department of Labour. Only if an employee works for less than 24 hours (or less than 3 days) are they exempt from UIF contributions. UIF protects employees should they not be able to work due to maternity leave, ill health or dismissal from work.

An employer is required to deduct 1% of an employee’s pensionable salary, as well as pay an additional 1% of the pensionable earning on behalf of the employee. If an employer hasn’t been paying UIF as required, they can still become liable to pay the benefits that the employee would have received had they been contributing. So be sure to familiarise yourself with how to register your employees for UIF.

  • Skill Development Levy

The Skills Development Levy is used to develop and improve the skills of employees in South Africa, and it becomes a requirement to register when the employer’s total salaries total more than R500 000 over 12 months. 1% of the total salaries amount must be paid to SARS monthly.

  • PAYE

Pay-as-you-earn tax (PAYE) is a South African Revenue Service (SARS) requirement where tax is withheld on salaries to employees. These amounts are viewed as advance payments of income tax due to SARS.

As an employer, you are obliged to register your employees and deduct this tax from their salaries. It is a means for SARS to receive their money monthly rather than waiting until the end of the year.

Employers liability insurance

Accidents in and around the workplace can happen despite an employer’s best efforts to create a safe work environment. The risks are higher in some industries: the injuries and fatalities in the SA construction sector average 1.5 to 2.5 deaths per week,  but no industry is immune to things going wrong.

Employers liability insurance is an essential inclusion in your company’s Business insurance cache. An employee can claim against you in any situation where they have been harmed, so regardless of the size of your staff team, it is prudent to invest in this type of cover. It covers the employer or any member, partner, director, principal or employee that is legally required to pay following an event that resulted during, or in connection with the person’s employment with your company.

Unfortunately, serious incidents can and do occur, and the financial implications can be dire for companies that don’t have Employers liability insurance in place.

Maternity and Family Responsibility Leave

As an employer, you are not obligated to pay an employee that goes on maternity leave. However, the mother is entitled to 4 months of maternity leave with her newborn.  This leave can be taken from at least 4 weeks before the expected date of delivery. If the mother is not well and, for example, requires bed rest, then the maternity leave may be taken earlier.

If an employee has been contributing to UIF, then they are legible to claim from the Maternity benefit fund. This benefit paid is up to a maximum of 60% of remuneration depending on the level of income and paid for a maximum of 121 days. It is up to the mother to claim from UIF by going to the Labour Centre with an ID book, banking details, and a medical certificate. Should she not feel well, a relative or friend may go on her behalf to claim the benefit.

It is against the South African Labour Relations Act (Basic Conditions of Employment Act) to dismiss a woman during her pregnancy or while on maternity leave. She is also entitled to return to her same position in the company or workplace.

A father is also entitled to Family responsibility leave when his child is born. If an employee meets the criteria for Family responsibility leave, then this may also be taken in the event of the death of a spouse, parent, grandparent, child, grandchild or sibling.

Family responsibility leave is an entitlement that is given as part of each annual leave cycle, during which the employee is employed regardless of the number of days worked. Employees are awarded 3 days leave per leave cycle, with unclaimed days lapsing at the end of the cycle.

Overtime and Public Holidays

The maximum regular working hours allowed is 45 hours per week, according to the Basic Conditions of Employment Act. That is 9 hours per day for a 5-day working week, and 8 hours per day if the employee works more than a 5-day week. These hours exclude a lunch break (legally this is 1 hour, but employee and employer can agree on 30 minutes), which is the employee’s time to do with as they please.

Overtime can only be worked if an agreement is reached between the employer and employee, with the maximum permissible time being 3 hours a day or 10 hours in one week. Employers must pay one and a half times that of the regular salary on weekdays, and double on Sundays and public holidays.

However, employees who earn above the present threshold amount are not subject to overtime provisions. That said, the employer cannot force them to work overtime, or to do so without compensation. This compensation needs to agreed to between the employer and employee.

Sick Leave

While sick absenteeism should be at about 1.5%, most South African companies report a higher rate of between 3.5 and 6%. Your employees are, in fact, entitled to 30 days (works 5 days a week) or 36 days (works 6 days a week) sick leave for every 3-year sick leave cycle. There are exceptions to this entitlement: workers who work less than 24 hours per month, or those who receive compensation for an occupational injury or disease.

As an employer, you can insist that a medical certificate is produced if the employee has been absent for more than 2 consecutive days or more than twice in 8 weeks. If a valid certificate is not shown, then the employee can refuse to pay the employee.

Commission for the Conciliation, Mediation and Arbitration (CCMA)

If you are a fair employer, then the CCMA is an organisation you are unlikely to hear much from. It does highlight, however, the importance of knowing your obligations as an employer (some of which we have mentioned in this article).

The CCMA is an independent authority that tries to find a compromise between the employer and employees, by resolving labour disputes and promoting fair practices in the work environment. They also provide advice and training on labour relations and legal issues. With over 20 years of service, the CCMA has registered about 2.7 million referrals, 800 000 arbitrations and over 1.8 million conciliations have been heard.

Being a good boss doesn’t just stop at being inspirational, considerate and fair. As an entrepreneur and employer, you need to be fastidious about protecting not only your employees but your company as well with the likes of Employers liability insurance. Continue to educate yourself as to what is required of you as a business owner, especially when it comes to your employees’ needs and rights. It is often ignorance rather than ill intent that lands the unsuspecting employer in hot water.

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