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SA employers under pressure to prepare payrolls for 2015/6 budget

By Madelein van der Watt, Development Manager at Sage Pastel Payroll & HR.

By IdeaEngineers
Johannesburg, 27 Feb 2015

South African employers must act fast to prepare their payroll systems and processes for the new tax brackets and calculations announced in finance minister Nhlanhla Nene's maiden budget speech.

That's the word from Madelein van der Watt, Development Manager at Sage Pastel Payroll & HR, who says companies have less time than usual to get ready for their first post-budget wage runs. Given that this is the first year since 1995 that government has hiked income taxes, it is especially important that companies recover the correct amount of tax from employees' weekly wages, she says.

"This year, minister Nene did as he warned he would and increased personal income tax to try and plug the growing budget deficit," Van der Watt says. "The tax hike will effectively decrease the pay packet of nearly everyone who earns more than R15 158 per month, with high income earners set to be hit the hardest. You can see how this will affect your pocket by using the Sage Pastel Payroll & HR free salary tax calculator."

Minister Nene lifted the second lowest marginal tax rate from 25% to 26% and the highest tax bracket to 41% from 40%. The annual tax rebate for individuals is now set at R13 257 effective, with people older than 65 receiving an additional rebate of R7 407 and those 70 or older getting an additional rebate of R2 466.

Van der Watt says since the budget was only announced in the last week of February, employers have less time than usual to get ready for the changes. Furthermore, where previous tax years saw most employees pay slightly less tax, most will be paying more for the 2015/2016 tax year.

If employers are two or three weeks late with adjusting their payrolls for the new tax rates, they will need to recover what may represent a significant amount of money for weekly wage earners in a single week. "Employers will need to be vigilant this year for the sake of employees who might fall into the brackets subject to higher PAYE contributions," says Van der Watt.

Good news amid the gloom

One piece of good news in a budget that has a gloomy tone is that medical aid tax credits have been increased to give relief to taxpayers contributing towards a medical aid. The credit for the main member and spouse will now total R540 per month, compared to R514 for 2014/2015.

Also positive for workers is Minister Nene's proposal that UIF contributions will be reduced to 1% of the first R1 000 of an employee's salary or just R10 for a month. Workers and employers previously paid 1% of the first R14 872 of an employee's salary. "We await further details about the implementation date of this change," says Van der Watt.

For the most part, individuals will have a little less money in their pockets. An 80.5c per litre increase on the fuel levy from 1 April puts an end to the relief motorists have enjoyed at the petrol pumps for the past few months. Smokers and drinkers will also feel pain from stiff sin tax hikes.

"Minister Nene faced a delicate balancing act this year, and not everyone will be happy with the tax increases they face," says Van der Watt. "However, it is encouraging to see him take decisive action to close the growing budget deficit."

Sage Pastel Payroll & HR assists SMEs

To help SMEs prepare for the changes outlined in the new Budget, Sage Pastel Payroll & HR is immediately incorporating all of the Budget changes to tax bracket values, medical aid benefits, and tax relief rebates. "With our automatic software updates, our customers will have the new year's tax rates and calculations downloaded as soon as they open their software to process the first payslip run for March 2015," says Van der Watt.

"There is no reason for businesses to rely on manual payroll spreadsheets since our automated solutions are easy-to-use, smart and also affordable with our Flex monthly subscription offering."

Try these Sage Pastel Payroll & HR free online tax tools:

* Salary tax calculator
* Online travel logbook
* 2015/2016 tax guide

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Sage Pastel Payroll & HR

Sage Pastel Payroll & HR, a division of Sage HR & Paroll and a part of Sage South Africa, is a leading developer of payroll and HR software solutions and services. Sage Pastel Payroll & HR provides a wide range of software solutions from start-up to medium sized businesses, creating greater freedom for them to succeed. It offers easy-to-use, efficient and secure payroll and HR software solutions to ensure businesses are kept up-to-date and fully compliant with ever changing legislative requirements. From the intuitive design of our software to the expertise of its people, the company focuses on giving businesses the confidence and control they need to achieve their business ambition.

The Sage Group

The Sage Group provide small and medium sized organisations, and mid-market companies with a range of easy-to-use, secure and efficient business management software and services ? from accounting, HR and payroll, to payments, enterprise resource planning and customer relationship management. The company's customers receive continuous advice and support through its global network of local experts to help them solve their business problems, giving them the confidence to achieve their business ambitions. Formed in 1981, Sage was floated on the London Stock Exchange in 1989 and entered the FTSE 100 in 1999. Sage has millions of customers and circa 13 000 employees in 23 countries covering the UK and Ireland, mainland Europe, North America, South Africa, Australia, Asia and Brazil. For further information please visit www.sage.com.

Editorial contacts

Lauren van der Merwe
Sage HR & Payroll
(+27) 011 304 4192
Lauren.vanderMerwe@sage.com