From managing and updating employee information to monitoring monthly payment deductions and liaising with the HR department, payroll is an extremely important function that requires the ability to juggle multiple financial reporting responsibilities.
More specifically, knowing what salary deductions are allowable and how to reduce an employee’s pay in a legal way can be a tricky and time-consuming business.
Do you have time to do all of that yourself?
An increasing number of companies are opting for outsourced payroll solutions, citing the complexity of the payroll management process, especially where deductions are concerned.
Let’s take a look at the main allowable payroll deductions and what they mean for your month-end management.
Effective payroll: what deductions are allowed?
From time to time, you may need to deduct certain expenses from your employees’ salaries – but that doesn’t mean that just any amount can be subtracted from their monthly or weekly pay.
Business owners who reduce their employees’ salaries by more than the law allows or without permission may find themselves in hot water at the CCMA and end up paying damages while losing the reputation for being fair employers.
In general you can deduct the following amounts with the employee’s knowledge:
- Personal or study loan repayments
- Expenses related to loss or damage caused by the employee
- Mandatory deductions like UIF
- Union fees
- Garnishee orders
- Corrections for overpayment as long as the amount doesn’t exceed 25% of the employee’s income
For each of these allowed deductions, there are a number of labour laws and other regulations that you’ll have to stay within to avoid legal disputes. As you can imagine, handling this type of sensitive process without the necessary training can be extremely risky.
Loose payroll management can become a tax headache
From a taxation perspective, payroll deduction errors can result in your business over- or understating its earnings for a given year, and once these mistakes are uncovered you may need to re-file your taxes which could increase your chances of being audited.
By choosing to outsource your payroll through us, you’ll not only be enhancing company tax and avoiding inaccurate payroll calculations, but you’ll also not have to purchase payroll management software and employ full-time payroll manager to track every single salary and deduction in your business.