Many employers are preparing for their leave and bonus runs as the holiday season draws near. Compliance remains key to a successful pay run especially when bonuses are being paid out. Bonuses must be declared to SARS and benefits other than cash bonuses must also be reported on the employee’s tax certificate.
There is no specific rate of tax applied to a bonus payment, in South Africa we make use of a progressive tax system, meaning the more one earns, the higher percentage of tax one pays on those earnings.
Your bonus amount becomes part of an individual’s total taxable income for the year, and in some cases depending on the amount of the bonus can push employees’ earnings into the next tax bracket.
Should employers be making use of a Bonus Provision setup you would need to make use of the proper transaction in this regard. A bonus provision is the accounting provision of funds to pay a bonus during a bonus period.
A bonus tax provision is an additional earning that is added to an employee to inflate the taxable earnings, increasing the tax so that the bonus becomes tax-free on the payout.
Employers can opt to have bonuses paid out in December with the employee’s normal earnings or opt for an additional separate run, also known as a bonus, run. These runs must be created correctly and accurately to ensure that the correct taxation is applied.
Apart from bonuses paid by companies to employees, this time of the year companies are also preparing for their annual shutdown period and leave pay period.
Leave Pay for employees belonging to various Councils are paid by means of calculations set out by the different sectors they belong to, normally the wage times the number of shifts worked.
Scheduled employees are entitled to leave pay in terms of their collective main agreement.
It is advisable that companies plan for this busy period in advance to ensure that productivity is not affected by employees going on leave and considering the three public holidays in December.
