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WHAT ARE THE REPERCUSSIONS OF NON-COMPLIANCE OF STATUTORY DEDUCTIONS IN SOUTH AFRICA?


In South Africa, employers are legally required to make statutory deductions from their employees’ salaries. These deductions include taxes, Unemployment Insurance Fund (UIF) contributions, and other statutory payments. While these obligations are clear, some employers may fall short of compliance, either inadvertently or deliberately.


The consequences of such non-compliance can be severe and far-reaching. As for our Industry, if you do not comply with the Collective Agreement by registering your establishment and employees accordingly, the designated agent will issue a compliance order against the employer (establishment) for it/them to comply.


1. Penalties and Interest

The South African Revenue Service (SARS) is stringent when it comes to the collection of taxes and other statutory deductions. Employers who fail to make these deductions or do so late are subject to penalties and interest charges. These financial repercussions can accumulate rapidly, creating a significant debt burden for the employer. When it comes to the Bargaining Council, if monies are not contributed accordingly as per the return, the accounts department will add 10% interest on the non-paid fees from the previous month, where the employer is liable for payment.


2. Legal Action

SARS and other regulatory bodies possess the authority to initiate legal proceedings against employers who do not comply with statutory deduction requirements. Civil actions may be taken to recover unpaid amounts, and in cases of intentional non-compliance or fraud, criminal prosecution is a real possibility. When an employer has failed to administer and pay accordingly to the Bargaining Council, the matter is taken as far as the Sheriff for them to start attaching the property of the establishment so those fees can cover the Sheriff fees including the council fees. Legal Fees payable according to the Bargaining Council is when an arbitration takes place, this is where an Arbitration Fee will appear, as the Council must appoint an Arbitrator to hear the arbitration.


3. Loss of Good Standing

An employer’s good standing with regulatory bodies is crucial for business operations. Non-compliance can tarnish this standing, affecting the employer’s ability to secure government contracts, obtain necessary licenses, or engage in business activities that demand adherence to tax and labour laws. When an employer or establishment is not in good standing, this merely means that they were not paying the fees over to the council for more than 3 to 4 months, that way it makes a member of the EOHCB lose all services and benefits from the organisation.


4. Employee Disputes and Claims

Employees are entitled to proper management of their deductions and contributions towards UIF, pensions, and medical aid. When employers neglect these responsibilities, they risk employee disputes and legal claims aimed at rectifying financial losses incurred by the workforce. These claims and disputes may also arise from the employer not paying the correct wages or salaries as per the Bargaining Council wages and salary schedules. The designated agent is allowed to calculate the difference between the actual and what was or had been paid to the employee, then bring this matter to the Bargaining Council or a set down and how the employer can pay back the money as per the calculations of the designated agent.


5. Damage to Reputation

An employer’s reputation is invaluable; non-compliance can lead to its deterioration. A tarnished reputation can hinder the ability to attract and retain top talent and form business partnerships, impacting long-term success. When the employee has brought the company into disrepute, the employer can seek assistance from the EOHCB representative to assist in a disciplinary matter to progressively discipline the employee as this has affected the company, establishment, or brand. Such consequences may lead to dismissal of the employee.



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