Michelle Sutton
STARTING your own business is an extremely exciting step to take for every entrepreneur, however far too often the small business owner becomes so focused on the productive aspect of their business that the administrative and legislative side of the business falls by the wayside. It is this failure to attend to specific tax legislation that can often result in the downfall of a successful business.
Taking on your first employees can be a nerve wracking experience simply due to the fact that one is now responsible for individuals who are dependent on you for their livelihood. At the early stage of one’s business, one often employs employees on a temporary basis to cover periods of high work volume or specific peak periods. It is important to note that a short-term or temporary employee’s tax period commences on the date that they are employed and ends on the date that their employment is terminated. If this period overlaps the end of a tax year, then the tax period will automatically end on the last day of the tax year and commence again on the first day of the new tax year and two separate tax certificates will need to be issued in respect to each tax year.
It is extremely important to ensure that you obtain personal details of the employee for record keeping purposes such as a copy of their South African Identity Book, Passport and Work Permit, Residential Address, Contact Telephone/Cell Phone numbers as well as their Income Tax Reference Number if they are registered for Income Tax. You will require these details when issuing relevant IRP5/IT3(a) Tax Certificates at the end of the relevant tax year.
To determine the correct amount of tax to deduct from the employees income, one must first determine whether they are in “Standard Employment” or “Non- Standard Employment” as follows: Standard Employment is when an employee is required to render services to a single employer for at least 22 hours in every full week.
The employee is taxed using the weekly, fortnightly and monthly tax tables and the annual tax table.