There are several different types of compliance that small businesses need to adhere to.  While many of the Acts governing businesses in South Africa apply to all businesses, there are some specific regulations as well.  Here are some of the main areas of small business compliance. 

EMPLOYMENT COMPLIANCE

There are several Acts that govern employment in South Africa.  Most of these Acts apply to all businesses, irrespective of their size.

LABOUR RELATIONS ACT

The Labour Relations Act applies to all employers, workers, trade unions and employers’ organisations and aims to promote economic development, social justice, labour peace and democracy in the workplace. It provides guidelines for dismissal of employees, the handling of disputes and attempts to define unfair labour practices.  

WORKMEN’S COMPENSATION

This is a fund, set up to compensate employees for injuries or diseases resulting from their occupation.  All employees must be registered with the Workmen’s Compensation Fund, which is paid annually. The fees are determined by the amount of the payroll and the risks associated with the work being done. Employers who register and pay their annual Workers Compensation fees are protected from being sued by employees who are injured at work.

COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES ACT (COIDA)

The aim of the COID Act is to provide for compensation in the case of disablement caused by occupational injuries and diseases, sustained or contracted by employees in the course of their employment, or death resulting from such injuries and diseases; and to provide for matters connected therewith.  An employer must register with the Commissioner within seven days of employing his/her first employee.  This Act replaced the original Workmen’s Compensation Act.  According to the Act, anyone who employs one or more part- or full-time workers must register with the Compensation Fund and pay annual assessment fees, which is based on the payroll and the risk associated with conducted the prescribed work.

UNEMPLOYMENT INSURANCE FUND

All businesses that employ employees, must register their employees for UIF.  This fund aims to give short-term relief to workers who become unemployed or are unable to work because of maternity leave, adoption leave or illness.  Both employees and employers contribute towards the UIF at a rate of 1% of pay (for employees and employers). 

BASIC CONDITIONS OF EMPLOYMENT

This Act regulates working hours, overtime, leave and the process that must be followed should a business need to dismiss an employee.  This Act applies to every business in South Africa, irrespective of size.  A summary of the Act must be displaced in the offices of all businesses.

SKILLS DEVELOPMENT ACT

In an effort to provide funds to develop previously disadvantaged people for the workplace, the Government introduced the Skills Development Levy.  Providing the business has an annual payroll larger than R500,000, it is required to registered with the Skills Development Levy and paid a monthly fee of 1% of their workers’ pay. 

TAX COMPLIANCE

Every business must be registered with SARS (South African Revenue Service) and submit annual returns that detail is earning and expenses.  These annual Tax returns are used to assess the amount of tax a company must pay.  To simplify the tax process for small businesses, the Government introduced Turnover Tax.  This means that small businesses with a turnover of under R1 million per years can elect to pay a percentage of turnover (3%) rather than file an income tax return and be assessed for tax in the normal way.  However, many businesses choose to rather file a tax return as the assessment will often mean they pay less tax than the 3% of turnover. 

VAT

This tax is only applicable to companies that generate R1 million  or more per annum. VAT returns place an administrative burden on small businesses who must submit by-monthly returns showing the amount of VAT they paid and the amount of VAT they charged.  Whilst many small businesses find that VAT refunds are owing to them, the delay in payment can impact their cash flows. 

PAY AS YOU EARN (PAYE)

This is a tax paid by the business on behalf of its workers.  SARS provides a sliding scale of salaries and the employer must deduct the PAYE and pay this monthly to SARS.  At the end of the year, the employer must reconcile the PAYE, UIF and salaries and issue the employee with an IRP 5 stating the total amount they earned, and the taxes paid.