Update: 31 March 2022

As mentioned below, in order to finalise the recent changes to ETI remuneration, you are required to ensure that your custom deduction items have the label Include in monthly remuneration for ETI option ticked if necessary. Please see our help site page here for more info on this. 

When accessing your EMP201 for March 2022 on the Filing page, you will be notified that your EMP201 has been disabled until you have confirmed that the required action has been taken. By clicking Continue on this step, you will be confirming that all your custom deduction items have been updated and that we can go ahead and recalculate ETI for this period. Please be sure you have actioned the changes to your custom deductions before you proceed with this.

As discussed in our original blog post below, these changes will likely cause changes to the ETI calculated per qualifying employee.

Original Blog Post

In our earlier blog post, we discussed an amendment to the Employment Tax Incentive (ETI) Act which increases monthly ETI values as part of the Government’s efforts to optimise the ETI scheme. 

In today’s blog post, we look at a second change to the ETI Act, which redefines the concept of “monthly remuneration for ETI”. More specifically, we’ll break down the calculation of monthly remuneration based on the new definition, how this change is being implemented on SimplePay and what effect the change will have on the amount of ETI calculated from 1 March 2022.

“Monthly Remuneration for ETI” and how its changed

Previously, monthly remuneration for ETI was calculated according to the rules outlined in the Fourth Schedule of the Income Tax Act. This meant that monthly remuneration included an employee’s Income, Benefits and Taxable Allowances.

Monthly remuneration is used:

• When determining whether ETI should be calculated for an employee i.e. no ETI will be calculated for employees with remuneration of R6500 or more per month; and
• When determining the amount of ETI that you can claim for each qualifying employee.

In terms of the new amendments, monthly remuneration for ETI must disregard all non-cash payments to the employee and deductions which do not satisfy the terms of the Basic Conditions of Employment Act (BCEA).

In other words, monthly remuneration for ETI is now calculated using the  gross remuneration, less the value of any benefits  and any deductions not provided for by legislation or collective bargaining.

In terms of the BCEA, a deduction may not be made unless it is permitted in terms of a law, collective agreement, court order or arbitration award. This wording will include most deductions on an employee’s payslip such as PAYE, UIF contributions, Retirement Fund contributions, etc.

What will change on SimplePay?

System Deduction Items

For payslips from 1 March 2022 onwards, our system will categorise all built-in system deduction items based on the BCEA requirements. Each system deduction item will therefore automatically be included in, or excluded from, monthly remuneration for ETI based on the guidance provided.

Items that are already in use on finalised payslips will automatically be adjusted and no action is required on your part.

Custom Deduction Items

Due to the nature and variability of custom items, our system cannot automatically categorise custom deduction items.

Therefore, to ensure that we keep your payroll compliant, we have made the following changes to our system:

• All custom deduction items will be defaulted as a non-BCEA deduction which will exclude it from monthly remuneration for ETI. 
• A checkbox has been added to all custom deduction items labeled “Include in monthly remuneration for ETI”, which will allow you to manually set the item as a BCEA deduction and thereby include the amount.

It is extremely important to note that if your existing custom deduction items should be categorised as “BCEA deductions”, you will need to please update the relevant items by selecting the checkbox before 31 March.

Our help site page on calculating ETI provides a list of our built-in deduction items and confirms which items are and aren’t BCEA deductions.

Effects of this change to ETI

Monthly remuneration is used when determining the amount of ETI available per qualifying employee. By subtracting benefits and “non-BCEA deductions”, the monthly remuneration is reduced. This will most likely lower the amount of ETI available to claim in respect of your qualifying employees. It may also mean that more employees will now qualify for ETI, as these employees are now deemed to earn less remuneration than the R6500 threshold.

It is important to note that if you choose to include deductions which should have been excluded (as “non-BCEA deductions”),  you will inflate the monthly remuneration for the employee. This may cause an ETI overclaim. 

Final remarks

To ensure that your March EMP201s are submitted correctly, we have prevented viewing and finalising March EMP201s for all our users while we make the necessary changes. We aim to have our changes complete by 31 March 2022. 

If you have already downloaded an EMP201, please do not submit your EMP201 before we confirm that the changes have been made to the system. 

We understand that these delays are frustrating and thank you for your patience. We share your frustration; however, the potential ramifications of incorrect ETI are serious, so we have approached these changes with abundant caution and have waited until we had clarity from SARS, which we only received late last week. This clarity did unfortunately come with the caveat that more changes may still follow - we will update you if this occurs. 

For more general information on ETI, please visit our help site section on the topic, here. 

If you have any queries regarding SimplePay or any of our services, please feel free to contact us on support@simplepay.co.za. 

Team SimplePay