Payroll Processing > System Items – Income > Arbitration Awards

Arbitration awards are the outcomes of disputes between an employee and an employer – usually after the employee’s service was terminated. In cases where this results in an arbitration award for compensation, in terms of which you, as the employer, has to pay the employee a sum of money, you can use the SimplePay system item* to record this.

*Note: As always, the use of the system item is strongly recommended because it will already include the correct tax treatment and meet the reporting requirements.

You should contact SARS to obtain a tax directive, which will provide details about how the arbitration award should be taxed.

The steps to add an arbitration award are the following:

  • Go to an employee’s profile and click on Add next to Payslip Inputs.
  • Click on Arbitration Award (with Tax Directive) under Income.
  • Enter the Arbitration Award – Non-taxable amount. This amount will be reported under code 3602.
  • Enter the Arbitration Award – Taxable amount. This amount will be reported under code 3608.
  • Enter the Directive Number, as found on the document obtained from SARS.
  • Click Save. If you click Save without entering a directive number, you will get an error message. The system forces you to enter a directive number to prevent errors during bi-annual filing, when you might want to import your tax certificates into [email protected]
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