SimplePay provides a number of regular and once-off system items and we strongly advise you to use these wherever possible as they often have special tax treatment and / or reporting requirements.
However, if you do need to create a custom item, you can do so by going to Settings > Custom Items > Add and selecting the type of item you need. All custom items will use the general SARS code and have the default tax treatment of that type. For more information on these aspects, please see the following article:
Custom Item Type
The first step in adding a custom item is to select the relevant item type:
- Income – remuneration for services rendered, in addition to salaries
- Deduction – amounts deducted from employees’ pay
- Allowance – payments made that are required for employees to do their job; note that all custom allowances will be taxable
- Benefit – taxable extra goods and services provided by the employer
- Employer Contribution – contributions that are not taxable as fringe benefits; not common
- Reimbursement – to reimburse employees for business expenses incurred; note that all reimbursements are non-taxable but that documentary proof might be required
Custom Item Setup
All custom items require a Name, which we generally recommend you make as generic as possible so that it can be used for all employees. For example, “Telephone Allowance” is a better name than “John’s Telephone Allowance – November 2016”.
You will also need to select an Input Type, which tells the system how the item will be added to and used on payslips. The following options are available but not all are applicable to every item type:
- Fixed amount – regular item, which will always have the same amount, irrespective of period or employee
- Enter Amount Per Employee – regular item, which will be different for each employee
- Different on every payslip – regular item, which will be different for each employee for each period; the amount will be entered under Payslip Inputs each month
- Once-off for specified payslips – once-off item
- Hourly rate * factor * hours – regular item, which will calculate an amount based on the hourly rate calculated by SimplePay, the factor entered here and the hours entered each month under Payslip Inputs
- Custom rate * quantity – regular item, which will calculate the amount based on the rate entered here and the quantity entered under Payslip Inputs
- A different rate can also be specified for each employee by checking the relevant box
- % of income – regular item, which calculates the amount based on the percentage entered here and the relevant employee’s income for the period
- Formula – allows you to create custom formulas, similar to Excel
- Monthly (for non-monthly employees) – regular item, which will be taken into account once a month (on the first payslip) for weekly, fortnightly and twice a month employees
Additional Inputs for Income Items
In addition to a Name and Input Type, income items have the following inputs, which may or may not be applicable:
Select Taxed Annually for income that should be taxed annually. This is generally applicable to annual bonuses or other incomes that are paid irregularly and not tied to a specific period that the employee worked. More information on which payments are taxed annually can be found in the SARS Guide for Employers in respect of Employees’ Tax.
Select Include in Fluctuating Leave Rate for income that must be included when calculating the additional rate for annual leave, as per the BCEA. This means that the last 13 weeks / 3 months of this type of income will be added up and divided by the total number of hours in 13 weeks / 3 months, which results in an extra leave rate over and above the employee’s normal hourly rate. More information on this requirement can be found in the following article:
In addition to these additional inputs for income items, there are also further inputs for income and allowance items with the Input Type of “Hourly rate * factor * hours” and “Custom rate * quantity”.
Hours Worked Factor
As indicated on the screen, the Hours worked factor should be entered as 1 for most cases. This input basically tells the system how many hours the quantity entered represents. This is relevant to calculate the number of hours for ETI purposes and for leave accrual based on the number of hours worked.
- For example, if you set up a custom item to record Sunday hours, you’d enter 1 as the Hours worked factor. The system will then see anything input for that item as hours. Therefore, if you entered 7 as the payslip input for this custom item, that would count as 7 x 1 = 7 hours for ETI and leave accrual purposes.
- However, if the custom item is being used to pay employees a daily rate, for example, the Hours worked factor should equal the number of hours the employee works in a day, e.g. 8. If they entered 3 (days) as the payslip input for this custom item, the system would add 3 x 8 = 24 hours to their hours for ETI and leave accrual purposes.
- Some items should have 0 as the Hours worked factor. An example would be a Night Shift Allowance, where the employees are already paid for those hours worked as part of their normal hours. In other words, having the Hours worked factor as 0 would prevent these hours from being double-counted for ETI and leave accrual purposes.
More information about leave accrual based on hours worked can be found in the following article:
This box should be ticked if the particular income or allowance item should be taken into account when determining the Qualifying Wage for ETI purposes (discussed in the ETI article linked to below).
- For example, if you are creating a custom income item for casual wages, you might select “Hourly rate * factor * hours” as the Input Type. If you now also tick the box next to Affects Wage for ETI Purposes, the system will know that it should include these wages as part of the Qualifying Wage.
Note: it is recommended that you do not do hourly calculations off-system, i.e. use one of the first four input types when creating custom income or allowance items. Instead, you should use one of the last two input types – “Hourly rate * factor * hours” or “Custom rate * quantity” – so that the amounts can be included in the qualifying wage and the hours can be included in the actual hours employed, if applicable.
Please see the following article for a comprehensive discussion of ETI: