SMALL BUSINESS NOTES.

 The National Small Business Act 102 of 1996, amended by the National Small Business
Amendment Act 26 of 2003, provides guidelines for promoting small businesses in South Africa.
 The Act broadly defines a "small business" as one that covers four categories based on the
number of full-time employees, annual turnover, and gross asset value.
 Categories include micro-enterprises (fewer than 5 employees, turnover under R200, 000, and
assets under R100, 000), very small enterprises (fewer than 20 employees), small enterprises
(fewer than 50 employees), and medium enterprises (fewer than 200 employees).
 Small businesses are a key source of job creation, employing 73% of the economically active
population, with 45% working in firms with fewer than 10 employees.
 In contrast, large firms employ only 10% of the economically active population over 20 years.
 As of March 2007, South Africa's economically active enterprises were comprised of 36% micro-
enterprises, 46% very small enterprises, 11% small enterprises, 4% medium enterprises, and 3%
large enterprises.
 Small businesses must register with various state authorities due to their significant role in the
economy.

STUDY UNIT 1 1Registration as an employer

1.1 Introduction
 As significant employers, small businesses must register under various laws applicable to
employers, including for tax and labour obligations.

 Key registrations required for small businesses include:

o SITE (Standard Income Tax on Employees)
o PAYE (Pay As You Earn)
o UIF (Unemployment Insurance Fund)
o SDL (Skills Development Levy)
o OHSA (Occupational Health and Safety Act)
o COIDA (Compensation for Occupational Injuries and Diseases Act 130 of 1993)

 Registration is necessary with SARS (South African Revenue Service) for tax purposes and with
the Department of Labour for labour-related obligations.
 Businesses must complete this registration within 14 days of starting to employ people by
submitting an EMP101 form to SARS, accompanied by specific supporting documents.

 Required Documents for Different Business Structures:

Sole Proprietorships:
o Certified copy of the ID of the sole trader.
o Original, cancelled cheque or bank verification letter.
o Copy of the business municipal account.
o Copy of the residential municipal account of the sole trader.

Partnerships:

o Certified copies of the IDs of the two main partners.

o Copy of the partnership agreement or affidavit.
 o Original, cancelled cheque or bank verification letter.
o Copy of the business municipal account.
o Copy of the residential municipal account of at least one partner.

Close Corporations (CC):

o Certified copy of the certificate of incorporation or registration.

o Copy of the CK1/CK2.
o Certified copy of the ID of the member or members.
o Original, cancelled cheque or bank verification letter.
o Copy of the business municipal account.
o Copy of the residential municipal account of at least one member.
o Lease agreement, if the business property is leased.

Companies (Pty Ltd):

o Certified copy of the certificate of incorporation or registration.

o Copy of the CM1/CM2/CM29.
o Certified copy of the ID of the director or directors.
o Original, cancelled cheque or bank verification letter.
o Copy of the business municipal account.
o Copy of the residential municipal account of at least one director.
o Lease agreement, if the business property is leased.

 Registering as an employer means registering for employees’ tax purposes, which involves SITE
and PAYE, both of which are payroll taxes.

1.2 SITE
 SITE (Standard Income Tax on Employees) was used to determine an employee's liability for
income tax on earnings up to R60,000 per annum.
 If employees earned R60,000 or less, they were taxed solely under SITE, typically at a lower tax
rate.
 For earnings above R60,000, the first R60,000 was taxed under SITE, and the remainder was
taxed under PAYE at a higher rate.
 SITE tax liability was calculated by the employer at the end of the tax year or upon termination
of employment.
 If an employee's earnings were only subject to SITE and they had no other taxable income, the
SITE tax constituted their final tax liability for that year.
 SITE was phased out over three years starting in 2010 and was completely discontinued as of 1
March 2013.
 Since then, all employee remuneration has been taxed under the PAYE system, with the relief
provided by SITE no longer applicable.

1.3 PAYE
 PAYE (Pay As You Earn) is a form of payroll tax deducted from employees' remuneration by the
employer.
 Once a business is registered as an employer, it is required to deduct or withhold PAYE from each
employee's remuneration.
 The deducted PAYE must be paid to SARS within seven days after the end of the month in which it
was deducted.
 The payment to SARS must be accompanied by a completed EMP201 return form.
 PAYE payments are made every month.

1.3.1 Amounts included in “remuneration”

The amounts which typically form part of remuneration include the following:

(a) Salary (b) Leave pay (c) Wage

(d) Overtime pay (e) Bonus (f) Gratuity

(g) Fee (h) Commission (i) Emolument

(j) Pension (k) Stipend (l) Superannuation allowances

(m) Retiring allowances (n) Fringe benefits (o) Directors’ remuneration

(p) Arbitration awards (q) Advances to employees (r) Restraint of trade payments.

1.3.2 Amounts excluded from “remuneration”

The following amounts do not form part of remuneration:

 Amounts paid to an employee to reimburse the employee for actual business expenses incurred in
the course of his/her employment.
 Payments to independent contractors.
 Social Security pensions.
 Disability grants or allowances payable to children.
 Annuity in terms of a divorce order, decree of judicial separation, or under any agreement of
separation.

1.3.3 PAYE calculation

 PAYE is calculated on net remuneration, which is the gross remuneration minus certain deductions.
 Deductions from gross remuneration include:
o Contributions made by the employee to a pension fund or retirement annuity fund.
o Premiums paid by the employee for an income protection insurance policy.
o Contributions made by the employee to a medical scheme (applicable only for employees 65
years and older; a medical scheme tax credit applies for those younger than 65 from 1
March 2012).
o Donations made by the employee, not exceeding 5% of the employee’s remuneration.
o The remaining amount after these deductions is taxed under PAYE.
o The tax rates for individuals for annual PAYE calculations are summarized in a table for the
2019 tax year.
 The tax rates for PAYE are sourced from the South African Revenue Service (SARS) website and are
effective for the 2018/2019 tax year.
 These rates are subject to annual review and amendment by the Minister of Finance during the
Budget Review.
 In addition to tax rates, there is a primary rebate available to all employees, which reduces the
taxable remuneration. For the 2018/2019 tax year, this rebate is R14,067.
 Like the tax rates, the primary rebate is also subject to annual review by the Minister of Finance.
 SARS provides tax tables to assist with PAYE deductions on a monthly, fortnightly, and weekly basis,
which are
available on
the SARS
website.
 A brief
illustration of
the monthly
deduction
table is
provided in
Table 1.2.
  Employees’ tax has priority over any other claims against an employee’s remuneration; all other
claims can only be enforced after the employee’s tax is deducted.
 Employers are required to issue employees with a tax certificate, either IRP5 or IT3 (a).
 The tax certificate must detail the total remuneration paid to the employee and the amount of
tax deducted or withheld by the employer during the relevant tax year.

1.3.4 Casual employees

loyees are engaged in "non-standard employment," where their services are used irregularly or occasionally.

 A person is classified as a casual employee if they:

o Work for an employer for less than five hours per day or less than 24 hours per week.
o Work without a specified period of employment.
o Work and are paid on a daily basis.
o Employees’ tax at a rate of 25% is deducted from the net remuneration of casual workers.
o Net remuneration refers to the balance after all permissible deductions have been made.
o The importance of record-keeping will be discussed next.

1.3.5 Record-keeping

onduct an audit of an employer's accounting records to ensure correct deduction and payment of employees’ taxes.
are required to maintain a register with personal and financial details for each employee.

 Records that must be kept for at least five years include:

o Remuneration paid to each employee.
o Employee’s tax deducted or withheld.
o UIF (Unemployment Insurance Fund) contributions.
o Income tax reference number of each employee.
o Any additional information prescribed by the Commissioner.

1.4 UNEMPLOYMENT INSURANCE FUND (UIF)

 1.4.1 Introduction

The unemployment insurance system in South Africa is governed by:

 The Unemployment Insurance Act, 63 of 2001 (UI Act)

 The Unemployment Insurance Contributions Act, 2002 (UIC Act)
 The UIF (Unemployment Insurance Fund), established through the UI Act, aims to alleviate
economic hardship for employees facing unemployment.
 The Fund provides short-term financial relief during periods of unemployment, illness, maternity
leave, or adoption leave.
 It also offers financial relief to dependants of a deceased contributor.

1.4.2 Application of the Unemployment Insurance Act

The UI Act, which governs the Unemployment Insurance Fund (UIF), excludes the following
groups from its application, and UIF contributions are not deductible in these cases:
 Employees working less than 24 hours per month for a specific employer.
 Learners under a contract of employment as outlined in section 18(2) of the Skills
Development Act, 1998.
 Public servants employed in the national and provincial spheres of government, as defined in
section 1(1) of the Public Service Act, 1994.
 Foreigners entering South Africa for a contract of service, apprenticeship, or leadership if they
are legally or contractually required to be repatriated or to leave the Republic upon
termination of their contract.
 Persons receiving a monthly state pension (old age pension).
1.4.2 UIF contributions
 Both employers and employees are required to contribute to the UIF every month.
 Employers must deduct 1% of an employee’s remuneration and contribute this amount to the
UIF.
 Employers are also required to contribute an additional 1% of each employee’s remuneration,
totalling 2% for each employee.
 If an employer fails to deduct the employee’s contribution, the employer is responsible for the
full amount.
 The total contribution (employees and employers) is paid to SARS monthly.
 SARS collects and transfers the contributions to the UIF, which is administered by the
Unemployment Insurance Commissioner.
1.4.3 Determining remuneration for purposes of UIF deductions
 UIF contributions must total 2% of an employee’s remuneration.
 To calculate this, the employer must first determine the total remuneration and then apply the
prescribed percentage.

 Excluded from remuneration are:

o Pension superannuating or retirement allowances
o Annuities
o Restraint of trade payments
o Gratuities (e.g., lump sum payments for long service awards)
o Commission payments

 As of 1 October 2012, the maximum earnings ceiling is R14,872 per month or R178,464 annually.
 For employees earning above this ceiling, contributions are calculated using the maximum earnings
ceiling amount.
 The maximum UIF contribution for employees earning more than R14,872 per month is R148.72 per
month.
 Amounts exceeding R14, 872 per month or R178, 464 annually should not be included in UIF
contributions.
 Contributions must be paid to SARS within seven days after the end of the month in which deductions
are made, accompanied by a completed EMP201 return.

1.4.5 Benefits claimable under the Fund

The following benefits may be claimed by an unemployed employee:

• Unemployment benefits • illness benefits

• Maternity benefits • adoption benefits • dependant’s benefits

1.4.6 Registration by employers

 After registering with SARS for employees’ tax purposes, a business must also register for UIF
contributions.
 Registration can be done with either SARS or the Unemployment Insurance Commissioner’s
office.
 If an employee's remuneration exceeds the employee’s tax threshold of R67,111 per annum, the
employer must register with SARS for UIF purposes by completing and submitting form EMP101.

 Registration with the Unemployment Insurance Commissioner’s office is required if:

o Employees’ remuneration does not exceed the R67, 111 threshold.
o The employer is not liable for the skills development levy, meaning the total annual
remuneration paid to employees is less than R500,000.

1.5 SKILLS DEVELOPMENT FUND AND LEVY

1.5.1 Introduction
 The Skills Development Act 97 of 1998 and the Skills Development Levies Act (SDL Act) of 1999
were introduced to address low skill levels in the South African workforce.
 Employers are required to pay a skills development levy (SDL) every month.
 The SDL is collected by SARS and then transferred to the Ministry of Labour.
 The Ministry of Labour distributes the funds to the National Skills Fund and various Sector
Education and Training Authorities (SETAs) established under the SDL Act.

1.5.2 The purpose of SDL

 The levies are used to enhance the skills and training of workers and prospective workers in
South Africa.

 The collected funds serve the following purposes:

o Developing the skills of the South African workforce.
o Increasing investment in education and training within the labour market.
o Improving employment prospects for people previously disadvantaged by unfair
discrimination.
 o Addressing disadvantages caused by previous discriminatory laws through training and
education.
o Assisting the unemployed in finding employment.
o Helping retrenched workers re-enter the labour market by re-skilling them.
o Assisting employers in finding qualified employees.

1.5.3 Registering for the Skills Development Levy

 According to the SDL Act, employers must register for the skills development levy (SDL) if the
total remuneration paid to employees during any 12-month period exceeds R500,000.
 Employers whose total remuneration is less than or equal to R500,000 are not required to
register for the levy.
 An employer registered with SARS for PAYE may not necessarily be registered for the SDL if the
R500, 000 threshold is not met.
 Registration for the SDL is done by completing and submitting form EMP10 to SARS.
 On the EMP10 form, the employer must specify the relevant Sector Education and Training
Authority (SETA) for their business or sector.
 This registration allows the employer to claim a grant from the SETA for funding workplace skills
training.
1.5.4 Calculation of the levy
 The skills development levy is calculated based on the total remuneration paid or payable to
employees, known as the "leviable amount."

 Exclusions from the leviable amount include:

o Payments to labour brokers
o Pension, superannuating, or retiring allowances
o Annuity payments
o Retrenchment payments
o Lump sum payments from pension, provident, or retirement annuity funds
o Payments to learners employed for training

 An amount equal to 1% of the leviable amount is payable to SARS each month.

 For example, if the leviable amount is R550,000, the levy payable is R5,500 (R550,000 x 1%).
 The levy must be paid within seven days after the end of the month in which it was determined,
along with a completed EMP201 return.

1.5.5 SETAs

 Sector Education and Training Authorities (SETAs) were established by the Minister of Labour
under section 9 of the Skills Development Act.
 SETA functions include:
o Developing a sector skills plan aligned with the national skills development strategy.
 Implementing the SETA sector skills plan by:
o Establishing leadership.
o Approving workplace skills plans by employers.
o Allocating grants to employers for executing skills plans.
o Monitoring education and training within the sector.
 Promoting leadership by:
o Identifying workplaces for practical work experience.
 o Improving training facilitation.
o Supporting the development of learning materials.
o Assisting in concluding and registering learnership agreements.

1.5.5 Distribution of the levies

 SARS collects levies on behalf of the Department of Labour from all employers, whether they fall
under a SETA jurisdiction or not.

 The collected levies are distributed by the Department of Labour to:

o The National Skills Fund.
o Various SETAs.
 Distribution of levies:
o 20% of levies from employers under a SETA's jurisdiction is paid to the National Skills Fund,
established under section 27 of the Skills Development Act.
o 80% of levies from these employers are paid to SETAs to support their functions.
o All levies from employers not under any SETA's jurisdiction are paid to the National Skills
Fund, used only for national priority projects identified in the Department of Labour's
national skills development strategy.

1.6 OCCUPATIONAL HEALTH AND SAFETY.

1.6.1 Introduction

 The Occupational Health and Safety Act (OHSA) aims to protect the health and safety of
employees at work and safeguard the public from work-related activities.
 The Act requires employers to provide a safe working environment free of health risks for
employees and the public.

 Employers must:
o Ensure that all workplace machinery and equipment are safe and do not pose health risks.
o Eliminate any dangers to employee health and safety.
o Safely manage the production, use, handling, storage, and transportation of articles and
substances.
o Provide necessary information, instructions, training, and supervision to ensure employee
health and safety.
o Take precautionary measures before allowing employees to engage in work, handle
substances, or operate machinery.
o Protect the public from any dangers associated with employee activities.

1.6.2 Duties of manufacturers, designers, importers, sellers and suppliers.

 The Act also places an obligation on manufacturers, designers, importers, sellers and suppliers of
articles or substances to be used in the workplace. They are required to ensure that:
o the article or substance is safe and does not pose any risk to the health of workers or the
public
 o when a structure or article is installed, it is done in such a way that the structure or article
is safe and does not pose a health risk
o information is readily available on
o the use of an article or substance
o any health and safety risks associated with the article or substance
o any precautions required to be taken to ensure the article or substance is used without
any risks to health and safety

1.6.3 Duties of employees

While employers owe their employees and the public the duty of care, employees themselves are
required to, inter alia, do the following:

 take reasonable care of their health and safety and those of others who may be affected by their
activities
 obey the health and safety rules and procedures laid down by the employer
 wear any prescribed safety clothing or use any prescribed safety equipment where this is
required
 report any unsafe or unhealthy conditions to the employer or the health and safety
representatives in the workplace
 Immediately report any injury to themselves to the employer.

1.6.4 Appointment of occupational health and safety representatives

 Once an employer has more than 20 employees in its employ, the employer is required to
ensure the election and appointment of health and safety representatives for the workplace.
 Only employees employed full-time and who are familiar with conditions and activities at the
workplace are eligible for election and appointment as health and safety representatives.

1.6.5 Functions of the health and safety representatives

The health and safety representatives are required to perform the following functions, amongst
other things:

 review the effectiveness of the employer’s health and safety measures

 identify potential hazards in the workplace
 investigate complaints by any employee about that employee’s health or safety at work
 make representations to the employer on any health and safety issue
 inspect the workplace, including any article, substance, plant or machinery, to ensure the
health and safety of employees

1.7 COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES.

1.7.2 Introduction
 The Workmen’s Compensation Act 30 of 1941 was replaced by the Compensation for
Occupational Injuries and Diseases Act (COIDA) 130 of 1993 to broaden the scope of
compensation eligibility.

Under COIDA, both part-time and full-time employees are entitled to compensation for:

- Temporary or permanent disablement due to workplace injuries.

 - Diseases contracted in the workplace.

- If an employee dies due to workplace injuries or diseases, their widow or dependants are entitled
to compensation.

- Compensation under COIDA protects employers from being sued by employees or their
dependants for workplace injuries or diseases.

- Once an employer is registered under COIDA, any civil claims against the employer for such injuries
or diseases are forfeited.

- COIDA compensation replaces the right to claim damages against an employer for negligence.

- Employees or dependants may still claim damages from third parties (e.g., co-employees) whose
negligence or intentional actions caused the injury or disease, except against certain senior
employees.

1.7.2 Application of the COIDA.

Generally, an employee is not entitled to be compensated if: • he/she is disabled for a period of
three days or shorter (In such a case, the employee will simply be entitled to normal paid sick leave.)
• he/she is a domestic worker • he/she is an individual undergoing military training • he/she is a
member of the South African National Defence Force or the South African Police Service • the
injuries sustained by the employee were due to the employee’s serious or wilful conduct, in other
words, if the employee himself/herself was to blame for the accident which caused the injuries (In
terms of the Act, “serious and wilful misconduct” means, among other things, being under the
influence of intoxicating liquor or a drug having a narcotic effect.17However, the employee may still
be compensated if the accident resulted in serious disablement, even though the employee was to
blame for the accident causing his/her injuries. In the case of the death of an employee, his/her
dependant(s) may be entitled to compensation.) • he/she is employed outside South Africa for 12 or
more consecutive months • The employee is on a temporary work assignment in South Africa

1.7.3 The Compensation Fund.

- Employers contribute to the Compensation Fund through an annual assessment issued by the
Compensation Commissioner.

- The assessment is based on the number of workers employed by the employer and

 the danger level of the industry in which the employer operates.

- All medical expenses and compensation for employees' workplace injuries or occupational diseases
are paid out of this Fund.

- Once a year, the Compensation Commissioner sends an assessment notice to the employer,
indicating the required contribution to the Fund.

- Employers' contributions are calculated as a percentage of the total annual earnings of their
employees.

1.7.4 Registration with the Compensation Commissioner.

An employer is required to register with the Compensation Commissioner18 (an officer associated
with the Department of Labour). Such registration is usually required within seven days of the
employer employing workers. Registration forms are obtainable from the Department’s website
(www.labour.gov.za). Once registered, the employer is required to keep a record of the earnings of
all employees, which must be available for inspection by the Commissioner. Such record is required
to be maintained for a period of at least four years. The employer is also required to annually (by 31
March) file a return of earnings with the Commissioner, which should show the amount of earnings
paid by the employer to its employees during the year starting on 1 March of the immediately
preceding year up until the end of February of the following year.

1.7.5 Notifying the employer of an accident