5 Things Payroll Managers need to know about Bargaining Councils
Although many Tax Practitioners pass Bargaining Council issues onto their HR department, it is important to realise the effects these institutions have on Payrolls.
There are currently 47 registered Bargaining Councils in South Africa. Of these, 3 are Statutory Bargaining Councils, 6 are Local Government Bargaining Councils and 38 are Private Sector Bargaining Councils.
The largest Private Sector Bargaining Councils are the National Bargaining Council for the Road Freight and Logistics Industry (NBCRFLI), The Metal and Engineering Industries Bargaining Council (MEIBC), and the Motor Industry Bargaining Council (MIBCO).
Here are a few things you should know about these institutions:
1. A Bargaining Council’s scope does not necessarily include EVERYONE on your payroll
Bargaining Councils are registered for specific industries, but if (as an example) you transport goods for gain and you need to register with the NBCRFLI (National Bargaining Council for the Road Freight and Logistics Industry) it does not mean that every single person on your payroll would be affected by this.
What you need to look for are the “scheduled employees” for the Bargaining Council that the company falls under. These are the categories of employees that would be affected on your payroll as well.
Most payroll systems would then have a sub-screen of sorts where such employees can be flagged as registered under that specific Bargaining Council. It is important to then also ensure that the category codes used for these employees are the same as what the Bargaining Council uses to ensure that your information on the payroll is the same as what will be captured at the Bargaining Council.
The scheduled employees are usually your blue-collar employees, and they would normally also be listed on the Bargaining Council’s annual minimum wage rate table.
If you need a short course that goes into detail about this, go to our Udemy course “The Jurisdiction of the NBCRFLI” for an in-depth look at this.
2. Private Bargaining Councils all have levies and funds that are payable to them on a monthly basis
As with all statutory bodies, Bargaining Councils demand certain funds and levies to be paid to them. These are deducted and contributed on your payroll and submitted to them using a prescribed form.
At the NBCRFLI, companies pay over Council levies, Wellness Fund contributions, Sick Fund contributions, Holiday Pay Bonus Fund contributions, Annual Leave Pay Fund contributions and Provident Fund contributions.
Some Bargaining Councils (not all) even have online-based portals (much like SARS E-filing) where returns are created and submitted. And much like SARS E-filing, these sites often have little glitches that need to be addressed before one can do a proper submission.
All Payroll Managers should be aware that your payroll data needs to balance with your submission. This is especially true when data cannot be submitted directly from your payroll system to the Bargaining Council. This could be a real challenge, as Payroll systems often export Bargaining Council return data using information on sub-screens, which means that if employees are not flagged as Bargaining Council members, then even though the deductions were made on the payroll, they will not pull through onto your export. This creates quite a problem for companies when they cannot balance back to the original data on the payroll system, but with a little more attention to detail this can be prevented completely.
3. Bargaining Council agents have the right to inspect and issue compliance orders to companies who are non-compliant
Compliance Orders may be issued without warning to companies who do not comply with a Bargaining Council’s Collective Agreement. These orders should not be ignored, but rather investigated and disputed, or paid on receipt. Please remember that this might also affect your payroll in the form of back pay, deductions, and classification of employees.
A company usually has 14 days to comply before the matter is referred to arbitration. At arbitration, the commissioner may award up to 200% penalties to a non-compliant company!
Non-compliance could include any of the following issues:
- Not registering with the Bargaining Council
- Not deducting and paying over prescribed levies and funds
- Not submitting / paying monthly returns
- Underpayment of wages / overtime
- Unauthorised deductions
Compliance orders usually originate from a complaint lodged by an employee / or employees or it might even be submitted directly by a trade union who was made aware of issues by its members.
4. Some Funds are taxable in the hands of the employer when paid over to the Bargaining Council
Some Bargaining Councils have Holiday Bonus, Sick Leave and Annual Leave Funds. The principle behind these funds is that companies contribute to them on a monthly basis for each scheduled employee. At the end of the year, the Bargaining Council can then pay out these funds to the employees as a holiday bonus. In the case of annual leave, the Bargaining Council pays it out on application for when the employee goes on leave.
It is important to note, that the Bargaining Council – although it is the one paying out the funds – does not become the employer and is not liable to deduct PAYE from the payout. This remains the obligation of the company, and on the payroll it becomes a taxable company contribution.
The other way in ensuring the money paid to these funds are taxed, is to enter it as an earning as well as a deduction in the period that the Bargaining Council pays out the money to the employees.
5. Bargaining Council Wage Increases
One of the main functions of a Bargaining Council is to negotiate wages. When an agreement is reached between the parties, it is first submitted to the Minister of Labour for promulgation. It is important to note that once the parties have signed the agreement, it is not enforceable on companies who are not members of the parties who signed it. It only becomes law to them once the Minister promulgates the agreement and it is gazetted.
Another important factor to remember is that usually the “across the board” (ATB) increases apply to everyone who were employed before the date of promulgation. Those employed after this date will be paid at the new minimum wage rates. Should the ATB increase be insufficient to get an employee’s rate up to the minimum rate for his / her category, then such employee will be paid according to the minimum wage. The increases are normally structured in such a way that those employees with longer service periods would be on higher rates due to the ATB increases awarded to them.
Navigating the sometimes stormy seas of payroll processing in a Bargaining Council environment can be a challenge and it is important to know whether the company falls under the jurisdiction of a Bargaining Council, and what that Bargaining Council’s Collective Agreement states. It therefore makes sense to outsource such a function to someone with expertise on the subject, which is what makes Mediant Solutions a payroll bureau with a difference. You can contact us any time through our contact page.