A burning question asked by many employees and that is not addressed often enough by employers is: How do I structure my salary to save on tax? The concept of a “one-size-fits-all” remuneration package no longer applies in the workplace.
The ability to offer a structured package that fits the needs of prospective and existing employees greatly enhances a company’s ability to attract and retain its talent.
However, many companies are struggling to structure a package with accurate computations that is a true reflection of the facts. This in turn may leave prospective or existing employees disgruntled because of incorrect calculations being provided.
The power behind the “PST”
Tax Consulting SA has designed an extremely powerful tool – aptly called the Package Structuring Tool (“PST”) – that provides validation and verification with regard to the current tax and regulatory legislation that companies have to comply with. It therefore provides assurance to the organisation surrounding compliance and risk.
The tool mirrors the payroll system and balances exactly from a total cost to company, net take-home pay and PAYE/statutory contribution basis. Once the information relating to the different offerings such as retirement benefits, medical aid, travel allowances, group life cover and funeral cover has been captured into the tool, a dummy payslip will clearly indicate what the earnings, benefits, deductions and take-home pay will be. There are no surprises and the tax saving is clear for all to see.
Disruption and chaos – payroll specialists left in the lurch?
A leading software payroll service provider has recently sent out notices indicating that they are no longer going to provide tax support to their clients.
This has caused a lot of disruption and stress in the market. The Package Structuring Tool provides a solution which will actually give companies “safety and security” by ensuring that their payroll systems are calculating the tax cost correctly, as well as treating benefits correctly for tax purposes.
The added “safety solution” is that the tool is updated on an annual basis once National Treasury announces the February Budget to accommodate any rate changes.
Accurate travel allowance quantification
The PST also answers the age-old question for employers: How do I optimally calculate travel allowance? There is a lot of governance and regulations around company cars and travel allowances, and amendments to the Income Tax Act have made this benefit less attractive over the years.
The “PST” reverse engineers the correct quantification of the actual amount that the employee qualifies for , based on each individual input. “We ensure absolute compliance – and the employee signs a declaration to this effect.” Employees are also then fully cognisant that they have to keep a log book and that the information that they have capture is true and accurate.
Tailor made solution
The “PST” is fully customised to fit the needs of each organisation. It is an Excel-based tool and is configured in terms of the company’s structure following a thorough consultation.
The tool is easy to use and has been designed with drop-down selections for the various offerings that the company provides in their reward structure. Flexibility is built in the tool in terms of the choice of medical aid schemes, the contributions to retirement funds and how to deal with travel allowances.
The tool is run independently from the payroll system, enabling instant feedback on what the impact of the employee’s choices will be on their take-home pay. This is crucial as part of the talent management/recruitment process.
It is also invaluable during the annual salary review process because of the ability to demonstrate what the impact of the annual increase will be by generating a dummy payslip with the new information.
Employers can rest assured, as it is designed in accordance with the organisation’s own reward philosophy. The PST lends itself to a complex, fast changing and ever evolving employment environment which increasingly requires real-time feedback, up to date statistics and flexibility to accommodate instantaneous policy changes.