Last week I went over the various things the payroll administrator needs to obtain and check when someone resigns. This week I am going to finish up with the process of what needs to be done when an employee is terminated.
Final Tax Calculation – tax always needs to be calculated correctly on a monthly basis, however this is even more important when an employee is leaving the company as once the employee leaves, there is no way of adjusting any shortfalls on tax calculations.
Tax Certificates – the employee is entitled to receive his/her tax certificate for the period within the current tax year during which he/she was in service, within 14 days of leaving the employment of the company. One copy of the tax certificate must be given to the employee, a second copy must be retained for company records, and the third copy must be submitted to SARS at year end.
Service Certificates – When an employee leaves the employment of the company the employee may request a service certificate stating the engagement date and the date he/she left the company’s employment.
Pension, Provident and Retirement Annuity Funds – If the employee was a member of the pension, provident or retirement annuity, premiums were paid for him/her. The fund must be informed that he/she left the employment of the company. They may require information such as the employee’s salary or wages over the last number of years in order to calculate the amount to be paid or transferred to another fund. All the forms need to be completed prior to the employee leaving the company.
Lump sums paid out by a pension, provident or retirement annuity fund to the employee is not part of his remuneration and must not be taxed as such. A directive must be obtained from SARS to determine how it should be taxed.
Also remember to ensure that all unions and industrial council requirements are completed. If may be required of the payroll administrator to inform the employee’s union and/or the Industrial Council that the employee left the company. If so, the payroll administrator/consultant should ensure the correct procedure is followed.