With frequent changes in labour legislation, entrepreneurs have to ensure that they are compliant or face significant financial penalties that could threaten the future of their companies, according to James McKerrell, CEO of Technologies South Africa, a human resources and payroll integrated software solutions company.

“Through our research, we found that small entrepreneurs are the most at risk when it comes to labour legislation as they often lack the specialist knowledge required to be compliant. It is alarming to see how many of them use friends and family to help with certain administrative functions but do not meet the necessary legislative requirements,” he says.

For example, if a small business deducts tax from employees but does not pay it over they are breaking the law. Also, if a business owner transports employees to a site then he or she needs to have a public transportation permit to do so. Not having the proper paperwork in place can lead to significant financial and reputational damage.

“There are also tax rules to observe. For example, overtime and bonus pay use different formulas and only software that is approved by SARS can be used. Even if an entrepreneur invites his or her senior manager and his wife to a weekend away then it can be construed as a benefit which has to be taxed. So the wording of policy documents, regarding benefits from the company, is crucial,” he adds.

The management and administration of salaries and labour requirements have become specialised. Ignorance of the law is no excuse and companies can be liable for large fines and labour inspections.

“Fortunately, it is not as difficult to be compliant as it sounds. With the necessary knowledge and working with the right partners, entrepreneurs can build everything themselves correctly and accurately without having to spend a fortune in the long-term. These partners need to provide the specialised services an entrepreneur requires and ensure systems are compliant with all the latest regulations and tax regimes to make sure that the focus can be on the core business,” he concludes.