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The South African Reserve Bank (Sarb) and the National Treasury have become aware of an increase in payroll deductions in recent years. Stakeholders were engaged to create a regulatory framework to govern payroll deductions, and the resulting proposal has led to three limited options on how companies can govern employees’ payroll deductions.

Why does the National Treasury want to clamp down on payroll deductions? Essentially, the offering of payroll deduction services provides preferential treatment to certain beneficiaries, as their payments are processed before the remaining funds are transferred to the employee’s banking account.

Only thereafter are other creditors or service providers allowed to collect on the remaining available funds. Arlene Leggat, the president of the South Africa Payroll Association (Sapa), says there are cases where a person is required by a court of law to pay their debts but has no liquidity after all their payroll deductions.

“Employee deductions have created a nation of employed people who are living in poverty. In the absence of an appropriate regulatory framework for discretionary or voluntary payroll deductions, employees remain vulnerable and susceptible to potential exploitation by unscrupulous employers and service providers,” says Leggat.

In a recently published joint proposal by Sarb, there are three payroll deduction regulatory options:

* Option 1 cites no access to payroll voluntary deductions; only statutory, court order, collective agreement and arbitration award deductions can be made against an employee’s salary.

* Option 2 stipulates limited access to voluntary payroll deductions; it enhances and adopts the principles of the current regulations governing government payroll deductions.

* Option 3 offers unrestricted access to payroll voluntary deductions.

“The new payroll deduction regulatory options will have a vast impact on how payroll departments can make deductions. Employee rewards and benefits programmes often include salary deductions and reimbursements for everything from office-based gym memberships, canteen facilities and crèche services to cellphone plans and travel schemes. If a company can no longer claim deductions, it not only affects payroll, but how the company attracts and retains talent,” says Leggat.

Leggat says although Sapa wasn't consulted during the initial development of the joint proposal, it is now working alongside the National Treasury to gain more insights on how companies are making deductions against employees’ salaries. This information will be used to inform policymakers on salary deductions that companies are making.

Sapa, together with the working committee from the Sarb, has designed a survey that enables companies to indicate how deductions from employee salaries are being made. This information will help inform the National Treasury and the Sarb on decisions regarding payroll deduction regulations going forward.

Leggat says participation in Sapa’s survey can help the Sarb and the Treasury to develop a fair payroll deduction regulatory guideline. 

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