Addressing Compliance Concerns Through Outsourcing

The South African corporate landscape is highly regulated from an HR and payroll perspective. Businesses must keep up to date regarding the required statutory updates or risk significant financial penalties.

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Unfortunately, small business owners are often unaware of these aspects as they rely on in-house skills and systems to manage this. This is where the importance of outsourcing to a specialised partner can make a significant difference assisting the small business owner to register with the relevant industry bodies and keeping up to date with changing legislation.


Non-compliance pitfalls

  • Incorrect calculation of statutory deductions.
  • A failure to submit statutory submissions to industry bodies like the Department of Labour and SARS.
  • Multiple levels of compliance put pressure on small businesses which may not have the capital required to invest more in their payroll capacity.

Related: How Outsourcing HR Can Optimise Your Human Capital

Risks of non-compliance

  • With monthly salary spend being one of the largest expenses of a small business, non-compliance carries significant financial penalties that can potentially cripple the company or force it to close.
  • HR regulations continually evolve. The legal ramifications of non-compliance and the impact on the HR department, the business, and its employees can be very serious. For example, all designated employers are required to comply with the Employment Equity Act. The cost of non-compliance starts at R1.5 million.
  • Even though an HR generalist may know a bit of everything, the legislative environment requires a specialist given the oversight of such industry bodies as the Department of Labour, SARS, and SETAs.

Benefits of outsourcing compliance

  • Outsourcing compliance empowers companies operating throughout Africa to ensure they meet all regulatory requirements of the countries in which they have a presence.
  • When compliance is managed by employees, they typically work in isolation from other functional specialists. This increases the risks of non-compliance when new legislation is applied. However, to develop in-house risk management and compliance capacity, it is advisable to enter an approved and legal consortium or joint venture, or association with practitioners in related non-HR or employee relations specialisations.

The reality is that when a company faces an audit, investigation, or even litigation, ignorance of the law is no defence.

In the complex environment of employee compensation, benefits, and related issues, it is critical that a small business works with a knowledgeable and trusted partner who specialises in all relevant aspects of compliance.

Related: The importance of outsourcing your payroll