1. Salaries and Wages Pg

2. Salaries & Wages Know: The difference between salaries and wages
Calculate salaries
Calculate wages
Deductions vs contributions
Salaries & wages journals
Posting to the relevant ledger accounts
Ethics related to salaries & wages

3. Labour Remuneration
The Labour Relations Act (LRA) No. 66 of 1995 governs all labour relations in South Africa. Basic types of remuneration for services rendered by employees include: Salaries Wages Commission/Bonusses The following factors makes the accounting for remunerating employees complicated: Employees paid at different time periods (weekly, hourly, monthly) Employees earn different rates of remuneration Overtime work is paid at a different rate to normal rates Numerous deductions (PAYE) are paid over to third parties Provision for employees’ leave As you will note: Payroll Accounting is a specialised area within Accounting.

4. Administrative Requirements
Employers are legally bound to maintain detailed records of their employees: Full Name & Address, Date of Birth, ID No., Marital status, Children… The following records should also be maintained: Work done (Clock cards, attendance register etc.) How gross and net pay were calculated Amount of tax deducted for SARS (Personal Income Tax) Employment Contract Each business employing people must register as an employer with: Regional Services Council (RSC) – To pay service levies on S&W SARS – To pay taxes (PAYE and skills development levies) Department of Labour – To pay UIF contributions

5. Basic Salaries and Wages
Basic Salary: calculated on an annual basis & paid monthly => gross salary
For Example:
An annual gross salary of R is R????? per month

6. Basic Salaries and Wages
Basic Salary: calculated on an annual basis & paid monthly => gross salary
For Example:
An annual gross salary of R is R per month
In many instances senior managers receive a salary package, which includes many perks (such as bonusses, vehicle allowances, etc.). These perks are mostly linked to performance at intervals.

7. Basic Salaries and Wages
Wages: Is the term used for remuneration paid to an employee on the basis of an hourly rate (rate per hour). The wage depends on the amount of hours worked and the rate paid per hour and therefore varies.
On Sundays & holidays the wage rate per hour is higher than the normal rate. Therefore an accurate record must be kept.
A clock card system is often used to record the hours worked.
Shift workers in factories / farmworkers etc. are paid in wages

8. Calculating net salaries
Gross salary - Deductions ??? = Net Salary
Do! Activity 8.1
Pg. 149

9. Salary scales
Indicates an employee’s starting notch. The employee can then see what their future increments and future notches will be. Employees will earn a minimum salary with annual increments. As the salary increases it will reach a higher notch when the annual increments will also increase. The starting notch depends on experience & qualifications.

10. Salary scales Notch: R80 000 + R3 000 = R92 000 + R4 500 = R105 500
Starting salary Annual increases Maximum before new New increment Maximum reached on
increment is implemented this notch
Salary
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Beginning
80000
83000
86000
89000
92000
96500
101000
Increment
3000
4500
Final annual salary
105500
Activity 8.2
Pg. 150

11. Salary scales Activity 8.2
Notch: R R6 600 = R R7200 = R
Starting salary Annual increases Maximum before new New increment Maximum reached on
increment is implemented this notch
Salary
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Beginning
121800
128400
135600
142800
Increment
6600
7200
Final annual salary
150000

12. Calculating net salaries
Gross salary - Deductions ??? = Net Salary

13. Deductions
Deductions are made from the gross earnings of an employee. Some are compulsory (contractual agreement) and others voluntary. Deductions include: a. Income Tax Deductions b. Unemployment Insurance Fund (UIF) c. Skills development levy (SDL) d. Completion of EMP 201 return e. Pension fund f. Medical aid g. Labour Union fees

14. Deductions
a. Income Tax Deductions: SITE: An employee who earns a salary/wage above a certain minimum, as determined by the Minister of Finance (Pravin Gordhan), pays Standard Income Tax on Employees. PAYE: If an amployee earns a salary/wage above the maximum for SITE, pays PAYE (Pay as you earn) tax in addition to SITE. The Employer is “obliged” to pay these amounts to SARS. b. Unemployment Insurance Fund contributions (UIF): The fund was established to provide short-term financial relief to workers when they become unemployed, or are unable to work because of illness, maternity or adoption leave. UIF is compulsory and is paid by the employer.

15. Deductions
c. Skills Development Levey (SDL) The SDL is a compulsory levy scheme for funding education and training. The SDL is aimed at developling skills of the South African workforce by improving and developing amongst others, the following: Quality of life for workers Productivity in the workplace Self-employment Delivery of social services Levels of investment in educationand training in the labour market The SDL should also encourage employers to: Provide opportunities for new entrants to the labour market to gain work experience Provide and regulate employment services Assist employers in finding qualified employees The SDL also does the following for workers: Use the workplace as an active learning environment Provide them with opportunities to acquire new skills Employ persons who find it difficult to be employed (if you are disabled) Provide opportunities to participate in leadership Help retrenched workers re-enter the labour market Pg

16. Deductions
e. Pension Fund deduction & contributions Provides an income to employees after retirement The employee and employer agrees to the deduction. The Employer also contributes to the pension fund. The contributions are paid over regularly to the pension fund concerned. f. Medical Aid deduction & contributions Funds to assist employees with medical expenses. These contributions are also voluntary and the employer may contribute. The contributions are paid over regularly to the pension fund concerned. g. Labour Union fees If an employee is a member of a labour union, the union will instruct the employer to deduct the membership fees and pay it over. Voluntary deductions are those that the employee specifically requests in writing from the employer. Pg

18. Salaries and Wages
Activity 8.2

19. Recap: Which Act covers labour relations in SA?
What is the term used to describe both salaries & wages?
Mention key differences between salaries and wages?
How do you calculate Net Salary/Wage?
Name compulsory and voluntary employee deductions.
SITE – Threshold: R Annually (R10 000p/m)

20. Calculating net salaries
Total cost to company (Salaries/Wages) = Employer’s contributions + Gross salaries _ Deductions ??? Net Salary
Pg. 286

21. Cost of Salaries/Wages to the employer
Besides the Salary/Wages paid to the employee, the compulsory and voluntary payments made on behalf of the employee further increases the total salary/wage bill. Compulsory and Voluntary payments include: - Pension Fund contributions - Medical Aid contributions - Housing Allowance - Motor vehicle or travel allowance - UIF contributions - Bonuses - Uniform Allowance - Skills development levies - Employee leave benefits
Pg. 286

23. Activity 8.3 Pg. 151

26. Recording Salaries
Salaries: Paid to management, sales, administrative personnel on a monthly basis.
Monthly -> Draw up subsiduary book called the SALARIES JOURNAL.
It makes provision for:
Gross Salary
Deductions
Net Salary
Employer Contributions
The Accountant will post to the relevant Ledger Accounts from the Salaries Journal and he also records the payments to the employees in the Cash Payments Journal.
Example 1 (pg. 289)

27. Recap:
1. Post the nominal accounts (Expenses, which reduces the profit)
2. Post counter-entries to the Balance Sheet accounts of the General Ledger
3. Post DEDUCTiONS to the Balance Sheet accounts of the G/L
4. Post CPJ Journals to pay off outstanding amounts in the B/S accounts of the G/L

28. Recap:

30. Recap: Per Annum (p.a.) Pro-Rata / Commencement / Review ... Benefits:
UIF
Pension Fund
Medical Aid
What we have learnt:
Company Expenses for Salaries, which result in a lower Profit and subsequently in a lower Owner’s Equity, include:
Gross Salaries
Company Contributions to:
Deductions from the Gross Salary to be paid on behalf of the employee by the company in question:
Gross Salary - Deductions = Net Salary (Creditors for Salaries)

31. Recording Wages
A subsiduary journal, the Wage Journal is drawn up weekly.
It provides for Basic Wages, Overtime (”Gross”), Deductions and Employer’s Contributions.
Posting to the General Ledger is made from the Wage Journal.
Once all postings have been completed, the outstanding amounts will be paid (Remember – Wages are paid weekly).
Deductions and employer’s contributions are paid to the relevant beneficiaries at the end of the month.