Unauthorized MIBCO Provident Fund Deductions on Bonus Pay

A Routine Check, A Costly Mistake

Picture this: I’m doing my regular compliance check for a client in the motor industry. Everything looks normal until I spot something odd in the December pay slips.

It’s simple, right? A salary, a bonus. But for one employer, this simple mix-up of R24,000 turned into a pricey mistake.

The employer paid each employee a R12,000 bonus on top of their R12,000 December salary. Generous, right?

But here’s where things went sideways. The payroll admin recorded the combined R24,000 as the employee's monthly salary instead of listing them as separate payments. Oops.

The Problem: Unauthorized Deductions on Bonuses

So, what’s the big deal? Well, by labeling R24,000 as the salary, the system deducted provident fund contributions on the entire amount.

And here’s the kicker: provident fund contributions don’t apply to bonuses. This was an unauthorized deduction! If the employees had filed complaints, this employer could have faced compliance notices—and a damaged reputation.

Breaking Down the Costly Impact

Now, let’s look at the numbers. The employer deducted R900 extra per employee for provident funds. With 10 employees, that totaled R9,000 in unauthorized deductions.

Plus, the employer made overpayments on their contributions, about R1,000 per employee. Total cost? Over R10,000 lost.

This wasn’t just a money issue; it’s about keeping employees’ trust and staying compliant. To make things right, the employer had to request a refund from MIBCO—a process that eats up time and resources. And those delays? They add up, often with interest penalties on missed payments.

Fixing the Mess: A Lesson Learned

To prevent this from happening again, here’s what they did:

1. Separate Salary & Bonus: The payroll admin learned to list salary and bonus as separate items. No more mix-ups!

2. Get Educated: Compliance training is a must. They needed to understand exactly what MIBCO requires.

3. Double-Check Payroll: December (or any bonus month) is now a double-check month. No surprises.

Takeaways: Avoiding These Expensive Mistakes

Mistakes in payroll don’t have to happen. Here’s how to stay safe:

• Know Your Deductions: Understand what’s included in contributions.

• Double-Check Bonus Payouts: Make sure everything lines up with compliance.

• Invest in Training: Knowing the rules can save thousands.
  

Don’t Let This Happen to You

Avoid expensive mistakes. Join us on 18-19 November 2024. Attend our In-Person MIBCO Compliance & Online Returns System Training Workshop at The Campus, Sandton.

In 2 days, master MIBCO rules, prevent payroll errors, and stop unauthorized deductions.

Can’t make it to Sandton? No problem—join us virtually. Wherever you are, invest in your training. Avoid expensive mistakes.