In this article, we gave you two payments labour law says you must exclude from termination pay. Now we're going to give you two to exclude so you can avoid penalties.
Labour law requires you to exclude these two payments from termination pay
#1: Entertainment allowances
The Practical Tax Loose Leaf Service says that entertainment allowances are given for employees to entertain clients and potential clients. Because of this, they don't form part of an employee's income in terms of the Basic Conditions of Employment Act (BCEA).
The Employment Tax Incentive Act can help you:
#2: Public education, schooling allowances, bursaries or scholarships
Basically, if your employee's dependant (for example, his child) is granted a bursary or scholarship, and the award was offered to the public at large, the grant won't form part of the employment package of the employee. But the commitment would remain towards the recipient of the bursary. Keep in mind that general or 'open' bursaries are subject to three requirements:
Bottom line: Exclude these payments when calculating termination pay. Doing so will ensure you're in line with the BCEA and you'll avoid SARS penalties.