Processing an arbitration award for a terminated employee

How to process an arbitration award, also known as Commission for Conciliation, Mediation, and Arbitration (CCMA) award for a terminated employee. This article relates to Sage Payroll Professional.

You're in the process of terminating an employee. The termination went through a dispute process, and the employer needs to pay an arbitration/CCMA award to the employee.

You'll need to apply for a tax directive from the South African Revenue Service (SARS) before you pay the employee.

Apply for a tax directive

Employers need to apply for a tax directive from SARS. The directive specifies the tax you need to deduct in respect of the arbitration award.

Review the process and requirements on the SARS website.

Review the Earnings Definitions

1. From the Main Menu, go to Payroll, then select Definitions.
2. Choose Earning Definitions.
3. Review to confirm the earning for Arbitration/CCMA award exists. 
4. To change or add the definition, click Change Mode.

 TIP: The IRP5 code for a CCMA award is 3608 or 3907, and 'When taxable' is Never. Refer to the tax directive to confirm the code. 

5. Click Close to save any changes.

Review the Deduction Definition

1. From the Main Menu, go to Payroll, then select Definitions.
2. Choose Deduction Definitions.
3. Review to confirm the deduction for Additional Tax (IRP5 code 4102) exists.
4. To change or add the definition, click Change Mode.
5. Click Close to save any changes.

Determine employee record to process on

You'll determine the employee records to process the award on by reviewing the following:

• The year of assessment on the tax directive
• The tax year in which you terminated the employee

Process the award on the terminated employee record when:

• Employee terminated in previous tax year, directive for previous tax year
• Employee terminated in current tax year, directive for current tax year

Process the award on a new employee record created in the current tax year when:

• Employee terminated in previous tax year, directive for current tax year

Enter the details of the tax directive

1. From the Main Menu, go to Employee, then select Change Employee.
2. Select the employee from the list.
3. Click Statutory Details tab.
4. Click Details of Directives.
5. Enter the details as per the directive.
6. Click Close.
7. Click Save and Close.
8. Click Close.

 CAUTION: Don't change the employee status to active or change the tax status when processing on a terminated record. 

Process the award on the payslip

1. From the Main Menu, go to Payslip, then select Payslip Information.
2. Select the employee from the list.
3. Click Earnings tab.
4. Enter the award amount on the CCMA awards line.
5. Click Deductions tab.
6. Enter the additional tax amount (if specific by directive).
7. Click Close.