Also note: Changes in Government Gazette 52607 are about Schedule 4 of COIDA, which deals with compensation benefits paid for workplace injuries and how this is calculated, and not about the Fourth Schedule of the Income Tax Act (PAYE). There has been some confusion recently about these two concepts, which are actually very different and don’t relate to one another. Here’s some clarity:
Use of 4th Schedule Remuneration – what’s the status:
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Previously, 4th Schedule remuneration was gazetted to replace COIDA Earnings.
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However, the official effective date has not yet been gazetted, and 4th Schedule Remuneration is thus not yet used as COIDA Earnings. There are, however, many companies that have adopted this way of calculating earnings already.
Implications of using 4th Schedule Remuneration and not COIDA Earnings as Gazetted:
Legal Implications:
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Potential Non-Compliance: Using Fourth Schedule Remuneration before its effective date goes against COIDA section 82, thus potentially risking audits, penalties, and fines.
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Benefit Misalignment: Mismatched earnings definitions may lead to disputes or under-compensation in claims, as benefits follow Gazette 52558 rules.
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No Retroactive Cover: Premature use won’t be validated post-proclamation, leaving ongoing liability.
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However, in virtually all cases, the use of Fourth Schedule remuneration will result in a higher remuneration calculation, thus generating higher levies for the DOL, which hopefully the DOL won’t be too unhappy about.
Cost Implications:
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Higher Premiums: Fourth Schedule Remuneration includes more earnings (e.g., all overtime, fringe benefits), potentially raising reported earnings by about 5-15%, thus increasing annual assessments.
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Overpayment Risk: Over-reported earnings lead to non-refundable overpayments and thus higher employer costs.
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Administrative Costs: Correcting non-compliance may incur unexpected legal / consulting fees.