INCLUSIVE FLEXIBLE REMUNERATION PACKAGE SYSTEM DISPENSATION FOR MEMBERS

INCLUSIVE FLEXIBLE REMUNERATION PACKAGE SYSTEM (DISPENSATION) FOR MEMBERS OF THE SENIOR MANAGEMENT SERVICE(SMS) ON LEVELS 13 TO 15 Presenter’s Name : D Van Loggenberg Branch : Regional Office Gauteng

Introduction Commencement of SMS dispensation § Compensation of new dispensation commenced on January 2001. § Cost-to-employer remuneration system. § Also referred to as a flexible remuneration system. § The objectives were to implement and maintain a modern and flexible remuneration with the view to amongst other things to enhance departments external equality in relation to the labour market in order to recruit and retain SMS members with the necessary skills and competencies. 2

REMUNERATION SYSTEM § CURRENT REMUNERATION SYSTEM Ø Current system comprises of the following elements: § Basic salary (notch) § Service bonus § Employer’s contribution to GEPF § Employer’s contribution to registered medical aid scheme § Home Owners Allowance 3

Diagram HOME OWNERS ALLOWANCE EMPLOYERS CONTRIBUTION TO GEPF CAR ALLOWANCE TOTAL REMUNERATION PACKAGE EMPLOYERS CONTRIBUTION TO MEDICAL AID NON PENSIONABLE ALLOWANCE SERVICE BONUS 4

Draft document: Total remuneration structures of Magistrates: § The total remuneration structure should include the following - Basic salary component of (60% of total package) - Pension Benefit - Flexible portion § The rules relating to structuring of the total remuneration packages should be similar to those in respect of senior management position in the public service. 5

Composition of the inclusive flexible remuneration package. Members who are appointed permanently or on contract and who are admitted to the Government Pension Fund (GEPF). 1) The inclusive remuneration package consist of the basic salary, State contribution to the GEPF and a flexible portion 2) The basic salary consists 60% of the inclusive flexible remuneration package 3) The State`s contribution to the GEPF is calculated on the basic salary 4) The remaining portion of the remuneration package may be structured 6

Flexible Portion Home owners allowance Motor Car allowance Medical Aid Allowance Medical Aid Contribution 13 th Cheque 7

Flexible portion (1) Motor vehicle allowance • Maximum amount of 25% of total package (subjected to SARS maximum reimbursable amounts) • If structured he/ she is OBLIGED to maintain a reliable vehicle, the SMS member must at all times have his or her vehicle (or a substitute) available for official journeys. • If not structured, there is no obligation to utilize own (private) vehicle for official purposes. • Heads of Department (or delegate) can deviate from the above for official purposes, taking into account practical implications, cost effectiveness, road conditions etc. • If structured, SMS members must secure own finance • Must maintain comprehensive insurance on the vehicle. • MMS member is responsible for parking fees at the place of work 8

Motor vehicle cont. • As far as possible, an SMS member is obliged to provide free transport to official passengers to the same destination on an official journey. • If an SMS member, who structures a motor vehicle allowance, utilises private vehicle to carry out official duties, he or she shall be compensated according to the tariffs payable for privately owned vehicles as prescribed by the Department of transport and shall reimburse toll fees. • MMS member is responsible for parking fees at the place of work • Any journey between an SMS member's home and work constitutes a private journey. 9

• • • 13 th CHEQUE The 13 th cheque is an annual payment in the anniversary month of birth. The 13 th cheque is payable on the day the SMS member is normally paid his or her salary and allowances If appointed from outside Public Service a pro rata amount is paid for the specific period Calculated from the 1 day of the anniversary month to the last day before the anniversary month. Specific conditions for payment of 13 th cheque is stipulated in the policy document for SMS members. 10

§ § Medical Assistance SMS members who are members of registered medical aid schemes are not obliged to structure for an employer contribution towards the scheme. The Executing authority shall pay the total medical aid scheme subscription fee directly on a monthly basis (Persal) The Minister of Finance has amended the personal income tax rates and tax bracket structure with effect from 1 March 2008 for the 2009 tax year. The Minister of Finance has amended the SARS capped amounts as follows. (Amendments to the monetary caps for tax free medical scheme contributions) 11

Medical Aid (2) Membership profile With effect from 1 March 2008 tax year Principal member R 570 pm (R 6 840 pa) Principal member plus 1 st dependant Additional R 580 pm (R 6 840 pa) (irrespective the age of the dependant) Further dependants (irrespective the age of the dependants) Additional R 345 pm (R 4 140 pa) per dependant. 12

Medical allowance (3) § The amendments to monetary tax amounts has implicit implications for SMS and MMS members who have the flexibility to structure for an employer contribution towards a registered medical aid scheme. This means that of a SMS or MMS member, who is a member of a registered medical scheme, decides not to structure for an employer contribution, he / she is still eligible for the tax benefit based on the membership profile – therefore the difference between zero and the appropriate SARS capped amount is deducted from members income for PAYE purposes. § Therefore a SMS or MMS member, who is a member of a registered medical aid scheme, who does not structure for an employer contribution towards the scheme, still qualify for the tax benefit based on membership profile, limited to a maximum of the relevant SARS capped amount. 13

Other benefits Home owners allowance § The State Guarantee Scheme for housing, as maintained by the national Department of Public Works, applies to SMS members. § Any amount can be structured for home owners allowance. Non pensionable cash allowance § Any amount not structured for any of the other amounts has to be structured as non pensionable cash allowance. 14

Amendments to the structuring of the flexible portion The structuring of the flexible portion of the package may only be amended in the following circumstances: § One year after the implementation of the dispensation § Adjustment of the remuneration scale (i. e annual cost of living adjustment) § On transfer to another post § Substantial changes to tax legislation – Departments will be informed accordingly. § Any changes to the total contribution to a registered medical aid scheme. 15

THANK YOU Accessible and Transformed Justice Services. Committed to the Promotion of Constitutional Values for All. 16