If you are an employer in South Africa, you are required by law to pay annual Workmen's Compensation (WC) premiums based on your annual payroll and the nature of the work performed by your employees.
What is Return of Earnings?
Return of Earnings (ROE) is a declaration that reflects the earnings paid by the employer to employees for the period under review. It is also known as the W.As.8 form. The Department of Labour uses this information to calculate the premiums due by the employer to the Workmen's Compensation Fund.
How to Calculate Return of Earnings
The calculation of ROE can be done using the following steps:
- Collate Gross Earnings: Gross earnings are the total salaries, wages, overtime pay, bonuses, and benefits paid to employees during the period under review.
- Exclude Unallowable Exclusions: Certain payments such as pension contributions, housing allowances, and subsistence allowances cannot be included in the calculation of ROE.
- Add Allowable Inclusions: Inclusions such as commission, bonuses, and overtime pay that form part of an employee's compensation package can be included in the calculation of ROE.
- Employer's Premium Rate: The employer's premium rate is determined based on the nature of work performed by employees and the risk inherent in the work environment. This rate is specified in the annual tariff determination by the Department of Labour.
- Calculate the Premium Payable: The premium payable is calculated by multiplying the employer's premium rate by the ROE.
Benefits of Accurate ROE Calculation
Accurate ROE calculation ensures that an employer pays the correct amount of WC premiums to the Workmen's Compensation Fund. Overestimating ROE can lead to overpayment of premiums, while underestimating ROE can lead to penalties and fines. Accurate ROE calculation also helps employers to manage their WC costs.
Conclusion
ROE calculation is an integral part of the WC premium payment process. Employers must ensure that they accurately calculate ROE to avoid underpayment or overpayment of premiums. Accurate ROE calculation also helps employers to control their WC costs and comply with relevant regulations.
