Please advise on the following two questions: (1) Are executive directors liable to pay UIF? (2) Do the salaries paid to executive directors who do not have service contracts with the employer (typically private company directors) need to be included in t
Author: The Payroll Authors Group of South Africa
Important:
This answer is based on tax law year ending 28 February 2020.
Answer:
1. The Unemployment Insurance Contributions Act defines an employee in exactly the same way as the Fourth Schedule to the Income Act (with the single exception that common law independent contractors are excluded from the UIC Act). In other words, if the individual is an employee that is subject to PAYE withholding, then that individual must contribute to the UI Fund. This would then include executive directors because they provide services to the employer, are paid remuneration for their services, and are therefore employees.
2. Your question is contradictory (“Do the salaries paid to executive directors who do NOT have service contracts with the employer (typically private company directors) need to be included in the Statement of earnings (W.As.8 form) for Workmen's compensation”
Executive directors provide services to the company and are paid remuneration (which may be in the form of fees) for these services. They are employees. Whether or not there is an employment (service) contract is not material, and whether it is a public or a private company is not material. Non-executive directors by the nature of the independent role that they perform, are not employees – they are independent contractors (see SARS Binding General Ruling # 40). The wording on the W.As 8 Return of Earnings (ROE) does not differentiate between an executive director and a non-executive director – it simply provides that ‘directors’ are included and must be reported. In my opinion, executive directors must be included in the ROE, non-executive directors are not included in the ROE.