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Protecting your Company’s Reputation When Staff Work from Home 

The number of staff working from home has surged with the lockdown, and many office-based employers now plan to keep most or all of their employees working remotely for the long term. There are of course many advantages to allowing those staff members who can work effectively from their own home offices to do so, but be aware also of the business risks that this “new normal” exposes your company to. 

One of these is the increased risk of reputational harm to your business, particularly whilst the pandemic and its economic fallout continue to threaten staff morale and uncertainty is the watchword of the day. We analyse those risks and suggest some positive steps you can take to address them. 

“It takes a lifetime to build a good reputation, but you can lose it in a minute” (Will Rogers)  

Whilst many employees enjoy working from home, this is a time of uncertainty for them. They read of people being retrenched or furloughed and wonder if they are next. The isolation of working from home can fuel this uncertainty. 

Yet it is these employees who daily interact with customers and other stakeholders. If staff have negative feelings about the company, this can be quickly picked up by customers. Social media can spread this quickly and suddenly management have to start undertaking damage control. Recently, an English business decided to not pay staff until the government’s wage subsidy kicked inFollowing an outcry, management swiftly reversed this and paid the staff. 

Contrast this with Quickbooks who kept their cleaning staff on full pay despite empty offices. L’Oreal have made a point of paying small suppliers quicker than usual.  

Don’t think short term  

The decisions you make send out signals to your staff and they are much more likely to view you favourably if you are showing fairness to your stakeholders.  

Think also of your investors – they tend to support businesses where carefully considered long-term decisions are made by management. Don’t forget having a holistic outlook and making the environmentalsocial and governance (ESG) criteria part of your strategies. 

Communicate effectively  

In a recent case, staff supported management putting them on furlough after they were persuaded by management that this was the best long-term strategy to preserve jobs in the business. 

Staff are more motivated if they know they have commitment and active support from their bosses. 

IBM have started a program of supporting employees who need to take out time to educate their children or look after family members. They have also encouraged their staff to raise any individual difficulties they have with their managers. Introducing this type of flexibility makes managers’ jobs harder to do and IBM have created separate online chat channels for managers to network with their peers and find solutions to employees’ problems.  

Other companies with diversity in the workplace have openly supported Black Lives Matter and have made sure that when there are pay cuts or retrenchments, there is no discrimination against minorities. 

The world has changed and become more uncertain and more flexible. You need to plan carefully and act to ensure you stay on top of the situation and keep the support of your staff. 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Employees Working from Home: What Tax Deductions Can You Claim?   

Working from home is part of our “new normal” and home offices are predicted to remain a permanent feature of many employment relationships in the future. 

Both employees and their employers should be familiar with the tax angles, in particular the opportunity to claim tax deductions. When and how do you qualify for deductions? What expenses can you deduct? We discuss the various ins and outs with a simple practical example to illustrate. 

If you own your own home, read our tail ender note on the possible impact of claiming for a home office on your Capital Gains Tax liability when you sell your house. 

“We like to give people the freedom to work where they want, safe in the knowledge that they have the drive and expertise to perform excellently, whether they at their desk or in their kitchen. Yours truly has never worked out of an office, and never will” (Richard Branson) 

Thousands of employees have had to work from home since the lockdown began at the end of March. This story has been one of the success stories of Covid19, as companies have reportedly found that productivity has increased, travel costs are right down and the work is still being done.  

Employees stand to reap a range of financial and health benefits from working at home and both they and their employers should know that they may also be able to claim certain home office expenses as tax deductions. Normally only independent contractors and commission-earners would claim these expenses, but SARS has confirmed the relief is available to full-time employees as well – but only in the specific circumstances set out in the Income Tax Act. 

How you can claim tax deductions for a home office  

The Income Tax Act sets out basic requirements that must be met if this tax relief is to apply: 

  • You must practice a “trade” – which can be employment so by being employed this criterion is fulfilled. 
  • The home office must be specifically equipped for you to do your job – usually, this would mean a computer, broadband, printer, desk and chair etc. 
  • The home office is be regularly and exclusively used by you to do your job – once you have finished a day’s work, for example, the area cannot be used as a family room.  
  • More than 50% of your work needs to be performed in the home office – in other words you must work from home for at least six months of the tax year. 

Tax deductions allowed 

If the above criteria have been met, theyou may deduct:  

  1. Rental or bond interest on your home and home repairs, 
  2. Municipal rates, electricity and water, 
  3. Wear and tear on office equipment (SARS has differing depreciation rates on computer equipment and office furniture). 

You will also incur numerous costs in running your home office such as cell phone, bandwidth, equipment repairs, stationery and cleaning. As these are not specified in the Income Tax Act, it is better that you be reimbursed by your employer for these expenses. 

In terms of points 1 and 2, as a taxpayer you need to make an apportionment of those costs when claiming them in the income tax return. Typically, this is done on a floor space i.e. square metre basis of the home office in relation to the total area of the home – see the example below. 

As noted above, one of the criteria is that you can only claim a home office allowance if more than 50% of your work (at least six months of the tax year) is done in your home officeThis is not a problem during lockdown (as the home office is being used 100% of the time) but should you want to continue claiming for a home office after the lockdown, then you will need to spend more than 50% of your working hours in your home office. 

This is all best illustrated with an example: 

Example: Home Office 
Notes  Calculation of deductions claimed    Rand   
  Elizabeth needs to work from home and purchases…       
  A desk and chair    10 000   
  Desktop computer and printer    12 000   
  = Total equipment and furniture    22 000   
  Elizabeth’s monthly rates, water, refuse and electricity cost    4 000   
  Elizabeth’s monthly rental of her home    20 000   
1  Her monthly data and cell phone cost    1 200   
1  Stationery     120   
         
  Her Annual tax return       
2  Wear and tear computer equipment  3 year write off  4 000   
2  Furniture  10 year write off  1 000   
  =Total wear and tear deduction C22    5 000   
3  Water, rates, refuse and electricity    6 000   
3  Rental claim    30 000   
  =Total deductions claimed    41 000   
         
  NOTES       
1  Company reimburses Elizabeth for these costs as they are not allowable per the Income Tax Act       
2  Annual depreciation computer = 12 000/3 = 4 000       
2  Annual depreciation furniture = 10 000/10 = 1 000       
3  Size of Elizabeth’s house  200 square metres   
  Size of her home office  25 square metres   
  Claim is (25/200)   12,5%   of allowable costs  
  Annual municipal charge  48 000  4 000 monthly  
  Claim is 48 000 x 12.5%    6 000 
  Rental claim = annual rental x 12.5%  30 000   240 000 x 12.5% 
         


The
se tax deductions effectively compensate you for your costs of equipping a home officeBoth employers and employees benefit. 

As an employee make sure you get a letter from your employer to confirm that you are working from home, retain invoices and statements of these expenses, and keep a running spreadsheet of days worked at home for the tax year. 

As an employer speak to your accountant when setting this upSARS’ requirements are stringent and you don’t want your staff to be denied the deduction.  

Beware the CGT impact! 

Claiming for a home office as above may well have an adverse impact on the amount of Capital Gains Tax you have to pay when you eventually sell your home. This can become a complicated issue and calculation so it is essential to get professional advice on this aspect! 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)