A Long Service Award (LSA) can be gifted to an employee as a gesture of appreciation in recognition of the employee’s lengthy service rendered to the company. A LSA can be granted in the form of cash. It can also be granted in non-cash forms, such as assets, free or cheap services, or the right to use an asset. It is regarded by the South African Revenue Service (SARS) as a Fringe Benefit.
Qualifying Criteria
To qualify for a Long Service Award (LSA), the employee must have an initial unbroken period of service of at least 15 years. Thereafter, a LSA may be granted to an employee for any subsequent unbroken period of service of no less than 10 years with the same employer.
If an employee is granted an award in recognition of a shorter period of service than what is stipulated above, then that award must not be considered as a LSA.
Adding a Long Service Award Item
To add a Long Service Award item:
- Go to Employees and select the relevant employee.
- Click on Add next to Payslip Inputs.
- Click the Long Service Award item under Other.
- Enter the full value of the Cash Portion and the Non-Cash Portion.
- Click Save.
Note: The full value of the LSA must be recorded on the payslip for the date when the LSA accrued.
Tax and Reporting
SimplePay ensures that the Long Service Award item takes into account the correct tax treatment and reporting requirements as directed by SARS. More information can be found on this SARS page.
The first R5 000 portion of the LSA is tax free and will, therefore, not be included in the PAYE calculation. The value of the LSA that exceeds R5 000 will be treated as irregular income and will be included in the PAYE calculation. More information on Irregular Income can be found below:
Before 1 March 2022, LSAs were only recognised if granted in the form of an asset and were reported under codes 3801 and 3699.
From 1 March 2022, the LSA is reported under codes 3622 / 3672 for the Cash portion of the award and 3835 / 3885 for the Non-Cash portion of the award. The LSA is also reported under codes 3696 and 3699 where applicable. More on SARS codes below:
Filing and Processes > SARS Codes
Adding a Long Service Award Item in Bulk
You will also be able to add this Long Service Award item in bulk. See the following section on Bulk Actions: