Payroll in South Africa is not as simple as it seems.
There’s a long list of requirements and submissions that your company needs to comply with to avoid penalties from both SARS and the Department of Labour.
Most South African entrepreneurs think having a rock-solid Payroll process is only necessary when you have multiple employees. That’s not true.
According to South African law, all registered companies should comply with annual, bi-annual and monthly PAYE (pay-as-you-earn tax), UIF (Unemployment Insurance Fund) and SDL (Skills Development Levy) requirements.
Here’s how to avoid penalties at SARS and the Department of Labour – by not making these 7 common mistakes most entrepreneurs make when it comes to payroll in South Africa.
Even if you’re the only person drawing a salary from your company, the legislation in terms of payroll in South Africa applies to you.
Our team of experts created a list of the 7 crucial things every entrepreneur should know about Payroll in South Africa to avoid penalties:
- Employers should be registered at SARS – AND the Department Labour SARS is not the only place you should be registered as an employer.
Every South African employer should be registered as an employer at both SARS (for PAYE, UIF, and SDL) and the Department of Labour (for UIF).
- You have to submit your monthly returns at both SARS – AND the Department Labour
Just as people often neglect their employer registration at the Department of Labour, they also neglect their paperwork submissions to the Department of Labour.
Your monthly returns must be submitted to both SARS and the Department of Labour.
There’s a cap on how much UIF you must pay
As per South African law, you contribute 1% of your employees’ salary as a UIF contribution. You also deduct 1% your employee’s salary as his or her contribution to UIF.
That amounts to a 2% contribution in total.
However, what employers often don’t know there’s a cap of R148.72.
No matter how much your employee earns, the maximum contribution will not exceed R148.72 for your UIF contribution. Your employee’s contribution also has a cap of R148.72.
- Monthly PAYE payments are due before the 7th of every month – even if it’s a weekend
There are two monthly deadlines in terms of PAYE.
First, you need to submit your Monthly Employer Declaration (the EMP201 form).
Then you need to pay your PAYE before the 7th of the following month. If the 7th falls on a weekend, you should make the payment before the weekend.
- You need to submit your Employer Bi-Annual Reconciliation Declaration twice a year
The Employer Bi-Annual Reconciliation Declaration (the EMP501) is due two times a year (due by 31 May and 31 October). You can submit it through SARS’s Easyfile system.
- Employees’ tax certificates’ are due once a year
You have to prepare your employees’ tax certificates (the IRP5 forms) once every year. This is due by 31 May.
- If you don’t calculate your tax correctly your employees might be paying too much
Nothing is as damaging to office morale than slicing down your employees’ salaries unnecessarily.
If your tax calculations (on the IT12 returns) aren’t 100% accurate, your employees will pay too much tax, or too little. This will result in employees, either getting a refund or they must pay in when submitting their annual tax return to SARS.
- You don’t have to do everything yourself
Keeping track of all your Payroll requirements can be complicated.
Contact us at [email protected] for our Payroll services. Our team of Payroll experts will handle everything for you.