All South African companies must be registered for employee tax with SARS. Here’s all you need to know.
There are three kinds of employee tax that all entrepreneurs need to understand – PAYE, UIF and SDL. SARS does love their acronyms! Understanding what is expected from you as an employer will make the process much easier – and those acronyms seem less like a foreign language…
PAYE
Employee tax is known as PAYE (Pay-As-You-Earn). It is the tax that has to be deducted by an employer (that’s you) from an employee’s salary. The amount deducted from the salary must be paid by the employer to SARS every month. PAYE has to be paid within seven days after the end of the month that it was deducted, generally through eFiling. Any employer who is registered for PAYE also has to register for the Unemployment Insurance Fund (UIF). More on that below…
UIF
Unemployment Insurance Fund (UIF) is the amount paid to SARS each month to provide insurance for the employee in the event of unemployment or when they are unable to work because of maternity or adoption leave, or because of illness. The amount payable to SARS is 2% of the monthly salary – 1% contributed by the employee and 1% by the employer. UIF has to be paid for any employee working 24 hours a month (or more) for an employer.
SDL
The Skills Development Levy (SDL) is a levy initiated to promote learning and development in South Africa – the funds are allocated to develop and improve the skills of the employees. All employers who have been registered need to pay SDL once they become liable: i.e. once their employee salaries over the next 12 month period exceed R500,000. The amount payable is 1% of the total amount paid in salaries to employees (including overtime, bonuses and commissions). The levy is then distributed via SETA (Sector Education Training Authorities in South Africa).
Together, these three deductions (PAYE, UIF and SDL) form the monthly payment declaration: the total payment for an employee, less the allocations for PAYE, SDL (if necessary) and UIF. Now you can add another language to the list of languages you speak: SARS!
Registration for PAYE (Pay As You Earn) and UIF (Unemployment Insurance) involves going to SARS in person and waiting 21 working days for the application to be approved. Company Worx delivers in 72 hours.