Getting payroll wrong is expensive. SARS charges penalties and interest on late or incorrect submissions. Employees who are underpaid may escalate to the CCMA. And a reputational hit with your team is hard to recover from.
1. Using Outdated PAYE Tax Tables
SARS updates tax tables every 1 March. If you don't update your calculations at the start of each tax year, every employee's PAYE will be wrong for the entire year. This is the most common mistake — and usually results in a large EMP501 discrepancy.
2. Missing the EMP201 Deadline
EMP201 returns must be submitted and paid by the 7th of the following month. SARS charges a 10% penalty on any outstanding amount plus interest at the prescribed rate. There is no grace period.
3. Forgetting to Include All Remuneration
Taxable income includes more than just basic salary. Travel allowances (80% for most), company vehicle fringe benefits, employer medical aid contributions, and housing allowances must all be included. Omitting them leads to under-withholding PAYE.
4. Not Registering for UIF
Every employer with at least one employee must register for UIF. Unregistered employers accumulate arrear contributions plus penalties. Registration is free and done on SARS eFiling.
5. Miscalculating Leave Payouts
When an employee resigns or is retrenched, their accrued leave must be paid out. Many employers use the wrong daily rate — the correct rate under the BCEA is based on the employee's ordinary hours of work, not an assumed 22 days per month.
6. Not Keeping Payroll Records for 5 Years
The BCEA requires employers to keep payroll records for at least 3 years, and tax law requires 5 years. SARS can audit up to 5 years back. Cloud payroll software automatically retains records indefinitely.