How to Run Payroll in South Africa

1. Register as an Employer with SARS

Before processing your first pay run you must be registered with SARS as an employer. Registration covers three separate obligations:

• PAYE — Pay As You Earn income tax withholding
• UIF — Unemployment Insurance Fund contributions
• SDL — Skills Development Levy (applies when annual payroll exceeds R500,000)

Register online at SARS eFiling (www.sarsefiling.co.za) or at your nearest SARS branch. You will need your company registration number, CIPC documents, tax clearance certificate and bank account details.

You must also register as an employer with the Department of Employment and Labour for UIF (if not already covered via eFiling) and Compensation Fund for occupational injuries.

2. Collect Employee Information

For each new employee, collect and verify:

• Full name and South African ID number (or passport for foreign nationals)
• Income Tax Reference Number (obtainable from SARS)
• Bank account details (for EFT payment)
• Completed and signed IRP5 declaration / employment contract
• Any tax directive (e.g. for commission earners or fixed PAYE rate)
• Medical aid and retirement fund details (if applicable)

Retain these records for at least 5 years as required by the Tax Administration Act.

3. Calculate Gross Remuneration

Gross remuneration is the sum of all amounts paid to an employee before any deductions. It includes:

4. Calculate Statutory Deductions

PAYE (Pay As You Earn)

PAYE is calculated using the SARS annual tax tables. The basic steps are:

1. Annualise monthly remuneration (× 12)
2. Subtract pension/retirement fund contributions (up to 27.5% of remuneration, max R350,000/year)
3. Apply the tax brackets to get annual tax
4. Subtract primary, secondary and tertiary rebates
5. Subtract medical tax credits (R364/month main member, R246 each additional dependant in 2025/2026)
6. Divide by 12 for the monthly PAYE amount

Use our PAYE Calculator to do this instantly, or read the full PAYE guide.

UIF (Unemployment Insurance Fund)

Both employer and employee each contribute 1% of remuneration, capped at a monthly earnings ceiling of R17,712 (2025/2026). Maximum contribution = R177.12 each per month.

SDL (Skills Development Levy)

SDL is 1% of the monthly payroll, payable by the employer only. Employers with a total annual payroll below R500,000 are exempt. Use the SDL Calculator to check your liability.

Other voluntary deductions

These require written employee consent under the BCEA and include: pension/provident fund, medical aid, garnishee orders and other agreed deductions.

5. Calculate Net Pay

Use the Net Salary Calculator to compute this automatically.

6. Pay Employees and Issue Payslips

Pay employees by EFT on the agreed pay date (weekly, bi-weekly or monthly). Under the BCEA Section 33, every employer must provide a payslip — written or electronic — on payday. The payslip must include:

• Employer name and address
• Employee name and occupation
• Period of payment
• Gross remuneration and itemised earnings
• All deductions (each one identified separately)
• Net amount paid

See the Payslip Requirements Guide for full details.

7. Submit EMP201 and Pay SARS

By the 7th of each month (or the last business day before the 7th) you must:

1. Log in to SARS eFiling
2. Complete the EMP201 return declaring PAYE, UIF and SDL amounts
3. Make the electronic payment — PAYE + UIF + SDL in one transaction using your employer reference number
4. Keep proof of payment for your records

Late payments attract a 10% penalty on the outstanding amount plus interest at the prescribed rate. Read the full EMP201 submission guide.

8. Record-Keeping Obligations

Employers must retain payroll records for a minimum of 5 years under:

• Tax Administration Act (tax records)
• BCEA Section 31 (wage records, hours worked, leave balances)
• UIF Act (contribution records)

Records must be available for SARS audit and Department of Labour inspection at any time.

9. Annual Reconciliation — EMP501

Between April and May each year, employers must submit an EMP501 reconciliation via SARS eFiling. This reconciles the PAYE declared on monthly EMP201 returns against the IRP5/IT3(a) certificates issued to employees. Read the EMP501 guide for step-by-step instructions.

10. Monthly Payroll Checklist