Guide
A Complete Guide to Running Payroll in South Africa
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Expert guidance on South Africa payroll compliance, accuracy, and efficiency
Running payroll in South Africa for the first time can feel overwhelming. From navigating local tax laws to ensuring compliance with strict labor regulations, there’s a lot to get right.
Whether you’re dealing with Pay As You Earn (PAYE) tax, Unemployment Insurance Fund (UIF) contributions, the Skills Development Levy (SDL), or reconciling foreign currencies, you need a reliable, streamlined solution.
This comprehensive guide has everything you need to stay compliant and run payroll smoothly, without the headaches.
What you’ll learn
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The basics of payroll in South Africa: Fundamental payroll principles, including tax compliance, employee classifications, and the key payroll components that every employer must manage
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Employment types in South Africa: The difference between full-time, part-time, independent contractors, and fixed-term contracts in South Africa, and how they impact payroll processing
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Key payroll laws and regulations: Essential labor laws that govern payroll in South Africa, including the Basic Conditions of Employment Act (BCEA), the Labour Relations Act, and the South Africa income tax regulations
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Employer registration requirements: Guidance on registering your business with the South African Revenue Service (SARS), the Compensation Fund, and other necessary authorities to comply with payroll laws
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Mandatory payroll contributions and deductions: Required statutory deductions, including PAYE, UIF, SDL, and COIDA, and how to calculate and remit them accurately
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Payroll cycle and process: Payroll frequency options, best practices for data collection and payroll calculations, and how to issue payslips that comply with local regulations
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Tax filing and reporting: Requirements for submitting monthly EMP201 forms, bi-annual EMP501 reconciliations, and generating IRP5 certificates to stay compliant with SARS tax laws
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Offboarding and final payments: How to handle offboarding, from managing notice periods and final pay to ensuring compliance with severance and UIF documentation requirements
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Payroll compliance risks and penalties: Common payroll pitfalls, such as misclassification of workers and late submissions, and learn how to avoid costly fines and legal risks
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Options for running payroll in South Africa: From manual processing and in-house automation to outsourcing payroll services in South Africa to a local payroll provider or using Deel’s global payroll services
Deel is an all-in-one payroll and HR platform built for global teams. Through Deel Local Payroll, powered by PaySpace, you can run payroll across South Africa, with:
- Effortless UIF submissions
- Automated medical scheme rate updates
- Simplified equity management
- Real-time payroll calculations
- Employee self-service through WhatsApp
- And more
Payspace by Deel is a top provider of payroll and HR solutions for South Africa, also including standard legislative setup for the rest of Africa. They are extremely knowledgeable in their field and their system works very well and can be customized for your own requirements.
—Peter King,
First Rand Group
Who is this guide for?
- Business owners of all sizes, including small business owners, looking to hire and pay workers in South Africa
- HR and finance professionals responsible for payroll processing * Bookkeepers and accountants managing payroll for clients
- Anyone wanting a clear understanding of payroll requirements in South Africa
Related resources
FAQs
How does payroll work in South Africa?
Payroll in South Africa involves calculating and processing employee salaries according to the country’s tax laws and labor regulations.
Employers are responsible for registering with the South African Revenue Service (SARS), withholding the necessary taxes (such as PAYE), and making mandatory contributions to the Unemployment Insurance Fund (UIF) and the Skills Development Levy (SDL).
Employers must also ensure compliance with statutory leave entitlements under the Basic Conditions of Employment Act (BCEA), issue payslips to employees, and meet monthly and bi-annual tax filing requirements.
What is the best payroll software in South Africa?
In South Africa, you need reliable payroll software that can handle the country’s complex tax rules and reporting requirements. For example, Deel Local Payroll, powered by PaySpace, ensures accurate payroll calculations, generates SARS-compliant reports like EMP201 and IRP5, and simplifies the payroll process by automating statutory deductions and payments.
What is the law regarding payslips in South Africa?
According to the Basic Conditions of Employment Act (BCEA), employers are required to provide employees with payslips detailing their earnings and deductions for every pay period.
Payslips must include the employer’s name and address, the employee’s name and job title, the payment period, the employee’s remuneration, the amount and purpose of any deductions, and the net pay.
In cases of overtime or special work conditions, additional information, such as overtime rates and hours worked, must be included on the payslip.
How much does SARS take from your salary?
SARS takes a portion of an employee’s salary through the Pay-As-You-Earn (PAYE) tax system. The amount deducted depends on the employee's income and is calculated using SARS’ progressive tax tables. Employees earning higher salaries will pay a higher percentage of tax.
In addition to PAYE, employees also contribute 1% of their salary to the Unemployment Insurance Fund (UIF), with the employer matching this contribution. Other statutory contributions, such as the Skills Development Levy (SDL), may apply depending on the employer’s payroll size.
When must salaries be paid in South Africa?
In South Africa, salaries must be paid on or before the agreed-upon payday, as stipulated in the employee’s contract or as defined by industry norms.
While monthly payroll cycles are the most common, weekly and bi-weekly cycles are also used, depending on the employer and the nature of the business. Employers must ensure employees are paid on time, as delays in payment can lead to legal disputes and breaches of contract.
Does Deel offer payroll services in South Africa?
Yes, Deel Local Payroll, powered by PaySpace, is a market leader in payroll technology, offering flexible solutions for businesses of all sizes, from startups to enterprises.
The platform’s advanced, native payroll engine serves customers globally. Deel combines payroll operations with workforce management, contractor management, employee visas, IT operations, and more into one centralized platform.
