Employee’s tax is money that is deducted by an employer from an employee’s wage or salary on a regular (usually monthly) basis. The amount of tax that should be deducted is written in tables that are issued by the South African Revenue Services (SARS). Every employer who pays wages or salaries which have to be taxed, has to register with the SARS as an employer for employees’ tax purposes.

Employees who earn do not need to complete a tax return. Employers must deduct PAYE from employees’ wages if they earn enough to qualify to pay PAYE. The minimum salary required to pay income tax is decided by SARS and varies depending on the taxpayer’s age. For the financial year 1 March 2024 to 29 February 2025, the thresholds are:

• People younger than 65 years must earn more than R95 750 to pay income tax.
• People between 65 and 74 years must pay tax if they earn more than R148 217,
• People who are 75 years and older, must pay tax if they earn more than R165 689.

Employers must pay the tax that has been deducted to SARS. The employer must register with SARS as an employer and submit an EMP201 return with the payment every month.

HOW TO REGISTER AS AN EMPLOYER FOR PAYE

To register with SARS an employer must fill in a form called an EMP101 form and send it to SARS. This form can be collected from SARS or you can print the form from SARS’s website: www.sars.gov.za

It is advisable to get professional help from an accountant or an attorney to help with the registration. SARS regularly changes the requirements for registration a well as the documentary evidence needed.

SARS will let the owner of the business know that it has received the EMP101 form. SARS will ask for more information if necessary. When the employer has given the information that SARS asked for, SARS will issue a letter confirming registration.

Returns are issued monthly from SARS E-filing.

WHAT MUST THE EMPLOYER DO EVERY MONTH?

When the employer pays the employees, they must deduct tax from their wages. At the end of every month, the employer pays the tax to the SARS. The employer must:

• Add up all the tax deducted from each employee’s wages and write it on the form called an EMP201 form
• Make payment of the tax to SARS. Either by electronic payment or by writing out a cheque to sars (keep copies of all cheques or efts made to sars)
• Submit the form EMP201 electronically on SARS E-filing and make an electronic or manual payment.

Electronic payments can be made directly into the SARS banking accounts at First National Bank, Absa Bank, Nedbank or Standard Bank or via the Internet banking facilities. In all cases, it is very important that the correct payment reference as indicated on the specific EMP201 Return is provided to ensure that tax payments can be identified and correctly allocated when SARS receives the payment:

• SARS beneficiary account ID; and
• A 19-digit bank payment reference number. This allows the allocation of such payment to a specific tax type and period.

The SARS website, www.sars.gov.za provides details and information relating to bank payment limits and bank payment reference number structuring.

SARS must receive the form and the cheque or electronic payment by the 7th of the next month. For example, the SITE/PAYE for January must reach SARS by 7 February. If it is late, SARS will fine the employer. If the seventh day falls on a weekend or public holiday the Return and payment must be submitted on the last working day before the weekend or public holiday. SARS will send a receipt to the employer which must then be filed.

Manual payment can also be made at most commercial banks.

Income earned below the tax threshold must be declared on a document called an IT3. The reason for not deducting PAYE must be stated. The threshold is adjusted every year.

WHAT MUST THE EMPLOYER DO EVERY YEAR?

Twice a year, SARS will ask the employer to add up all the SITE/PAYE tax paid for that period. The employer must add together all the amounts shown on the receipts and fill in a form, called an IRP501 form. At the end of February every year, the employer must give each employee a form called an IRP5 form, which says how much the employee has earned that year, what deductions have been made and how much tax the employee has paid that year. The employee must keep the form in a safe place.

At the end of February every year, the employer must give each employee a form called an IRP5 form, which says how much the employee has earned that year, what deductions have been made and how much tax the employee has paid that year.

The employee must keep the form in a safe place.

In cases where the employer has, for valid reasons, not deducted employees’ tax, the employer must provide the employee with an IT 3(a) certificate.

SPECIAL SITUATION FOR MEMBERS OF CCs AND DIRECTORS OF COMPANIES (NOT APPLICABLE TO SOLE TRADERS)

If you are a director of a company or a member of a close corporation, you have to pay an employee’s (PAYE) tax every month.

Employees normally earn a salary, which means that an employee earns the same amount every month. The PAYE is therefore easy to work out. But the members of the CC or the Directors of the Company, who are often the owners of the business, often do not earn the same amount of money every month. The law around payment of tax for CC members and company directors is therefore complicated and difficult to work out. It is advisable to get an accountant or bookkeeper to help. It is also a good reason not to register a business as a CC unless it is a business that makes a lot of money and can afford to pay an accountant to help.

Look up the Small Enterprises and Development and Financial Agency (SEDFA) website: www.sedfa.org.za for more information on these procedures.

CASUAL EMPLOYEES AND TAX

An employer must deduct 25% from a casual employee’s wages as PAYE tax. This will apply to employees who:

• Work for an employer for less than 22 hours per week OR
• Work for an employer without reference to a specific period
• Work daily, who are paid daily and whose wages are more than R75 per day.

Examples include:

• Casual commissions paid, for example, spotters fees
• Casual payments to casual employees for irregular/occasional services
• Payments made to office bearers of organisations or clubs

Exemptions to this rule are as follows:

• If an employee works regularly for less than 22 hours per week and provides the employer with a written undertaking that they do not work for any other employer then they will be regarded as being in standard employment and tax must be deducted according to the standard weekly or monthly tax tables.
• An employee who is in standard employment, in other words, they work for one employer for at least 22 hours per week.