Payroll in South Africa is defined as the company’s list of employees, together with the total remuneration contributions (for wages, bonuses, and other benefits), owed by the employer to these individuals.
In addition to these mandatory payroll processing requirements, companies in South Africa are also subject to a payroll tax, as explained below by our tax lawyers in South Africa.
Our team can assist business owners with complete payroll services that include paycheck processing, calculating employee benefits, as well as the needed social security contributions and taxes. If you require these services in addition to those for company formation in South Africa, please do not hesitate to reach out to our team.
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The process of payroll in South Africa
Payroll is an essential and mandatory step for companies and one to which all employers are subject to. Observing the monthly payments and keeping track of the benefits each employee is entitled to is streamlined when the company outsources this process.
Payroll in South Africa for your company can be easily handled by our local team of experts. Some of the advantages of outsourcing payroll include the following:
- Complete payroll calculations: the third-party payroll processing company will not only calculate the due wages, but also the bonuses, overtime, and other types of compensation, according to the employee’s logged hours and other details, as per the employment agreement;
- Timely payments: the company makes sure that the salary payments are sent regularly, once a month, at the agreed date, therefore avoiding any situations in which the employees are unhappy with their irregular payment;
- Full compliance: the company can rest assured that the legal requirements for paying the social security contributions are followed and that any tax changes are implemented accordingly.
The employer’s duties and responsibilities
As previously mentioned, there is a tax on payroll in South Africa. Our team lists the most important taxes for a company, which are related to its employees:
- 1% payroll levy, however, companies with an annual payroll cost below ZAR 500,000 are exempt;
- 1% of social security contributions of the gross income for each employee (up to a cap);
- a similar 1% deduction is made from the employee to the Unemployment Insurance Fund.
The employer is required to register for the Pay As You Earn (PAYE) system, as well as the Unemployment Insurance Fund. Our attorney in South Africa specializing in employment issues can give you complete information on your requirements as soon as you start hiring employees.
Another important requirement for employers, and one that is also important in the context of calculating payroll in South Africa, has to do with the minimum wage. The following rates were communicated for 2023 by the Employment and Labour Department:
- a minimum rate of R25.42 per hour for all workers (including farm workers and domestic workers);
- the weekly rate is R1016,80 for 40 work hours (as applicable in most cases);
- the monthly rate is approximated to R4405,79 (in most cases).
The wage calculations above do not include additional benefits, allowances, or tips, as employees in certain business sectors may be entitled to. An important issue to keep in mind for employers is that the minimum payable working hours per day is four hours, even if the worker effectively works less than four hours.
Employers who have questions about how they can hire foreign employees in the country can reach out to our lawyers for information on the residence permit for South Africa.
Contact us if you need additional information on payroll, the employer’s duties, and responsibilities concerning employees, as well as other business and commercial matters.
Our lawyers assist individuals as well as companies and can also answer questions about immigration to South Africa.