PAYE: What Every SA Employer Needs to Know

What is PAYE?

Pay-As-You-Earn (PAYE) is the income tax that employers are required to withhold from employees' remuneration and pay directly to SARS on their behalf.

As an employer, you are effectively a tax collection agent. You deduct the correct amount from each employee's pay, add your employer's UIF contribution, and pay the total to SARS by the 7th of the following month.

When do you need to register as an employer?

You must register with SARS as an employer within 21 business days of first becoming an employer — which typically means as soon as you pay your first employee or director remuneration.

Registration is done on SARS eFiling using the EMP101 form.

The monthly PAYE cycle

1. Calculate each employee's PAYE

Annualise the employee's monthly remuneration, apply the tax tables, deduct rebates, and divide by 12. Most payroll software (SimplePay, Sage Payroll, PaySpace) automates this.

2. Deduct UIF

Both employer and employee contribute 1% of remuneration each (maximum R177.12 per month per party as of the 2026 year). The employer deducts the employee's 1% and adds their own 1%.

3. Skills Development Levy (SDL)

If your total annual payroll exceeds R500 000, you are liable for SDL at 1% of gross payroll. SDL is remitted with the monthly EMP201 return.

4. Submit EMP201

The EMP201 is your monthly PAYE declaration. It must be submitted and paid to SARS by the 7th of the following month. Missing this deadline attracts a 10% penalty on the outstanding amount.

The bi-annual reconciliation (EMP501)

Twice a year you must submit an EMP501 reconciliation, which confirms that your monthly EMP201 submissions match the actual tax deducted from employees:

Interim reconciliation: covers 1 March to 31 August — submission window is approximately 22 September to 31 October
Annual reconciliation: covers the full tax year (1 March to 28/29 February) — submission window is 1 April to 31 May of the following year

Your employees' IRP5 certificates are generated from the annual reconciliation. These are the forms employees use to file their personal income tax returns during SARS tax season. IRP5s must be issued to employees within 60 days of year-end — approximately 29 April following the tax year end.

Common PAYE mistakes to avoid

Paying directors' remuneration without deducting PAYE — director fees are subject to PAYE (note: directors are also typically provisional taxpayers on any income outside their salary)
Missing the 7th of the month — the 10% late payment penalty is automatic
Incorrect UIF registration — some employers register for PAYE but forget to register for UIF separately with the Department of Employment and Labour
Fringe benefits not included — company car, employer contributions to medical aid, and other fringe benefits must be included in the PAYE calculation
Not issuing IRP5s on time — employees cannot file their returns without their IRP5

Severance and leave payouts

Lump sum payments (leave payouts, severance) are taxed differently from monthly remuneration. They use a different rate scale (the "lump sum" directive process). Getting this wrong can result in both the employer and employee owing SARS.

How FinSup handles payroll and PAYE

We process payroll and PAYE for businesses of all sizes — from one-employee owner-managed businesses to multi-staff companies. We handle registration, monthly EMP201 submissions, employee payslips, UIF and SDL, the bi-annual EMP501 reconciliation, and IRP5 certificates.

If you are behind on PAYE submissions or have never registered, contact us. Voluntary disclosure and regularising your affairs is always better than waiting for a SARS audit.