Managing payroll isn’t just about paying salaries – it’s a legal minefield that can cost your business dearly if you get it wrong. With strict regulations and ever-changing compliance requirements, even a small mistake can lead to hefty fines and penalties.
That’s why staying on top of South Africa’s payroll legislation is essential for keeping your business financially secure and running smoothly, says Nicol Myburgh, head: HR services at CRS Technologies.
The key payroll regulations you need to follow
South Africa has no fewer than eight acts regulating the employer-employee relationship, each with specific payroll-related requirements:
- Basic Conditions of Employment Act
- Labour Relations Act
- Income Tax Act
- Skills Development Act
- Unemployment Insurance Act
- Compensation for Occupational Injuries and Diseases Act
- Employment Equity Act
- Protection of Personal Information Act
Beyond these laws, different industry sectors have their own employment conditions, while agreements between employers and bargaining councils add further complexity to payroll management.
“Understanding and adhering to these regulations is essential for both legal compliance and business efficiency,” says Myburgh.
He cites the most important payroll legislation rules to know about to ensure your payroll runs seamlessly.
Getting started: business and payroll registration
Before hiring employees, you must register your business with the Companies and Intellectual Property Commission.
Once that’s completed and you’ve opened a bank account, you need to register with the South African Revenue Services (SARS) for pay-as-you-earn tax deducted from your employees, skills development levy (SDL) deductions paid to the sectoral education training authority, and unemployment insurance fund (UIF) contributions. You must also register with the Department of Employment and Labour (DEL) for UIF contributions.
“This must be done whether you have one employee (even if that person is yourself) or more than a hundred,” Myburgh notes.
He adds that if your business is registered as a company, you’ll also need to register with SARS for value-added tax (VAT) and company tax.
Employee contracts a legal requirement
Under the Basic Conditions of Employment Act (BCEA), all employers must provide their employees with a written contract outlining key employment conditions such as notice periods, annual leave and pay rates.
However, not all employees are covered by the BCEA, Myburgh explains. Exemptions apply to:
- Employees who work fewer than 24 hours a month (although there are instances where temporary workers have the same rights as permanent employees);
- Members of the South African National Defence Force, National Intelligence Agency and South African Secret Service;
- Unpaid volunteers who work for a charitable organisation;
- Employees earning more than the statutory BCEA earnings threshold.
Understanding bargaining council agreements
Some industry sectors operate under bargaining council agreements, which set minimum wages, working hours and overtime rates.
“If your business falls under such an agreement, compliance with these additional payroll requirements is mandatory,” says Myburgh.
Monthly employer declarations and payments
Employers must submit payroll-related deductions to SARS every month. This includes PAYE, UIF and SDL, all of which are included in the EMP201 declaration which must be submitted by the seventh of the month. If the seventh falls on a weekend or public holiday, submissions must be made by the preceding business day.
“Late submissions attract a penalty of 10% on the outstanding amount, so timely compliance is essential. Additionally, businesses must submit a monthly UIF return to the DEL,” warns Myburgh.
Additional payroll submissions to remember
In addition to monthly requirements, businesses must meet several annual and bi-annual payroll submission deadlines to avoid interest and penalties:
- March: Workmen’s Compensation Fund return of earnings
- April/May: SARS PAYE annual reconciliation
- August: Six-month PAYE reconciliation
- 31 May: Employee tax certificates
Large businesses must also submit a six-monthly employment equity report to the DEL, while smaller companies are required to submit this report annually.
Maintaining comprehensive payroll records
As an employer, it is your responsibility to maintain accurate records of your employees, including employment contracts, time sheets and payslips.
While most records, including SARS-related documents, must be retained for at least five years, Myburgh recommends keeping them indefinitely for compliance and reference purposes.
“With multiple regulations to follow, staying up to date with registrations, tax submissions and record-keeping can feel overwhelming,” he concludes. “However, by understanding your obligations and implementing efficient payroll processes, you can navigate these complexities with confidence. If managing payroll in-house becomes too demanding, partnering with a reliable payroll service provider can help ensure accuracy, compliance and peace of mind.”