You’ve just paid your team, the salaries are sorted, and you breathe a sigh of relief—until a letter from SARS arrives, flagging a mistake on your PAYE submission. Sound familiar?

Payroll might seem straightforward—pay people, subtract tax, move on—but in reality, it’s one of the most complex and compliance-heavy parts of running a business in South Africa. Between UIF contributions, SDL thresholds, ever-changing tax tables, and BCEA leave rules, there’s a lot that can go wrong. And when it does, it’s not just a headache—it’s costly.

I once worked with a construction company in Pretoria that had all the right intentions. They paid staff on time every month, but they hadn’t registered for SDL and weren’t submitting their EMP201 forms correctly. By the time they reached out for help, the penalties were piling up.

If you’re a business owner juggling multiple responsibilities, this guide is for you. We’ll walk through the key parts of payroll compliance—from registration to reporting—and help you avoid the common pitfalls that trip up even seasoned employers.

1. Understanding Employer Obligations

Think of payroll compliance as a house. Before you can start laying tiles (like calculating taxes or issuing payslips), you need a solid foundation—and that starts with registration.

When you hire your first employee, whether full-time, part-time, or even temporary, you become an employer in the eyes of SARS. This means you’re expected to register for:

• PAYE (Pay-As-You-Earn)

• UIF (Unemployment Insurance Fund)

• SDL (Skills Development Levy) — if your payroll exceeds R500,000 per year

• EMP201 submissions — your monthly tax declarations

It might sound like a long checklist, but skipping a step can have serious consequences.

Let me tell you about a boutique printing company I advised in the Eastern Cape. They had a lean team of five, were doing great work, and assumed they didn’t need to register for SDL. Fast forward a year—SARS conducted a review, found the payroll exceeded the SDL threshold, and issued a backdated payment order with penalties. It wiped out most of their savings for a planned equipment upgrade.

Here’s what you can do to stay compliant from the start:

• Register with SARS as an employer through eFiling or your accountant.

• Get your UIF number from the Department of Labour.

• Ensure you understand whether SDL applies to your business—and register if necessary.

• Set up a system for submitting your EMP201 monthly declarations before the 7th of each month.

Ask yourself:
“Do I have all the registrations in place to legally employ people in South Africa?”

This is the groundwork. Get it right, and the rest of your payroll process becomes much easier.

2. PAYE, UIF & SDL – What They Are and How They Work

If payroll compliance is a puzzle, PAYE, UIF, and SDL are three key pieces that have to fit together—every single month. Each one plays a different role, but they all need to be calculated correctly, submitted on time, and paid over to SARS.

Let’s break them down:

PAYE – Pay-As-You-Earn

This is the portion of your employee’s salary that gets withheld for income tax. SARS provides monthly tax tables based on earnings and allowances—get it wrong, and you’re either underpaying (which leads to penalties) or overpaying (which employees won’t be happy about).

UIF – Unemployment Insurance Fund

Both you and your employee contribute 1% of their salary (total 2%). This goes into a government fund that helps workers if they’re retrenched, go on maternity leave, or fall ill.

SDL – Skills Development Levy

Only applies if your payroll exceeds R500,000 per year. It’s 1% of total remuneration (paid by the employer) and is used to fund skills development initiatives like SETAs. Businesses that qualify can also claim back through training programmes.

A Quick Story for Perspective

A small digital marketing agency in Cape Town hired a junior content creator and an admin assistant. The owner handled payroll himself, assuming the PAYE threshold didn’t apply since their salaries were modest. However, he didn’t realise that UIF contributions are compulsory regardless of salary, and his admin assistant should have been contributing.

When a UIF claim was later submitted (after a retrenchment), it was rejected—because no contributions had ever been made. The owner had to back-pay the UIF, with penalties, and deal with an understandably frustrated former employee.

How to Stay on Top of It

• Use automated payroll software that calculates these values based on current SARS tables.

• Keep your EMP201 submissions up to date—this is how you declare and pay PAYE, UIF, and SDL each month.

• Train your payroll administrator or outsource to a trusted accountant who understands SA compliance.

Ask yourself:

“Am I calculating PAYE, UIF, and SDL correctly—and am I submitting them before the 7th of every month?”

Getting these three right isn’t just about avoiding penalties—it’s about protecting your business and your employees.

3. Payroll Reporting & Deadlines

If you’ve ever missed a birthday or an anniversary because it slipped your mind—you’ll know the trouble a missed date can cause. Now, imagine missing a deadline with SARS. Unfortunately, they don’t send reminders, and the penalties aren’t flowers and an apology—they’re hard cash.

Payroll compliance isn’t just about paying the right amounts; it’s about reporting those amounts on time, every time. This is where EMP201s, EMP501s, and IRP5s come into play.

Key Reports and Their Deadlines

✅ EMP201 (Monthly Submission)

• Your monthly declaration to SARS showing how much PAYE, UIF, and SDL you owe.

• Due by the 7th of the following month.

• Late payments attract interest and administrative penalties.

✅ EMP501 (Bi-Annual Reconciliation)

• This is how you reconcile all monthly submissions with actual payments.

• Submitted twice a year:

  • Mid-year: Covers March to August

  • Annual: Covers March to February (due around May)

✅ IRP5 Certificates

• Must be issued to every employee annually.

• Reflects total earnings, deductions, and contributions.

• Essential for employees when they file their personal tax returns.

Real-World Example

A landscaping business in Port Elizabeth handled everything manually—payslips were typed in Word, and EMP201s were done “when we had time.” When they finally submitted their EMP501 after the year ended, nothing matched. SARS flagged multiple months of under-declaration, and the business was fined R18,000. The kicker? They’d actually paid more than required—it just wasn’t reported correctly.

They switched to a cloud payroll system and outsourced EMP501 reconciliations. The following year? Zero issues—and they even claimed back an overpayment.

Best Practices

• Set calendar reminders or automated workflows for every payroll deadline.

• Store all supporting payroll documentation—SARS can audit you up to 5 years back.

• Consider outsourcing EMP501 reconciliations if you’re unsure—getting them wrong is costly.

Ask yourself:

“If SARS audited me tomorrow, could I quickly access all my EMP201 submissions and IRP5s?”

Meeting deadlines isn’t just about ticking boxes—it’s about maintaining trust with your employees, staying on the right side of SARS, and ensuring your numbers hold up under scrutiny.

4. Leave, Overtime, and Other Payroll Rules (BCEA Basics)

Payroll compliance in South Africa doesn’t end with tax. The Basic Conditions of Employment Act (BCEA) sets the standard for how employees should be paid, how leave is calculated, and how overtime is handled. These aren’t just guidelines—they’re legal requirements. And breaching them can land you at the CCMA quicker than you can say “unfair dismissal.”

Key BCEA Payroll Considerations

🕒 Leave Calculations

• Annual Leave: Minimum of 15 working days per year (or 1.25 days per month).

• Sick Leave: One day for every 26 days worked in the first 6 months, then 30 days over a 36-month cycle.

• Family Responsibility Leave: 3 days per year after 4 months of continuous work.

• Public Holidays: Must be paid as normal working days unless otherwise agreed.

💼 Overtime

• Employees earning under the BCEA earnings threshold (set by the Department of Labour) are entitled to:

  • 1.5x pay for overtime work (up to 10 hours/week).

  • 2x pay for overtime on Sundays or public holidays.

• Overtime must be agreed to in writing.

💳 Deductions

• Only permitted if authorised in writing by the employee (e.g., for uniforms, staff loans).

• Illegal deductions (like for till shortages without proof) can lead to CCMA disputes.

Case in Point

A restaurant owner in Johannesburg decided to deduct the cost of a broken glass door from an employee’s salary—no agreement, no discussion. The employee took the case to the CCMA and won. Not only did the employer have to repay the money, but they also covered the employee’s legal costs and compensation.

On the flip side, another client—a construction firm in Mpumalanga—created a simple leave tracker linked to payroll, helping them avoid leave payout errors and disputes. They haven’t had a single CCMA case in 3 years.

Compliance Tips

• Keep accurate leave records and link them to payslips.

• Use contracts that clearly state overtime terms and deductions.

• Periodically review your HR policies to ensure they align with current BCEA standards.

Ask yourself:

“Would my current leave and overtime setup stand up in front of the CCMA?”

5. Tools & Support to Stay Compliant

Trying to manage payroll with a spreadsheet and a calculator is like using a bicycle to deliver parcels across provinces—you might get there eventually, but it’s risky, slow, and prone to breakdowns.

Luckily, payroll compliance in South Africa doesn’t have to be overwhelming. With the right tools and expert support, even small businesses can stay on top of tax changes, deadlines, and labour laws—without losing sleep.

Smart Tools for Payroll Compliance

💻 Payroll Software Options

• SimplePay – Designed for SA businesses, auto-updates tax tables, submits EMP201s directly to SARS.

• Sage Payroll – Great for SMEs with growing teams, integrates with accounting.

• PaySpace – Ideal for companies needing more advanced functionality or cross-border operations.

All of these automate key tasks:

• PAYE/UIF/SDL calculations

• Payslip generation

• Leave tracking

• EMP501 reconciliations

• IRP5 certificate creation

🧾 eFiling

• SARS eFiling lets you submit EMP201s, EMP501s, and make payments online.

• You can even register your business for UIF, PAYE, and SDL through this platform.

👥 Outsourced Services

• Many SMEs don’t need a full-time payroll person. Outsourced accountants or payroll providers can handle everything monthly at a fraction of the cost of an internal hire.

• They’ll also keep you informed about changes in SARS regulations or BCEA updates—so you stay compliant without constantly researching.

Real-World Example

A small events company in George had three employees and handled payroll in-house with Excel. Every year-end, EMP501 submissions turned into a panic-fuelled weekend event. After switching to SimplePay and engaging an accountant for quarterly reviews, year-end became a 15-minute task—and they avoided a costly EMP501 error that had plagued them the year before.

Best Practice Tip

Choose tools that grow with your business. Start with basic automation, and as your team expands, layer in leave tracking, reporting dashboards, or outsourced reviews to stay ahead of compliance curveballs.

Ask yourself:

“Is my current system helping me stay compliant—or adding stress and risk to my payroll process?”

Conclusion

Payroll compliance isn’t just about ticking boxes or filing forms—it’s about protecting your business, taking care of your team, and staying on the right side of SARS and labour law. From understanding your obligations as an employer to calculating PAYE, UIF, and SDL correctly, to meeting deadlines and managing leave, every part plays a role in building a solid foundation for growth.

Yes, the rules can be complex. But with the right tools, systems, and a little expert help, payroll can shift from a monthly frustration to a strategic strength. And when your employees are paid accurately and on time, your team runs smoother—and your business earns trust.

Take this as your sign to review your current payroll setup.

Are you confident everything’s compliant? If not, now’s the perfect time to fix it—before the next submission deadline sneaks up.