South Africa Payroll Outsourcing, Payroll Software and Employer Of Record (EOR) services.
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SOUTH AFRICA
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South Africa Payroll and Employer of Record: Employment Contracts
General Work Permit
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The most prevalent type of visa is the General Work Visa. The employing employer must show that the position cannot be filled by a South African in order to receive this visa. This usually means they must first promote the opportunity in the local media, ensuring that South African citizens are not refused employment. Second, proof of the applicant’s qualifications and/or experience must be provided. The South African Qualifications Authority must verify their credentials (SAQA).
Skilled Work Permit
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The South African government recognizes some abilities as outstanding. A Critical Talents Work Visa can be applied for by someone with certain skills and/or certifications. This visa does not require the applicant to have a job at the time of application.
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The DHA’s critical skills list defines what talents qualify as critical under the law. The applicant’s writing skills must be confirmed by an appropriate South African body (for example, SAQA), ensuring that the candidate is qualified for the critical sector of employment. A letter from the relevant professional body may be required on occasion. This can help your application if you have a doctorate in a specialized field, have published articles, or are an expert in a field.
Intra-company Transfer
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People who work for multinational corporations frequently move across nations in today’s world. An individual who has been transferred to South Africa must apply for an Intra-Company Transfer visa. Before seeking to relocate to the South African branch, any applicant must have worked for at least six months in the company’s international office.
PAID TIME OFF
Annual Vacation
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An annual leave cycle is a 12-month period with the same company, beginning with the employee’s first day on the job or ending with the employee’s previous leave cycle. In each annual leave cycle, an employee is entitled to 21 consecutive days of paid annual leave.
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if an employee works a five-day week, this equates to 15 working days; if an employee works a six-day week, this equates to 18 working days.
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In other words, the number of full-pay working days that fall inside the 21-day period are the number of full-pay working days that the employee must be provided for annual leave purposes.
Sick
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The Department of Labour, in accordance with the BCEA, enforces the sick leave cycle to protect the interests of both the employee and the employer. The cycle lasts 36 months (three years) and begins when the employee starts working. Employees are entitled to paid sick leave equal to the number of days worked during a six-week period during each sick leave cycle. This means that if an employee works a five-day week from Monday to Friday, over the course of three years, he or she is entitled to 30 days of paid sick leave.
Maternity
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Section 25 of the Basic Conditions of Employment Act (BCEA) guarantees a pregnant employee at least four months of unpaid maternity leave. It further specifies that maternity leave must begin no later than four weeks before to the projected due date of the child. The employee may return to work before the six-week period from the date of birth has passed if she receives a medical certificate from her doctor or midwife stating that she is medically fit to return to work.
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Payment to a maternity leave employee is not required.
Paternity
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South Africa’s new parental leave rules took effect on January 1, 2020, and have been warmly received. All parents, including dads, adopting parents, and surrogates, are now entitled to ten days of unpaid leave when their children are born under the new legislation.
Family
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Employees in South Africa are entitled to family responsibility leave in addition to sick leave, parental leave, and yearly leave if they match the qualifications. Employees who have worked for the same company for more than four months and at least four weeks per day are entitled to at least three days of paid family responsibility leave throughout each leave cycle, according to the Basic Conditions of Employment Act 75 of 1997.
National Holidays
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11 Paid National Holidays
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If paid holiday falls on a Sunday, the next available working day becomes a public holiday.
Other Paid Time Off
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Election voting days are public holidays. Elections are typically held on a Wednesday.
STATUTORY EMPLOYEE BENEFITS
Unemployment
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Run by the department of labour.
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Employees submit a UI19 to claim unemployment.
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Payment is calculated as a percentage of exit salary.
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Maximum exit salary is R 17 712 per month.
Workers Compensation
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Government run insurance.
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Pay-outs will be made to private insurers for a claim.
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Compliance certificates are issued.
Social Security
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No social security in place.
Retirement
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No national retirement fund in place as yet.
Health
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No national health in place as yet.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
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Private workers compensation available only in the construction industry.
Retirement
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Private retirement schemes available.
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Defined contribution schemes known as Provident Funds.
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Defined benefit schemes know as Pension Funds.
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Early retirement available at 55 for defined contribution schemes.
Health
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Private health insurance available.
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Known locally as Medical Aid.
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Many private providers.
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You can claim for in-hospital care, as well as additional benefits like disease tests, day-to-day expenses like medicine or GP visits, and dental treatment, depending on your medical aid plan.
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Gap cover is a short-term insurance policy that covers the difference between what doctors and specialists charge and what medical aid covers. Gap coverage works in tandem with your medical insurance.
Insurance
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Group life insurance available.
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Approved and unapproved insurance.
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Approved means premiums are tax deductible. Payout is taxable.
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Unapproved means premiums are taxed as income. Payout is not subject to tax.
PERSONAL INCOME TAX
Tax Year
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Tax year runs from March 1st to February 28th (29th) of the following year.
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The term tax year refers to the year ending February 28th.
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Tax tables are published annually in the budget speech by the Minister of Parliament in the 2nd to last week of February prior to the commencement of the tax year.
Tax Tables
Taxable Income (R) : Rate of Tax
R1 – R237 100 : 18% of taxable income
R237 101 – R370 500 : R42 678 + 26% of taxable income above R237 100
R370 501 – R512 800 : R77 362 + 31% of taxable income above R370 500
R512 801 – R673 000 : R121 475 + 36% of taxable income above R512 800
R673 001 – R857 900 : R179 147 + 39% of taxable income above R673 000
R857 901 – R1 817 000 : R251 258 + 41% of taxable income above R857 900
R1 817 000 and above : R644 489 + 45% of taxable income above R1 817 000
Taxation Method
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Tax is calculated on an annual basis but applied each payroll period.
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A monthly employee’s tax is calculated by working out their annual tax year to date and applying tables. A credit is applied in the event the employee has paid too much tax.
Double Taxation
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South Africa is signatory to multiple double taxation agreements, also known as a DTA.
Residence Requirements
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For tax purposes, a resident is a natural person who is habitually resident in South Africa or who is physically present in South Africa for a specific period of time. There is no legal definition of what it means to be “ordinarily resident.” A taxpayer is typically resident in the nation of their most fixed or settled domicile, the country to which they would naturally and as a matter of course return from their travels, or their habitual or major home, according to South African courts.
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An individual is considered a South African resident if they are physically present in South Africa for more than 91 days in the relevant tax year and each of the preceding five tax years, and also for more than 915 days in the preceding five tax years if they are not ordinarily resident in South Africa. If a person who has become a South African resident based on this physical presence test spends at least 330 days outside of the country, the person ceases to be a resident at the start of the absence.
Payroll Calendars
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There are no predetermined dates on which employees must be paid.
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Weekly, Bi-weekly, fortnightly and monthly payrolls are acceptable.
Rebates & Tax Credits
A taxpayer is entitled to so-called tax rebates that are deducted from tax payable. The rebates have the effect of establishing tax thresholds below which no tax is payable. For the 2023-2024 tax year the following rebates apply:
- Primary R17 235
- Secondary (Persons 65 and older) R9 444
- Tertiary (Person 75 and older) R3 145
Tax Threshold:
- Below age 65 R95 750
- Age 65 to below 75 R148 217
- Age 75 and over R165 689
In determining tax payable, individuals are allowed to deduct a rebate based on:
- Monthly contributions to medical schemes by the individual who paid the contributions up to R364 for each of the first two persons covered by those medical schemes, and R246 for each additional dependent. This rebate is referred to as a medical scheme fees tax credit; and
- in the case of: An individual who is 65 years and older, or if an individual, his or her spouse, or his or her child is a person with a disability, 33.3% of the sum of qualifying medical expenses paid and borne by the individual, and an amount by which medical scheme contributions paid by the individual exceed three times the medical scheme fees tax credits for the tax year; or
- Any other individual, 25% of an amount equal to the sum of the qualifying medical expenses paid and borne by the individual, and an amount by which medical scheme contributions paid by the individual exceed four times the medical scheme fees tax credits for the tax year, limited to the amount which exceeds 7.5% of taxable income (excluding retirement fund lump sums and severance benefits).
- This rebate is referred to as an additional medical expenses tax credit.
Health Insurance
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Health insurance paid for by the company is a fringe benefit and subject to taxation.
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Full contribution is added to the employees monthly income.
Unemployment
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Employees contribute 1% of their monthly earnings subject to a maximum of R 177.12 per month.
Social Security
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There are no social security contributions or national retirement funds that are deducted from employees.
PAYROLL ELEMENTS
Income
Remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits. Profits or losses from a business or trade. Income or profits arising from an individual being a beneficiary of a trust. Director’s fees.
Bonuses
Bonuses are added to the monthly income of the individual. Gratuities paid on termination, severance, settlement or mutual agreement must be taxed according to a rate provided by the authority on a Tax Directive.
Allowances
Types of allowances which are deductible from taxable income.
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Subsistence Allowance
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Travel Allowance
All other allowances are fully taxable in the hands of an employee. Legitimate business expenses claimed against an allowance reduce the value of the allowance to be applied to the employee’s taxable income.
Benefits in Kind
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Acquisition of an asset at less than the actual value.
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Right of use of an asset.
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Right of use of a motor vehicle for private or domestic purposes.
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Meals, refreshments and vouches for meals and refreshments.
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Accommodation.
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Free of cheap services.
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Subsidies in respect of debt.
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Low or interest free debt.
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Subsidies in respect of debt.
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Employer contributions to insurance policy schemes.
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Employees release from an obligation to pay debt.
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Medical scheme contributions paid by an employer.
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Medical costs incurred by an employer.
Investment Income
Individual taxpayers are entitled to an annual exemption on all interest income earned in South Africa, which is determined by SARS each year. This interest exemption has stayed fixed for several years, and is set at R23 800 for those under 65 and R34 500 for those 65 and above for the 2022 tax year.
Retirement Funding
Total contributions to retirement funds (Pension, Provident & RAF) are deductible but limited to 27.5% of the greater of remuneration or taxable income (excluding lump sums), capped at an annual limit of R350 000. Where an employee earns no other income, remuneration will be used calculate the deduction.
Health Insurance
A Medical Scheme Fees Tax Credit (also known as an “MTC”) is a rebate which, in itself, is non-refundable, but which is used to reduce the normal tax a person pays. Any portion that is not allowed in the current year (usually that amount which exceeds the normal tax payable) cannot be carried over to the next year of assessment. The MTC applies for years of assessment starting on or after 1 March 2012 (from the 2013 year of assessment).
Risk Insurance
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For approved benefits, the insurance premium is not taxed as a fringe benefit in the hands of the employee. Approved benefits are taxable when the employee receives the benefit.
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For unapproved benefits, the insurance premium is taxed as a fringe benefit in the hands of the employee. Unapproved benefits are tax free when the employee receives the benefit.
Taxable Income
Examples of amounts an individual may receive, and from which the taxable income is determined, include;
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Remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits
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Profits or losses from a business or trade
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Income or profits arising from an individual being a beneficiary of a trust
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Director’s fees
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Investment income, such as interest and foreign dividends
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Rental profit or losses
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Income from royalties
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Annuities
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Pension income
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Certain capital gains
Allowable Deductions
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Pension fund contributions
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Retirement annuity fund contributions
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Provident fund contributions
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Legal costs – under certain qualifying circumstances
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Wear–and-tear – in respect of certain assets
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Donations – to approved bodies
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Repayable amounts – amount received for services rendered as refunded by that person
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Bad and doubtful debts – employment related
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
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A Skills Development Levy (SDL) is a levy imposed to encourage learning and development in South Africa. The funds are paid to the South African Revenue Services (SARS) and are to be used to develop and improve skills of employees in the workplace.
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The amount is levied on taxable income at a rate of 1% of taxable income.
Unemployment
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Employers must match the contribution of employees.
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Employee may pay the employees contribution on behalf of the employees.
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The maximum contribution which can be deducted, for employees who earn more than R17 712 per month, is R177,12 per month. Excess amounts shouldn’t be included as remuneration for the purposes of UIF contributions.
Social Security
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There are no additional social security contributions in South Africa.
Workers Compensation
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Workman’s Compensation is payable annually on assessment.
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Workman’s Compensation is a type of insurance, instituted by the The Compensation for Occupational Injuries and Diseases Act. It protects employers from dooming civil claims and enables both casual and full-time employees to claim compensation directly from the Fund for work-related injuries and disability.
ADMINISTRATION
Income
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Income tax is filed monthly using the online SARS E-Filing service.
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Payments are due by the 7th of the month. If the 7th falls on a weekend or public holiday then the payments are due on the prior working day.
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Penalty of 10% of the amount due is levied for late payment.
Payroll Taxes
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Skills Development levy is paid over when paying over employee income tax.
Unemployment
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Unemployment is paid over when paying over employee income taxes.
Social Security
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Not applicable in SA
Workers Compensation
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Return of earnings submitted annually each year in May.
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Online entry of earnings and online assessment.
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Invoice levied once data uploaded.
Statutory Benefits
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Not applicable in SA.
Employee Benefits
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Contributions can be paid by employees if contracted in their private capacity and by employers if benefits are a company benefit.
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Membership numbers are required in order to enjoy the tax relief on contributions.
LEGISLATION
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Labour Relations Act 66 of 1995
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Basic Conditions of Employment Act 75 of 1997
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Employment Equity Act 55 of 1998
STATUTORY BODIES
SARS
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The South African Revenue Service is the revenue service of the South African government. It administers the country’s tax system and customs service, and enforces compliance with related legislation.
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Parent department: National Treasury
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Employees: 12 479 (2020/21)
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Headquarters: Lehae la Sars Building; Pretoria, South Africa
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Founder: Parliament of South Africa
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Founded: 5 September 1997, Parliament of South Africa
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Preceding agencies: Department of Inland Revenue; Department of Customs and Excise
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Key document: South African Revenue Service Act 34 of 1997
CCMA
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The Commission for Conciliation, Mediation and Arbitration was formed as a dispute prevention and resolution agency under Section 112 of the Labour Relations Act 1995 (Act No. 66 of 1995) (LRA) as modified.
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Its mission is to promote social justice and fairness in the workplace by providing ethical, qualitative, innovative, and cost-effective dispute resolution and management services, as well as education, training, and development, and efficient administration.
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Parent department: Department of Employment and Labour
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Headquarters: CCMA House; Johannesburg, South Africa
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Founder: Parliament of South Africa
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Founded: 1995
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Key document: Labour Relations Act of 1995
