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Navigating Payroll in South Africa: 5 Tips to Avoid Penalties

Many entrepreneurs underestimate the intricacies involved, assuming robust payroll systems are only necessary for larger companies.

Below are the top five key things that every business owner should know about payroll and compliance to help you steer clear of penalties:

1. Employers should be registered at SARS - AND the Department of Labour

SARS is not the only place you should be registered as an employer.

Every South African employer should be registered as an employer at both SARS (for PAYE, UIF, and SDL) and the Department of Labour (for UIF).

2. Monthly Submissions to Both Authorities is Mandatory:

Just as people often neglect their employer registration at the Department of Labour, they also neglect their paperwork submissions to the Department of Labour.

Your monthly salary returns must be submitted to both, SARS in the form of EMP201s and the Department of Labour in the form of UI19s.

3. Monthly EMP201 payments are due to SARS before the 7th of every month

You need to submit your Monthly Employer Declaration (the EMP201 form)

AND pay your EMP201 before the 7th. If the 7th falls on a weekend, you must ensure the EMP201 has been submitted and paid before the weekend to avoid incurring interest and penalties from SARS.

4. You need to submit your Employer Reconciliation Declaration twice a year

The Employer Reconciliation Declaration (the EMP501) is due bi-annually (March - August salaries) on the 31st of October and annually (March - February salaries) on the 31st May.

Additionally, IRP5 forms for employees must be prepared annually by May 31st.

5. If you don’t calculate your tax correctly your employees might be paying too much

Incorrect tax calculations can have repercussions for both employers and employees.

UIF: As per South African law, you contribute 1% of your employees’ salary as a UIF contribution. You also deduct 1% your employee’s salary as his or her contribution to UIF. That amounts to a 2% contribution in total.

However, what employers often don’t know there’s a cap of R177.12 No matter how much your employee earns, the maximum contribution will not exceed R177.12 for your UIF contribution. Your employee’s contribution also has a cap of R177.12.

Other statutory payments: These include the skills development levies (SDL) and contributions to industry-specific funds. Ensuring these deductions are made correctly and remitted on time is vital.

Providing benefits: These include medical aid, retirement contributions, and bonuses which impact payroll calculations. Understanding how these benefits affect tax deductions and UIF contributions is essential.

Properly managing leave entitlements and payments: This is vital for accurate payroll processing. Understanding the regulations surrounding annual leave, sick leave, and other types of leave ensures compliance and avoids penalties.

Fortunately, you don't have to navigate this complex terrain alone. Partnering with a reputable payroll service provider like HM Accounting can alleviate the burden. Our team of experts can manage all your payroll needs, from registrations and submissions to calculations and compliance monitoring. With HM Accounting, you can rest assured that your payroll processes are in capable hands.

HM Accounting offers a comprehensive suite of services, including the following:

  • COIDA Registration

  • Submit and obtain your Letter of Goodstanding with COIDA

  • SARS – PAYE/UIF/SDL registrations

  • UIF registrations and filings

  • Monthly EMP201 calculations, submissions and filings

  • EMP501 bi-annual and annual calculations and submissions

  • Prepare your employee IRP5s

  • Calculate and provide monthly employee payslips

  • Keep track of annual leave, sick leave, and Family Responsibility leave.

Contact Us.

For all your company compliance, accounting, and tax service needs, reach out to us on any of the following channels:

Whatsapp : click here

For a Quotation : Click here

To book your free Business Finance Consultation : Click here

HM Accounting ensures compliance with all regulatory requirements throughout the year.
By entrusting your payroll to professionals, you can focus on growing your business with peace of mind, knowing that your payroll obligations are being handled efficiently and accurately.

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