Payroll in South Africa
South Africa is renowned for its technologically advanced and diverse economy, with a wealth of talent that could potentially transform your business. If your business wants to utilize some of that top talent, then you’ll need a payroll system that works.
While hiring employees abroad means dealing with the technicalities of taxes and payroll, it’s not something that should stop you from exploring new avenues and opportunities in South Africa.
Payroll regulations, labor laws, and taxation requirements will need to be ticked off, but luckily there are options available to make managing payroll services in South Africa easier for you.
Let’s dive into everything you need to know about the system and structure in the country, and explore how Skuad can make hiring, managing, and paying employees outside of your HQ country as easy as 1, 2, 3.
What does the payroll process in South Africa involve?
Never handled payroll in South Africa before? No problem, we’ve got you covered. While the payroll workflow internationally will generally follow the same basic principle, there are some country-specific nuances you’ll need to be aware of, and South Africa is no exception.
Let’s take a look at the basics first. For all employees, you’ll need to:
- Collect relevant documents. You will have to take documents from your employees, including their passports, right to work, and bank account information.
- Estimate the gross and net pay. You’ll need to find the gross pay, which is the amount your employee earned, before deductions. After which, you will have to withhold any deductions, benefits, and other contributions to find the net pay.
- Pay your workers. It goes without saying, you’ll need to pay your employees. You’ll also need to provide them with a payslip of their salaries to allow them to keep a record.
- Giving the deductions to the authorities. The employer will have the responsibility to file for taxes and pay the benefits to the relevant authorities in South Africa.
- Maintaining record. The most important step of the payroll workflow is maintaining accurate and detailed records to protect your business.
Looking to get the ball rolling and still unsure where to begin? Speak to one of the team about South Africa payroll management today.
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What do you need to know about payroll in South Africa?
Now that we know what payroll calculations include — and don’t — in South Africa, let’s explore how we actually get it right. Unfortunately, it’s not quite as easy as transferring an employee's salary on the last day of the month and calling it quits there.
The currency of South Africa is South African Rand (ZAR). There is no set payroll cycle in South Africa, instead it’s set out in the employment contract. Salaries will be paid monthly, bi-monthly, or weekly.
Working hours in South Africa
The general working hours for employees in South Africa can be no longer than 45 hours weekly, or 9 hours per day. If employers exceed these, they may be liable to pay overtime rates.
Overtime rules in South Africa
As you would expect, overtime pay in South Africa is for any employees working more than the standard hours. The limit for the overtime hours per working week is for 10 hours. All employees working above 45 hours every week will get overtime for the following rates:
- Employees who make less than 205,433.30 ZAR per annum will get a rate of 150% on weekdays. If the employees are working on weekends, they will get a statutory rate of 200% overtime for the extra hours.
- Employees who earn more than 205,433.30 ZAR per annum are not entitled to any overtime compensation.
There is an upper limit of 10 overtime hours per week, capping total work hours off at 55 hours. If you weren’t aware of this already, make sure to make note of it now!
Minimum wage requirements in South Africa
The minimum wage in South Africa is 23.19 ZAR an hour, which is around $1.58.
In South Africa, sick leave is based on a three-year cycle. During every sick leave cycle, employees are entitled to paid sick leave equal to the number of days they have worked over six weeks. This means that if an employee works a five-day week from Monday to Friday, he/she is entitled to 30 days’ paid sick leave over the course of the three-year period.
This sick leave cycle will only commence after 6 months of continuous employment; for the first 6 months, they will be entitled to one sick day for every 26 days worked.
Once the three-year cycle ends, the sick days will reset.
Severance pay in South Africa
The severance pay in South Africa is commonly known as the transition payment, which is a part of the contract/collective agreement. The employees will be eligible to get a week's severance pay for the number of years they have worked with the employer.
However, the employee will not receive any severance payment if their termination is due to lacking performance or misconduct.
Book a demo with Skuad and ask our payroll experts any burning questions about payroll in South Africa.
Payroll taxes and deductions
The rate and thresholds for the payrolls taxes in South Africa are on the basis of the progressive tax system. Therefore, the more income an individual has, the more tax they will have to pay.
The income tax rates are as follows:
- Income up to 226,000 ZAR is subject to 18% tax
- Income from 226,001 to 353,101 ZAR is subject to 26% tax for the amount above 226,001 + 40,680 ZAR
- Income from 353,100 to 448,700 ZAR is subject to 31% tax for the amount above 73,726 ZAR + 40,680 ZAR
- Income from 448,701 to 641,400 ZAR is subject to 36% tax for the amount above 488,701 ZAR + 115,762 ZAR
- Income from 641,401 to 817,600 ZAR is subject to 39% tax for the amount above 641,401 ZAR + 170,734 ZAR
- Income from 817,601 to 1,731,600 ZAR is subject to 41% tax for the amount above 817,601 ZAR + 239,452 ZAR
- Income above 1,731,601 ZAR is subject to 45% tax + 614,192 ZAR
Honestly, understanding the income tax bands is no mean feat for any company that isn’t used to running payroll in South Africa. That’s where an international payroll expert like Skuad comes in handy.
Employee leave entitlement in South Africa
Employees working on a full-time basis are eligible to get 15 days every year as per the five working days. This means they will get a day off for every 17 days worked.
In addition, employees will be entitled to 15 public holidays.
As per South African labor laws, pregnant employees will get maternity leave for four months with no salary. The employee will not come back to work until they take complete rest after six weeks of the delivery.
If an employee contributes to the unemployment insurance fund (UIF), they will get a maternity benefit. This can be up to 60% of their regular pay and will last for four months maximum.
The employees of adopting parents, fathers, and surrogates can get leave for ten days. However, it will not fall under paid leave.
Besides these leave entitlements, employees can also take study leave and leave for injuries sustained at work.
For study leave, the employees in school can take up to a maximum of 10 days per annum.
Any employee sustaining injuries on the job will also be entitled to 4 days of leave.
Have you given these a second thought yet? If not, don’t worry. Skuad can do that for you.
Payroll compliance in South Africa
It goes without saying that employers have to abide by the rules and regulations set for the payroll. Failure to do so can open up the door to problems, anywhere in the world, but especially in South Africa when employers are unfamiliar with existing rules and regulations.
There are easier ways to do it than trawling South Africa payroll guides online — you can always use payroll partners for South Africa with a complete dashboard. This will allow you to stay on top of regulations and ensure that you don't miss any tax deadlines.
Payroll providers in South Africa: how to start building your team?
Are you looking to enter the new market but not sure how to deal with the payroll issues? Then Skuad is here to help you out. With our services, you can ensure you are:
- Completely Compliant. Skuad has a team of experts who can give you complete guidance regarding the payroll process, rules, and regulations in South Africa. We will be there with you on our step.
- Avoiding common mistakes. It’s easy to make missteps on rules and regulations in foreign countries, but it can be costly in the long term. Why not take help from those that understand the processes in South Africa, who can ensure there are no calculation errors?
- Better Workflow. We’re here to make your life easier. With our optimization and streamlining of the entire payroll operations, you can make the most out of it.
Take a demo of Skuad today for free and check out for yourself why we are the best in the business!