As an employer, you have a number of obligations for fees and taxes that you need to pay on behalf of your employees. In this instalment in our series on starting a business, we’re looking at PAYE and the Skills Development Levy, and in the next article we’ll cover UIF and the Compensation Fund.
If your employees earn more than the tax threshold, you need to deduct employees’ tax, generally referred to as Pay-As-You-Earn (PAYE), from their salaries and pay it to South African Revenue Services (SARS) every month. You need to register with SARS for PAYE within 21 days of becoming an employer (unless none of your employees need pay tax).
Your company also needs to be registered as a provisional taxpayer, which means you’ll need to pay tax in advance based on your estimated income earned by the company. It involves two provisional payments during the tax year and then a final payment after your assessment by SARS.
Skills Development Levy (SDL)
The SDL is a compulsory levy intended for developing and improving employees’ skills. Every month you need to pay 1% of the total amount you spend on salaries, including, overtime, bonuses, commission etc. This isn’t a deduction from your employees’ salaries – it needs to be paid by the company.
(If you expect to spend less than R500,000 in total on salaries in the next 12 months, you don’t need to pay the SDL)
When you register with SARS, you need to indicate which Sector Education and Training Authority (SETA) your company falls under. This is the SETA that your SDL payments will be allocated to, and where you need to apply for skills funding for your employees.