What are the PAYE requirements for my new business?

How does POPIA affect my Payroll
How does POPIA affect my Payroll?
April 26, 2021

I’ve been asked this question a lot lately. Due to our economic recession and associated job losses, many people are setting aside a portion of their retrenchment packages or life savings to start up their own businesses. Starting your own business usually means that you need to start employing more people as your business grows. If you have employees that are eligible to pay tax you must register for PAYE, UIF and SDL with SARS. According to law, an employer needs to register employees for PAYE within 21 business days of employing them. It is a simple online registration process on SARS eFiling.

PAYE or “Pay-As-You-Earn” simply means that you, as the owner of the business deduct the payable tax from the employee’s salary monthly to pay it over to SARS on their behalf, instead of the employee having to pay a lump sum of cash over to SARS at the end of the financial year.

So how much PAYE do you need to deduct and pay to SARS for each of your employees? SARS provide PAYE tables which contain different tax rates based on the employees age and income bracket. You’ll calculate the PAYE based on the employee’s annual earnings and this includes their basic salary, any bonuses, fringe benefits or other allowances.

You may pay your employees weekly, every fortnight or monthly. If you are paying your employees weekly, you need to multiply their earnings x 52 to get their annual earnings amount. If you pay them every second week, multiply x 26 and if they receive a monthly salary, multiply x 12 to get the annual amount. Apply the annual amounts to the SARS Tax table to calculate their annual tax. Once you have the PAYE amount for their annual salary, you’ll need to divide it again by the same period to calculate the PAYE amount that will be withheld and paid over to SARS on the employee’s behalf.

The latest tax tables are always available on the SARS website: https://www.sars.gov.za/

Not all your employees may be eligible to pay income tax however. For 2021 the tax threshold is R87 300 per annum for employees younger than 65 years. If an employee is between 65-75 years old, they are only eligible to pay income tax if they earn more than R135 150 per annum and for taxpayers aged 75 years and older the threshold moves up to R151 100.

If you offer your employees additional benefits like medical aid, retirement annuity, pension fund or income protection you can deduct these from their earnings when calculating their PAYE amount.

Do you need assistance with your PAYE calculations or Payroll Management? We would love to help. Get in touch for a hassle-free process that will keep your business compliant.