Every South African employer who pays salaries is legally required to deduct PAYE, UIF and in some cases SDL from employee remuneration — and to pay these over to SARS and the Unemployment Insurance Fund on time. Get it wrong and you face penalties, interest, and personal liability as a director.
This guide explains exactly how PAYE, UIF and SDL work in plain language, gives you the current 2025/26 rates and thresholds, and shows you how to calculate each one correctly. At the end, you'll find a link to download NanoLeap's SARS-ready Payroll Calculator for South African SMEs.
Tax year note: South Africa's tax year runs from 1 March to 28/29 February. This guide uses 2025/26 (1 March 2025 – 28 February 2026) rates. Always verify current thresholds on the SARS website at sars.gov.za before processing payroll.
PAYE is income tax withheld from an employee's salary by the employer and paid to SARS on the employee's behalf. The employer acts as a collection agent for SARS — the tax liability belongs to the employee, but the employer is responsible for deducting and remitting it correctly.
Any employer who pays remuneration to an employee must register as an employer with SARS and deduct PAYE. "Remuneration" includes salary, wages, overtime, bonuses, commissions, and most allowances. It does not include true expense reimbursements.
There is no minimum business size threshold — even a domestic employer paying a single employee above the tax threshold must deduct PAYE.
| Age | Annual threshold | Monthly equivalent |
|---|---|---|
| Under 65 | R95,750 | R7,979 |
| 65–74 | R148,217 | R12,351 |
| 75 and older | R165,689 | R13,807 |
Employees earning below the applicable threshold pay no income tax — but PAYE must still be calculated to confirm this, and the employer must still be registered.
| Taxable income (annual) | Rate |
|---|---|
| R0 – R237,100 | 18% |
| R237,101 – R370,500 | R42,678 + 26% above R237,100 |
| R370,501 – R512,800 | R77,362 + 31% above R370,500 |
| R512,801 – R673,000 | R121,475 + 36% above R512,800 |
| R673,001 – R857,900 | R179,147 + 39% above R673,000 |
| R857,901 – R1,817,000 | R251,258 + 41% above R857,900 |
| Above R1,817,000 | R644,489 + 45% above R1,817,000 |
Example: Employee earns R25,000/month (R300,000/year). Annual tax = R42,678 + 26% × (R300,000 – R237,100) = R42,678 + R16,354 = R59,032. Less primary rebate R17,235 = R41,797/year. Monthly PAYE = R41,797 ÷ 12 = R3,483/month.
UIF provides short-term relief to employees who become unemployed, unable to work due to illness or maternity, or whose employer dies. Both employer and employee contribute.
| Contributor | Rate | Basis |
|---|---|---|
| Employee contribution | 1% of remuneration | Deducted from employee's pay |
| Employer contribution | 1% of remuneration | Employer's own cost (not deducted from employee) |
| Maximum monthly ceiling | R17,712/month remuneration | Contributions capped at this salary level |
Maximum monthly UIF deduction per employee: R177.12 (employee) + R177.12 (employer) = R354.24 total.
Common mistake: Many small businesses don't register for UIF because they think they're too small. There is no size exemption. Any employer with at least one qualifying employee must register with the Department of Employment and Labour and submit monthly UI-19 returns.
SDL funds skills development training through the relevant Sector Education and Training Authority (SETA). Unlike PAYE and UIF, SDL is entirely an employer cost — nothing is deducted from the employee.
| Annual payroll | SDL obligation |
|---|---|
| Below R500,000 | Exempt — no SDL payable |
| R500,000 and above | 1% of total leviable amount monthly |
The "leviable amount" is essentially the total gross remuneration paid to all employees in the month. Once your annual payroll exceeds R500,000 (approximately R41,667/month average), SDL applies to the entire payroll — not just the portion above R500,000.
SDL is paid monthly to SARS as part of the EMP201 return. However, employers who register with their relevant SETA and submit Workplace Skills Plans (WSP) and Annual Training Reports (ATR) can claim back up to 20% of their SDL as a mandatory grant, and additional discretionary grants if they train employees.
Every month by the 7th of the following month, registered employers must submit an EMP201 return on eFiling declaring:
Payment must accompany the return. Late payment attracts a 10% penalty plus interest at the prescribed rate. There is no grace period — the 7th means the 7th.
Tax brackets, thresholds and rebates change every year in the February Budget. If you're using an Excel payroll calculator, you must update it on 1 March each year. Using last year's figures means incorrect PAYE — either under-deducted (SARS liability) or over-deducted (employee complaint).
SARS applies a 20-factor test to distinguish employees from independent contractors. Getting this wrong has serious consequences: PAYE on contractor fees, UIF on contractor payments, potential deemed employment penalties. When in doubt, consult a tax practitioner before classifying someone.
Many small business payroll spreadsheets don't cap UIF at the ceiling amount. An employee earning R30,000/month should have UIF calculated on R17,712 (the ceiling) — not R30,000. The difference is small per employee but compounds across a large payroll.
Annual bonuses must be annualised for PAYE purposes — you can't just apply the normal monthly rate to the bonus. The correct method is to annualise the employee's income including the bonus, calculate annual tax on that amount, subtract the tax already paid for the year, and deduct the balance in the bonus month.
✓ NanoLeap's SA Payroll Calculator handles all of these correctly — PAYE with 2025/26 tax tables, UIF ceiling, SDL threshold, and bonus month calculations. Download for R349.
PAYE, UIF and SDL calculated automatically. SARS-ready for 2025/26. Handles up to 20 employees. Excel and Google Sheets formats included.
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