Your guide to South Africa payroll

To effectively manage South Africa payroll, employers need to understand a range of local labor laws, tax regulations, and statutory requirements. 

Businesses expanding into the region need to consider how to structure payments, navigate contributions, and offer benefits in a way that supports growth while aligning with local standards.

For businesses looking for a low-overhead, flexible solution, partnering with an Employer of Record (EOR) in South Africa, like Payoneer Workforce Management, helps streamline the process to handle payroll and employment without setting up a local South African entity.

South Africa payroll: Wages and other payments

Establishing a consistent and accurate South Africa payroll process requires a working knowledge of the payment cycle, salary norms, minimum entitlements, and bonus structures.

1) Payroll cycle

Most employers operate on a monthly payroll cycle, with payments made on the last working day of the month. Employers must calculate gross pay, apply deductions, and pay net wages on time.

2) 13^th-month salary payments

A 13th-month salary payment is not required in South Africa, but it is common across many sectors. Usually paid in December, it acts as a holiday bonus and should be outlined in the employment agreement.

3) Minimum wage

The currency in South Africa is the South African rand (abbreviated as ZAR or R). South Africa’s minimum wage is ZAR 27.58 per hour. Industry-specific wages may differ. 

Overtime is paid at 1.5 times the normal rate. And employees working on weekends and public holidays must be paid double, unless another day off is provided.

4) Sick pay

Employees are entitled to 30 days of paid sick leave over a 36-month cycle after the initial accrual period (first 6 months: 1 day for every 26 days worked). 

5) Maternity pay

Employees are entitled to 4 months of maternity leave, regardless of gender. Employers are not required to pay employees during this time, but eligible employees can claim maternity benefits from the Unemployment Insurance Fund (UIF), which provides partial income support during maternity or paternity leave.

6) Severance packages

If an employee is made redundant, they are entitled to at least 1 week of pay for every completed year of service. 

Severance only applies to dismissals based on operational requirements. If employees are terminated due to poor performance or misconduct, severance payments are not required under South Africa payroll laws.

South Africa payroll: Contributions and deductions

Employers must account for several mandatory taxes, deductions, and contributions when planning how to pay employees in South Africa. These deductions support national labor and training initiatives and help employees access certain benefits.

1) Income tax

In South Africa, employers must withhold income tax under the Pay As You Earn (PAYE) system and pay it directly to the South African Revenue Service (SARS). The rates are progressive, ranging from 18% to 45% based on the employee’s total earnings.

In addition to PAYE, employers are responsible for the following deductions:

• UIF: 1% of gross salary from the employee, matched by the employer
•  Voluntary deductions: Pensions, medical aid, or other benefits per employment agreement

All deductions must be reported on payslips and included in SARS monthly submissions.

2) Unemployment Insurance Fund (UIF)

South Africa does not have a comprehensive social security or national healthcare system, so the UIF serves as the main safety net for employees. Both employers and employees contribute 1% of the employee’s gross salary, totaling 2%. The UIF provides short-term relief for things like unemployment, illness, and parental leave.

3) Skills Development Fund

If your company’s annual payroll exceeds ZAR 500,000, you need to contribute 1% to South Africa’s Skills Development Fund (SDF). The SDF supports national training programs and workforce development.

SDF payments cannot be withheld from employee salaries.

4) Pension systems

Employers in South Africa are not legally required to contribute to retirement funds. However, many offer this benefit as part of total compensation. Contributions are generally agreed upon in the employment contract.

In September 2024, South Africa introduced a two-pot retirement system where one-third of retirement contributions may be accessed before retirement, with the rest preserved until retirement or death. This policy applies to employer-based pensions.

Mandatory South African employee benefits

Employee benefits are mandatory in South Africa to protect workers’ rights and support fair labor practices. These requirements are outlined in South Africa’s national labor laws and aim to promote health, stability, and equity in the workplace. 

Some mandatory employee benefits in South Africa include:

• Paid time off: A minimum of 21 consecutive days per 12 months supports rest and well-being.
• Maternity leave: At least 4 months off helps ensure recovery and bonding time with a newborn. This leave is unpaid.
• Paternity leave: 10 days of unpaid leave support shared caregiving for non-birthing parents. This leave is unpaid.
• Family responsibility leave: 3 paid days annually for certain urgent family matters like bereavement.
• Overtime compensation: Paid at 1.5 times the normal rate, or double for weekends and public holidays, to prevent unfair workloads.

Employers in South Africa often offer supplementary benefits such as private health insurance, remote work stipends, bonuses, and training support.

How to pay employees in South Africa

When deciding how to pay employees in South Africa, there are a few popular options, each with different trade-offs:

• Set up a local entity: Offers full control over employment but involves heavy administration and long-term regulatory commitments.
• Using international payment platforms or wire transfers.
• Use an Employer of Record (EOR): A quick, reliable way to manage local payroll and employment without creating a local entity. An EOR, like Payoneer Workforce Management, assists with onboarding, salary payments, and tax filings as per South African labor laws.

To streamline employee management and South Africa payroll with confidence, try Payoneer Workforce Management.

FAQs 

1) How is payroll calculated in South Africa?

It’s based on gross salary minus statutory deductions like income tax and UIF. Employers must also contribute to UIF and the Skills Development Levy if applicable.

2) What is the payroll cycle in South Africa?

The payroll cycle is typically monthly, with payments made on the last working day of each month.

3) What is the South African minimum wage?

The minimum wage is ZAR 27.58 per hour. Overtime is paid at 1.5 times the normal rate, and work on weekends and public holidays is compensated at twice the usual rate.