Starting and growing your own business is an exciting and challenging undertaking. Entrepreneurship is not for the faint of heart, and the requirements for financial reporting and tax compliance can quickly bring those business owners fantasising about 'the next big thing' back to reality.
Whether you manage your own payroll process or have grown your business to the point where you've hired an administrative and/or payroll manager, this payroll processing guide will ensure you don't miss any of the steps and stay on track with tax registration and submissions.
1. Employer registration for PAYE
By growing your business in South Africa and becoming an employer, you're positively contributing towards the country's economic prosperity, but this does come with some administrative responsibility. The first step in the process is to let the South African Revenue Service (SARS) know that you are registering as an employer and will be submitting PAYE tax. You are required to register with SARS as an employer by completing and submitting the EMP101 form, no longer than 14 days after becoming an employer.
2. Payment of PAYE tax
By or before the seventh day of each month, you are required to pay SARS the PAYE tax collected from your employees, and submit a completed EMP201 return, which shows all the PAYE tax deductions from your employees' salaries, commissions, bonuses, and any additional earnings and benefits.
3. Skills Development Levy (SDL) registration
The South African government imposes a 1% levy on a company's payroll to encourage learning and development in and through the company. The Skills Development Levy (SDL) is applicable to companies where the total amount paid to salaries is more than R500 000. Employers need to register for SDL with SARS no later than 14 days after becoming an employer. If your total for employees' salaries is below R500 000, then your company is exempt from the SDL.
4. UIF registration
The Unemployment Insurance Fund (UIF) makes provision for employees who have contributed towards it, to receive an income if they find themselves made redundant or unemployed, or on maternity leave. Employees and employers contribute an amount equal to 1% of an employee's salary to UIF.
As an employer, you need to register for UIF with the Department of Labour by completing the UI-8 form, after which you'll be given a registration number. You must also register for UIF with SARS within 14 days of becoming an employer. Employers not only make monthly UIF payments, but also need to declare these UIF contributions - this can be done electronically via your payroll system (instead of submitting the paper-based UI-19 form).
5. Issuing tax certificates
As an employer, you'll be responsible for issuing tax certificates to your employees at the end of each financial year. These forms - either IRP5 or IT3a forms - go hand-in-hand with your employer reconciliation submissions (EMP501) and declarations (EMP201), which need to be submitted to SARS at the end of each tax year. If you run an automated payroll solution, you can produce and print tax certificates at the push of a button, and also upload these certificates to SARS's online returns systems - e@syFile and eFiling - instead of needing to capture them manually.
6. Streamline your business with automated processes
The benefit of running an automated payroll system is that it is much easier to integrate your internal HR and payroll processes with your SARS submissions. SARS's electronic submissions applications integrate fully with automated payroll systems and solutions, which means you or your HR or business administrator can file returns and interact administratively with SARS from your office at any time of day. This is good news for you if you're the kind of business owner who wants to focus your and your staff's time on core business, and leave the nitty-gritty processing up to technology.