The Cost of Getting It Wrong: PAYE in South Africa 🇿🇦 for Employers
Emmanuel Amegah
August 4, 2025
Hiring employees in South Africa? Then understanding how Pay As You Earn (PAYE) works is essential. It’s one of the most important components of South Africa’s payroll system and a core employer responsibility.
This article breaks down how PAYE works in South Africa, how to calculate it, and what employers need to do to stay compliant.
What Is PAYE in South Africa?
PAYE is South Africa’s mechanism for collecting income tax from employees through their employers. The employer deducts the tax from the employee’s salary each pay period and sends it directly to the South African Revenue Service (SARS). This allows the government to collect income tax in real time throughout the year.
PAYE applies to all employees earning above a minimum income threshold and is calculated based on the employee’s earnings and tax code.
How Is PAYE Calculated?
PAYE in South Africa is calculated using a progressive tax system, meaning the more an employee earns, the higher their tax rate.
As of the 2024/2025 tax year (1 March 2024 – 28 February 2025), here is the current tax table for individuals under 65 years old:
| Annual Taxable Income (ZAR) | Tax Rate / Tax Payable |
|---|---|
| 0 – 237,100 | 18% of taxable income |
| 237,101 – 370,500 | R42,678 + 26% of taxable income above R237,100 |
| 370,501 – 512,800 | R77,362 + 31% of taxable income above R370,500 |
| 512,801 – 673,000 | R121,475 + 36% of taxable income above R512,800 |
| 673,001 – 857,900 | R179,147 + 39% of taxable income above R673,000 |
| 857,901 – 1,817,000 | R251,258 + 41% of taxable income above R857,900 |
| 1,817,001 and above | R644,489 + 45% of taxable income above R1,817,000 |
Note: Tax rebates apply (primary rebate of R17,235 for under 65), which reduce the overall tax liability.
The calculation involves projecting the employee’s annual taxable income based on year-to-date earnings, applying the tax rates to determine annual tax liability, subtracting rebates, then de-annualising to calculate monthly PAYE due.
PAYE also considers deductions such as:
- Pension fund contributions
- Medical aid credits
- Retirement annuity fund contributions
These deductions reduce the employee’s taxable income.
Employer Obligations
If you're an employer in South Africa, your responsibilities include:
- Register as an employer with SARS.
- Deduct PAYE accurately from employee salaries each pay cycle.
- Submit monthly declarations (EMP201) by the 7th of each month.
- Remit payment to SARS in line with the declarations.
- Issue IRP5 tax certificates (or EMP501 summaries) to employees at year-end.
- Submit an annual EMP501 reconciliation.
Failure to comply may lead to fines, penalties, or audits.
Minimum Income Thresholds
For the 2024/2025 tax year, employees under 65 must pay PAYE if their annual income exceeds R95,750.
There are higher tax thresholds and rebates for taxpayers aged 65 and above, but the article here focuses on the majority under 65.
Why Manual PAYE Calculation is Risky
Manually managing PAYE might seem feasible for small teams, but as your workforce grows or spans multiple regions, it quickly becomes error-prone and time-consuming.
Common risks include:
- Incorrect tax bracket application
- Missed deadlines for SARS submissions
- Inaccurate payroll reporting
- Payroll delays and employee dissatisfaction
A Better Way: Automate PAYE with Payroll Tax Software
Modern payroll tax software can automatically handle PAYE calculations, apply up-to-date tax rates and rebates, and generate the necessary declarations and forms. It ensures every payslip is correct and every remittance is timely—without spreadsheet headaches.
This is particularly helpful for:
- Global companies hiring in South Africa
- Platforms managing payroll for third parties
- Finance teams aiming for audit-ready transparency
Summary
Understanding PAYE in South Africa is not just about compliance. It’s about delivering a smooth, trusted payroll experience for your team and freeing up your operations from repetitive, high-stakes admin.
If you’re looking to grow without the burden of manual tax management, automated payroll tools offer the fastest and safest path forward.
Cadana’s Global Payroll Tax Engine simplifies PAYE across 100+ countries. Stay compliant, automate calculations, and build confidently into new markets.
Emmanuel Amegah