PAYE is an acronym for pay-as-you-earn. Deducting and paying PAYE Tax to SARS is part of the Payroll process.
PAYE tax is a form of income tax which an employer pays on behalf of its employees. This is why an employee only receives his or her income after PAYE taxes have been deducted. The employer withholds this tax and pays it directly to SARS.
According to South African law, all trading companies should be registered for PAYE tax. So yes, it’s compulsory. It’s important to make sure you are registered.
UIF is short for the Unemployment Insurance Fund. This fund was initiated by the Government in the 1940s. The goal of the fund is to help individuals who lose their jobs, those who require maternity leave or those who are unable to work for specific reasons, for example, illness. This Fund is designed to alleviate the financial stress when losing your income source.
UIF contributions are made both by employers and employees in equal parts. The amount is determined as a percentage of the employee’s income – the percentage is usually relatively low.
To legally trade in South Africa, an employer has to register with the UIF and usually most employees, even contracted employees, qualify for UIF. Employers must be compliant with the UIF.
SDL is another acronym from SARS which refers to Skills Development Levy. This levy is imposed to encourage continuous learning and the continuous development of employees. This levy is determined by the amount paid to the employee as their salary.
It is usually calculated at 1% of total wages (taking into account overtime payments, leave pay, bonuses, commissions and lump sum payments) and it is payable by employers.
SDL is compulsory when the total amount of all salaries paid by your company to its employees amounts to more than R500 000 over 12 months. If this isn’t the case, it usually isn’t compulsory.