RSM South Africa

Payroll taxes and the related declarations

While a key component of running a business is how much employees should be paid and what amounts must be withheld from their earnings, the buck definitely does not stop here. It is critical that employers understand their full responsibilities when it comes to hiring employees and the associated obligations that arise from paying them remuneration.

There are various compulsory declarations that need to be submitted and paid to ensure that a company complies with legislation.

EMP201

This is a monthly declaration to the South African Revenue Services which summarises the taxes withheld from employees for Pay As You Earn, the amount payable by the company for Skills Development Levy and the combined amount due from employees and the employer for the Unemployment Insurance Fund contribution. The total amount reflected on the EMP201 is payable to SARS by the 7th of the following month. Should the 7th fall on a weekend or public holiday, it is then payable on the last working day before the 7th.

To further understand the obligations of the EMP201 return let’s take a more in-depth look at the three items mentioned above.

Pay As You Earn (PAYE)

Monthly taxes withheld from the employees earnings which has been determined by applying the applicable tax rules in terms of earnings, deductions and company contributions. These taxes are calculated according to the tax tables for the current tax year. The amount is declared and paid as part of the EMP201 submission.

Skills Development Levy (SDL)

The Skills Development Levy is used to develop and improve skills of employees by increasing investment in training and education for the workforce and thus improving the skills level in the South African labour market. This levy is imposed on employers where the total annual remuneration for the next 12 months is expected to exceed R500 000.00. 1% of remuneration, subject to certain limited exclusions, is calculated and paid to SARS as part of the EMP201 submission.

Unemployment Insurance Fund Contributions (UIF)

UIF contributions are paid into a fund which is administered by the Department of Labour. This fund is used to provide short-term relief to workers when they become unemployed due to pre-defined circumstances. 1% of ‘ongoing employment’ services rendered remuneration, with the exclusion of commission, is payable by both the employer and the employee towards the Unemployment Insurance Fund. The current capped amount, which is applied separately to both the company and the employee is currently R148.72 per month. The UIF contribution by both the employer and the employee is declared and paid as part of the EMP201 submission.

However, in addition to the declaration on the EMP201, a separate UIF Declaration must also be made on a monthly basis. This declaration is submitted to the Department of Labour and the gross earnings, employment status and UIF amount contributed for each employee are declared.

There are also two other declarations which must be completed and submitted.

EMP501

Following on from the monthly payroll taxes submitted, the EMP501 is the interim or annual declaration to SARS that reconciles the monthly declarations made to SARS via the EMP201, to the actual payments that were made as well as the final tax position of each individual employee. The interim EMP501 is due on the last working day of October and the annual EMP501 is due on the last working day of May. Once the annual EMP501 has been filed with SARS, employees are issued with their IRP5 tax certificates which are used for their individual tax declaration purposes.

Return of Earnings (ROE)

Also referred to as COIDA or Workmans Compensation. The purpose of the workmans compensation fund is to compensate employees for injuries, diseases, disablement or death sustained or contracted from injury or disease in the course of their employment. This declaration is an annual declaration and is currently due on the last working day of March. However, extensions are generally provided until the last working day in May. The calculations are based on actual and estimated earnings per employee and are subject to a ceiling limit. The industry sector also provides a measure of the risk involved and this pre-determined percentage will also affect the amount payable. It is important to note that any employer who employs even just one employee is obligated to register and submit annual returns.

Understanding the different declarations and payments that are due allows employers to adequately plan cash flow requirements, as well as avoid falling short of the law, thus avoiding interest and penalties.

RSM’s Outsourced Accounting and Payroll Department offer all of these services to facilitate clients in running their business.

Sheereen Hassim

Manager: Payroll & Outsourced Accounting, Johannesburg


Related articles

Tightening the rops on your payroll control  

Making informed decisions: Human Resources