Employer of record in South Africa

PAID TIME OFF

Annual Vacation: An annual leave cycle is defined as a 12-month period, starting from the employee’s first day or following the completion of the previous leave cycle. During this cycle, employees are entitled to 21 consecutive days of paid vacation. If the employee works a five-day week, this corresponds to 15 working days, and if a six-day week is followed, it equates to 18 working days. The number of paid working days within the 21-day leave period is the number of full-pay working days granted to the employee.

Sick Leave: According to the BCEA, the sick leave cycle spans 36 months (three years), starting from the employee’s first day of employment. Employees are eligible for paid sick leave based on the number of days worked during a six-week period. For instance, if an employee works five days per week, they are entitled to 30 days of paid sick leave over the course of three years.

Maternity Leave: Section 25 of the Basic Conditions of Employment Act (BCEA) ensures that pregnant employees receive at least four months of unpaid maternity leave. This leave must commence no later than four weeks prior to the expected due date. Employees may return to work before the six-week post-birth period if they provide a medical certificate confirming their fitness to work. Payment during maternity leave is not mandated.

Paternity Leave: Effective from January 1, 2020, South Africa’s updated parental leave regulations grant all parents, including fathers, adoptive parents, and surrogates, ten days of unpaid leave following the birth of their child.

Family Responsibility Leave: In addition to other types of leave, South African employees who meet specific criteria are entitled to family responsibility leave. Employees who have been with the company for at least four months and work a minimum of four days per week are eligible for three days of paid family responsibility leave each year, as per the Basic Conditions of Employment Act 75 of 1997.

National Holidays: Employees are entitled to 11 paid national holidays. If a holiday falls on a Sunday, the following working day is observed as a public holiday.

Other Paid Time Off: Election voting days are treated as public holidays, typically held on Wednesdays.

STATUTORY EMPLOYEE BENEFITS

Unemployment: Managed by the Department of Labour, employees apply for unemployment benefits by submitting a UI19 form. Payments are based on a percentage of the employee’s final salary, capped at a maximum of R17,712 per month.

Workers Compensation: This government-backed insurance provides benefits for work-related injuries and disabilities. Claims are processed through private insurers, and compliance certificates are issued.

Social Security: There is no national social security system in place.

Retirement: Currently, there is no national retirement fund established.

Health: There is no national health scheme available.

PRIVATE EMPLOYEE BENEFITS

Workers Compensation: Private workers compensation is available exclusively within the construction industry.

Retirement: Employees have access to private retirement plans, such as Provident Funds (defined contribution schemes) and Pension Funds (defined benefit schemes). Early retirement is available at age 55 for those enrolled in defined contribution plans.

Health Insurance: Private health insurance, known locally as “Medical Aid,” is available, with numerous providers offering various plans. Coverage can include in-hospital care, medical testing, outpatient expenses, and dental treatment. Gap cover, a supplementary insurance policy, is also available to cover the difference between medical aid coverage and out-of-pocket costs.

Insurance: Group life insurance is offered, with both approved and unapproved insurance options. Approved insurance premiums are tax-deductible, while the payout is taxable. Unapproved insurance premiums are taxable as income, but the payout is not subject to tax.

PERSONAL INCOME TAX

Tax Year: The tax year in South Africa spans from March 1 to February 28 (or 29) of the following year. Tax tables are released annually during the Minister of Finance’s budget speech, typically in the second-to-last week of February.

Tax Tables

Taxable Income (R) : Rate of Tax
R1 – R237 100 : 18% of taxable income
R237 101 – R370 500 : R42 678 + 26% of taxable income above R237 100
R370 501 – R512 800 : R77 362 + 31% of taxable income above R370 500
R512 801 – R673 000 : R121 475 + 36% of taxable income above R512 800
R673 001 – R857 900 : R179 147 + 39% of taxable income above R673 000
R857 901 – R1 817 000 : R251 258 + 41% of taxable income above R857 900
R1 817 000 and above : R644 489 + 45% of taxable income above R1 817 000

Taxation Method: Taxes are calculated annually but applied on each payroll period. Employees receive credits if they overpay taxes during the year.

Double Taxation: South Africa has multiple double taxation agreements (DTAs) in place.

Residence Requirements: Tax residency is determined by physical presence and habitual residence. An individual is considered a resident if they have spent more than 91 days in South Africa during the tax year and in each of the previous five years, or 915 days in the last five years.

Payroll Calendars: There is no set date for payroll; employers can choose weekly, bi-weekly, fortnightly, or monthly payroll schedules.

Rebates & Tax Credits: For the 2023-2024 tax year, the following rebates apply:

• Primary: R17,235
• Secondary (age 65+): R9,444
• Tertiary (age 75+): R3,145

Tax Thresholds

• Below 65: R95,750
• 65 to below 75: R148,217
• 75 and over: R165,689

Health Insurance: Health insurance provided by the company is a taxable fringe benefit, with the full contribution added to the employee’s income.

Unemployment: Employees contribute 1% of their monthly earnings to unemployment benefits, with a cap of R177.12 per month.

Social Security: There are no social security contributions in South Africa.

PAYROLL ELEMENTS

Income: This includes salaries, wages, bonuses, overtime, taxable benefits, allowances, and certain lump sum benefits, as well as income from business, trusts, and director’s fees.

Bonuses: Bonuses are added to the employee’s monthly income and are taxed as part of the individual’s income.

Allowances: Allowances, including travel and subsistence, are taxable. Legitimate business expenses claimed against allowances reduce the taxable value of the allowance.

Benefits in Kind: Includes assets provided below their actual value, or the use of assets, accommodation, meals, and other fringe benefits.

Investment Income: Interest income is exempt up to R23,800 (under 65) or R34,500 (65+), as determined by SARS.

Retirement Funding: Retirement contributions are deductible up to 27.5% of the greater of salary or taxable income, with a cap of R350,000 annually.

Health Insurance: The Medical Scheme Fees Tax Credit (MTC) reduces the tax payable, with non-refundable portions carrying over to the next year.

Risk Insurance: For approved benefits, insurance premiums are not taxed, while unapproved benefits are taxed as fringe benefits.

Payroll Taxes and Employer Contributions: Employers must match employee contributions to unemployment benefits and pay the Skills Development Levy (SDL), which is 1% of taxable income.

Workers Compensation: Employers are required to contribute to Workman’s Compensation annually, which provides protection for work-related injuries and disabilities.

ADMINISTRATION

Income tax is filed monthly via SARS E-Filing, with payments due by the 7th of each month. Penalties apply for late payment. Skills Development Levy and unemployment contributions are paid with income taxes. Workers Compensation is filed annually, with data submitted online.