Payroll Compliance South Africa: Your SARS Checklist
Payroll Compliance in South Africa is more than just paying your employees on time — it’s about meeting all your legal obligations with SARS. Whether you employ one person or fifty, you’re responsible for deducting taxes, submitting returns, and keeping records in order.
Failing to comply can result in heavy penalties, interest, SARS audits, or even reputational damage. This practical SARS-aligned checklist helps business owners, HR teams, and payroll administrators stay compliant and avoid costly mistakes.
✅ Why Payroll Compliance in South Africa Matters
If your business pays any form of salary — even to directors or family members — you may have payroll compliance duties. As an employer, you’re legally obligated to:
- Register for PAYE, UIF, and SDL (if applicable)
- Deduct the correct taxes and submit them on time
- File monthly and biannual payroll returns (EMP201 and EMP501)
- Issue IRP5 tax certificates to employees
- Retain payroll records for a minimum of 5 years
Payroll compliance in South Africa isn’t optional. It’s a legal requirement — and one that SARS monitors closely.
📋 Your SARS Payroll Compliance Checklist
Follow this step-by-step checklist to ensure your business meets SARS payroll regulations.
1️⃣ Register for PAYE, UIF, and SDL
If any employee earns above the annual tax threshold (R95,750 for 2024/2025), you must register for:
- PAYE – Pay-As-You-Earn income tax
- UIF – Unemployment Insurance Fund
- SDL – Skills Development Levy (if annual payroll exceeds R500,000)
✅ How to register:
Log into SARS eFiling → go to Register Tax Types → select PAYE/UIF/SDL → follow the prompts. SARS will issue a PAYE reference number once registration is complete.
2️⃣ Deduct PAYE Monthly
PAYE is calculated based on:
- Gross salary
- Annual tax tables (updated by SARS)
- Medical credits and retirement contributions
- Fringe benefits and travel allowances
💡 Example:
Lebo earns R25,000/month. After applying tax credits, her PAYE is R3,142. You must deduct this and pay it to SARS by the 7th of the next month.
Use a SARS-compliant payroll system or the SARS PAYE Calculator to ensure accurate deductions.
3️⃣ Submit EMP201 Monthly Returns
EMP201 is your monthly employer declaration that includes:
- PAYE deducted
- UIF contributions (1% employer + 1% employee)
- SDL (1% from the employer, if applicable)
📅 Due Date:
The 7th of every month. If the 7th falls on a weekend or public holiday, the due date moves to the previous business day.
Submit via:
- SARS eFiling
- e@syFile Employer
- Approved third-party payroll software
4️⃣ Pay SARS Monthly
Once your EMP201 is submitted, payment must be made by the same due date to avoid penalties.
Payment options:
- Debit push via SARS eFiling
- Bank EFT with correct beneficiary details
- SARS MobiApp (for smaller employers)
⚠️ Late payment triggers a 10% penalty plus daily interest.
5️⃣ Reconcile Payroll Twice a Year (EMP501)
SARS requires employers to submit two EMP501 reconciliations per year:
- Interim Reconciliation: Due in September
- Annual Reconciliation: Due in May
This ensures your monthly submissions (EMP201) align with actual payroll and that IRP5s are accurate.
Submit EMP501 via e@syFile, including:
- All IRP5/IT3(a) employee tax certificates
- Summary of PAYE, UIF, SDL contributions
6️⃣ Issue IRP5 Certificates to Employees
After completing your annual reconciliation, issue each employee with an IRP5 certificate.
IRP5 must include:
- SARS source codes (e.g., 3601 = salary)
- Employee tax reference number
- Start and end dates of employment
- All income, deductions, and fringe benefits
✅ Tip: Use payroll software that auto-generates IRP5s to avoid source code errors — incorrect certificates can trigger SARS audits for both employer and employee.
7️⃣ Keep All Payroll Records
SARS requires employers to keep records for at least 5 years, including:
- IRP5 certificates
- Payslips
- EMP201 and EMP501 submission proofs
- Payroll summaries and calculations
- Signed contracts and amendments
These documents may be requested during audits or verification processes.
❌ Common Payroll Compliance Mistakes to Avoid
🔻 Missing EMP201 deadlines
No grace period — always submit and pay by the 7th.
🔻 Using incorrect source codes on IRP5s
This leads to mismatches in employee tax returns.
🔻 Paying salaries without PAYE registration
Even small businesses or family-run operations may need to comply.
🔻 Overlooking UIF obligations
UIF applies even to low-income earners who don’t pay PAYE.
👩💼 Why Work With a Payroll Specialist?
As your team grows, so does the complexity of payroll compliance in South Africa. A professional payroll provider can:
- Ensure all SARS submissions are on time and accurate
- Advise on structuring fringe benefits and allowances
- Handle EMP501 reconciliations and IRP5 generation
- Help you avoid penalties and prepare for audits
✅ Sparrows Chartered Accountants – Your Payroll Compliance Partner
At Sparrows Chartered Accountants, we offer end-to-end payroll compliance services tailored for South African businesses.
Our services include:
- PAYE, UIF, and SDL registration
- Monthly EMP201 submissions and payments
- EMP501 reconciliations and IRP5 generation
- SARS audit support and ongoing compliance consulting
Let us handle the admin — so you can focus on running your business.
Need help with payroll compliance in South Africa?
Contact Sparrows Chartered Accountants today for professional payroll support that keeps you compliant, confident, and stress-free.
Disclaimer: This article is intended for general informational purposes only and reflects the legislation and SARS practices in effect at the time of publishing. Tax laws are subject to change, and individual circumstances vary. Always consult a registered tax practitioner or financial advisor for advice tailored to your situation.
