PAYE and UIF in South Africa: rates, rebates and how to calculate

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PAYE and UIF in South Africa are the two payroll deductions almost every employer handles: PAYE is income tax withheld from salaries, and UIF is the Unemployment Insurance Fund contribution shared between employee and employer. Together with the Skills Development Levy, they are declared monthly to SARS on the EMP201. This guide explains the current brackets and rebates for the 2027 tax year, how UIF and SDL work, worked examples, filing deadlines and common mistakes.

The South African tax year

South Africa's tax year runs from 1 March to the last day of February. The year from 1 March 2026 to 28 February 2027 is called the 2027 tax year. New tax tables usually take effect on 1 March after being announced in the February budget, so payroll systems must be updated before the first March payroll.

Employers withhold PAYE monthly (or weekly or fortnightly for some workers) using SARS's tables or formula, which spread the annual tax across the year.

PAYE brackets for the 2027 tax year

Annual taxable income is taxed as follows:

• Up to R245,100: 18% of taxable income.
• R245,101 to R383,100: R44,118 plus 26% of income above R245,100.
• R383,101 to R530,200: R79,998 plus 31% above R383,100.
• R530,201 to R695,800: R125,599 plus 36% above R530,200.
• R695,801 to R887,000: R185,215 plus 39% above R695,800.
• R887,001 to R1,878,600: R259,783 plus 41% above R887,000.
• Above R1,878,600: R666,339 plus 45% above R1,878,600.

Rebates and the tax threshold

Every individual receives a primary rebate of R17,820 a year, subtracted from the tax calculated on the brackets. People aged 65 and over receive an additional secondary rebate, and those aged 75 and over a further tertiary rebate. Because of the primary rebate, people under 65 earning below a certain threshold pay no income tax; the threshold rises each year with the rebate and brackets.

Employers apply rebates automatically based on the employee's age. Make sure dates of birth are correct in the payroll system.

Retirement fund contributions

Contributions to pension, provident and retirement annuity funds are deductible up to 27.5% of the greater of remuneration or taxable income, with an annual cap of R430,000. Employer contributions to a fund on the employee's behalf are treated as a taxable fringe benefit and then as a contribution by the employee, so they also fall within the deduction limit.

When employees contribute through payroll, the employer applies the deduction when calculating PAYE. Contributions to retirement annuities paid privately can be claimed by the employee on assessment, or through payroll if the employer deducts them.

Medical scheme tax credits

Instead of a deduction, medical scheme contributions give a fixed monthly tax credit: a set amount for the main member, the same for the first dependant, and a smaller amount for each additional dependant. For the 2027 tax year these are R376, R376 and R254 per month respectively. Employers apply these credits in PAYE when contributions are paid through payroll or when the employer contributes.

Additional medical expenses tax credits may be available on assessment, depending on age, disability and the amount of out-of-pocket expenses.

UIF: the Unemployment Insurance Fund

UIF provides short-term benefits to workers who become unemployed or cannot work due to illness, maternity, adoption or parental leave. Contributions are:

• 1% of the employee's remuneration, deducted from pay.
• 1% contributed by the employer.

Both are capped by a monthly earnings ceiling, currently R17,712, so the maximum contribution from each side is R177.12 a month. UIF applies to most employees working more than 24 hours a month, with some exclusions. Employers declare employee information to the Department of Employment and Labour as well as paying contributions through SARS.

SDL: the Skills Development Levy

The Skills Development Levy is 1% of total remuneration paid to employees, payable by employers whose annual payroll is expected to exceed R500,000. It is an employer cost, not deducted from employees. Employers who pay SDL may be able to claim grants from their Sector Education and Training Authority (SETA) for training. Small employers below the threshold do not pay SDL but must still register for PAYE and UIF as required.

Worked example: R20,000 a month

Annual remuneration R240,000, employee under 65, no retirement or medical contributions:

• Tax on brackets: 18% of 240,000 = R43,200.
• Less primary rebate R17,820: annual tax R25,380.
• Monthly PAYE: R2,115.
• Employee UIF: 1% of R17,712 (the ceiling) = R177.12.
• Net pay: 20,000 − 2,115 − 177.12 = R17,707.88.

The employer pays its own UIF of R177.12, and SDL of R200 (1%) if annual payroll exceeds R500,000.

Worked example: R40,000 a month

Annual remuneration R480,000:

• Tax: R79,998 plus 31% of (480,000 − 383,100) = 79,998 + 30,039 = R110,037.
• Less primary rebate: R92,217 a year.
• Monthly PAYE: about R7,684.75.
• UIF: R177.12 (capped).
• Net pay before other deductions: about R32,138.

Worked example: R80,000 a month

Annual remuneration R960,000:

• Tax: R259,783 plus 41% of (960,000 − 887,000) = 259,783 + 29,930 = R289,713.
• Less primary rebate: R271,893 a year.
• Monthly PAYE: about R22,657.75.
• UIF: R177.12.

Retirement contributions and medical credits would reduce PAYE in each example. Use the South Africa PAYE calculator to include them.

Fringe benefits and allowances

Many non-cash benefits are taxable as fringe benefits, valued under the Seventh Schedule to the Income Tax Act. Common ones include company cars, employer-provided accommodation, low-interest loans, and employer contributions to medical schemes and retirement funds. Travel allowances are partly subject to PAYE, with the final tax determined on assessment based on business travel records. Subsistence allowances for business travel are tax-free up to SARS's daily rates.

Include fringe benefits in remuneration when calculating PAYE, UIF and SDL according to SARS rules; some benefits are excluded from UIF remuneration.

Bonuses and thirteenth cheques

Annual bonuses and thirteenth cheques are taxable remuneration. SARS provides a method for calculating PAYE on annual payments that spreads the effect over the year, so that the employee is not over-taxed in the month of payment. Payroll software applies this automatically. UIF applies to bonuses within the monthly ceiling.

Monthly filing: EMP201

Employers declare PAYE, UIF and SDL monthly on the EMP201 return through SARS eFiling, and pay the total by the seventh day of the following month (or the last business day before it, if the seventh is a weekend or public holiday). Late payment attracts a penalty of 10% of the unpaid amount plus interest.

UIF declarations about each employee are also submitted to the Department of Employment and Labour, typically through uFiling or payroll software that supports it.

Reconciliations: EMP501 and IRP5

Twice a year, employers reconcile monthly declarations with actual payroll on the EMP501: an interim reconciliation for the first six months of the tax year, and an annual reconciliation after the tax year ends. With the annual reconciliation, employers issue IRP5 certificates to employees showing income, deductions and tax. Employees use these for their own returns during filing season.

Differences between EMP201 payments and EMP501 totals must be resolved before submission. Good monthly records make this straightforward.

Payroll software and providers

Most South African employers use payroll software that applies the current tables, calculates fringe benefits and annual payments, produces payslips and generates EMP201, EMP501 and IRP5 files. Compare options in our South Africa payroll software ranking, the South Africa payroll software guide and Sage Payroll pricing.

If you employ in South Africa from abroad without an entity, an employer of record handles PAYE, UIF and SDL; see how to hire employees in South Africa.

COIDA and other employer obligations

Alongside PAYE, UIF and SDL, employers register with the Compensation Fund under COIDA and pay an annual assessment based on payroll and industry risk, submitting a return of earnings each year. Accounting software that supports South African VAT and payroll journals keeps everything tied together; see South Africa accounting software and Xero vs Sage Accounting.

Common mistakes

• Using last year's tax tables after 1 March.
• Calculating UIF on full salary instead of capping at the ceiling.
• Forgetting SDL once payroll passes R500,000 a year.
• Wrong dates of birth, so rebates for older employees are missed.
• Not applying medical credits or retirement deductions for payroll contributions.
• Paying the EMP201 after the seventh.

Payslip requirements in South Africa

The BCEA requires employers to give employees a written payslip each payday, containing the employer's name and address, the employee's name and occupation, the period of payment, the remuneration in money, the amount and purpose of each deduction, the actual amount paid, and the number of ordinary and overtime hours worked where relevant. Most payroll software also shows year-to-date figures, leave balances and employer contributions.

Clear payslips reduce questions. Show PAYE, UIF and other deductions on separate lines, and include medical credits and retirement deductions where they affect PAYE. Employees who understand their payslips are more likely to spot errors early, which helps you too.

Directors, foreign employees and special cases

Directors of private companies who receive remuneration are subject to PAYE, and SARS has specific rules for directors' remuneration that is not fixed. Foreign nationals working in South Africa are generally taxed on South African employment income, and residents working abroad may qualify for an exemption on part of their foreign employment income if they meet the days-outside-South-Africa test, subject to a monetary limit. Learners and certain categories have special UIF rules. Where these cases apply, confirm the treatment with your payroll provider or a tax practitioner rather than relying on the standard calculation.

When an employee leaves

In the final pay run, include outstanding salary, payment for accrued but unused annual leave, notice pay where applicable, and any severance. Lump sums such as severance benefits have their own tax table, and SARS may need to issue a tax directive before certain lump sums are paid. UIF applies to the final remuneration within the ceiling.

Give the employee a UI-19 form (declaration of termination) so they can claim UIF benefits if eligible, and include their details in the next EMP501 reconciliation with a final IRP5. Our guide on hiring in South Africa covers the fair dismissal rules that come before this step.

A month-end checklist for South African payroll

1. Process joiners, leavers, increases, overtime and leave.
2. Check fringe benefits, retirement and medical contributions.
3. Run payroll with the current tax year's tables.
4. Review PAYE, UIF and SDL totals against last month.
5. Pay salaries and issue payslips.
6. Submit UIF declarations for employee changes.
7. Submit the EMP201 and pay SARS by the seventh.
8. Post the payroll journal to your accounting software.

If you also sell online in South Africa, see accepting online payments in South Africa for the other side of your cash flow.

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