PAYE & UIF – If You Have Employees, You Need This

Hiring your first employee is a big moment — but it also comes with legal responsibilities many small business owners don’t know about. In South Africa, the moment you start paying someone a salary, you must comply with PAYE and UIF. These are not optional. They are compulsory employer obligations.

Here’s a simple breakdown of what they are, when they apply, and why every employer must take them seriously.

---

What Is PAYE?

PAYE (Pay-As-You-Earn) is a tax system where employers deduct tax from an employee’s salary before paying them.

You withhold the tax and pay it to SARS monthly.

You must register for PAYE if:

• You pay any employee more than the tax threshold, OR
• You pay any employee a taxable allowance (travel, commission, etc.)

2024/2025 Tax Thresholds

If an employee earns more than:

• R95,750 per year (≈ R7,980 per month)
  → You must deduct PAYE.

---

What Is UIF?

The Unemployment Insurance Fund is a compulsory fund that provides financial support if an employee:

• Loses their job,
• Goes on maternity leave,
• Needs reduced working hours, or
• Becomes ill.

UIF applies to almost all employees, even if they earn below the tax threshold.

UIF Contributions

• 1% deducted from the employee
• 1% paid by the employer

Total: 2% of the employee’s salary.

You must pay UIF monthly to the Department of Employment and Labour.

---

Who Must Register for PAYE & UIF?

Any business that has employees, including:

• Sole proprietors
• (Pty) Ltd companies
• Partnerships
• NPOs
• Trusts
• Informal businesses
• Freelancers hiring assistants

Even if you have one employee, you are legally required to register.

---

Why Is PAYE & UIF Important?

1. It keeps your business compliant.

Not registering can lead to:

• Penalties
• Interest
• Audits
• SARS compliance flags
• Forced backdating

2. Your employees gain legal protection.

UIF helps them in emergencies or unemployment.

3. You can get a valid Tax Clearance Certificate.

Essential for:

• Tenders
• Government contracts
• Funding
• Business partnerships

4. It shows professionalism.

Your employees will trust you more knowing their tax and UIF are handled correctly.

---

What Are Your Monthly Employer Responsibilities?

Every Month, You Must:

✔ Deduct PAYE (if applicable)
✔ Deduct UIF (1%)
✔ Add Employer UIF (1%)
✔ Submit EMP201 to SARS
✔ Pay the total to SARS
✔ Submit UI-19 information to UIF (when hiring/terminating staff)

Every Year, You Must:

✔ Do EMP501 Reconciliation
✔ Issue IRP5 certificates to employees

---

What If You Don’t Register or Comply?

SARS can:

• Charge penalties
• Charge backdated PAYE
• Add interest
• Freeze tax compliance
• Flag your business for audit

Department of Labour can:

• Charge penalties
• Block UIF claims
• Request employer records

Non-compliance always becomes expensive later.

---

Simple Example

You hire someone at R8,000 per month.

This is above the tax threshold →
✔ You must register for PAYE
✔ You must register for UIF

If you don’t, SARS can charge you backdated PAYE + penalties + interest.

---

Final Thoughts — As Soon As You Hire, You Must Comply

PAYE and UIF are not optional. They are part of your responsibility as an employer in South Africa. By registering early and staying up to date, you protect your employees, your business, and your tax compliance status.

If you’re unsure how to register for PAYE, UIF, or manage monthly submissions — Creative Bookkeepers can handle everything for you, from setup to payroll to compliance.