Frequently Asked Questions
Why is the tax on the payslip not what I was expecting?
The sections below aim to address the most common queries / areas of confusion surrounding the tax (PAYE) calculation on SimplePay and should be read in conjunction with the Statutory Deductions and Contributions > Tax (PAYE) help page.
Why is the tax on the payslip different to what I looked up on the tax tables?¶
Tax calculation method¶
SimplePay uses the tax averaging method, recommended by SARS, to calculate the tax on your employees' payslips. This method takes into account all income received, and tax already paid, for the year to date (YTD) period. In contrast, the tax tables are used to calculate tax per period in isolation, using only that period's income.
The averaging method is used as it provides the greatest accuracy when dealing with fluctuating income. Therefore, while the tax on a specific payslip may not match the amount on the monthly tax table, the correct amount of tax will always be deducted by the end of the tax year.
Employee age¶
SARS grants certain age-related rebates, i.e. reductions in tax payable, and these rebates are based on the taxpayer's age at the end of the tax year.
For example, in the case of a 64-year old employee, it could be that the tax on the payslip is lower than what you had expected because the employee will turn 65 before the end of the tax year, i.e. 28 February. The calculation of the tax on the payslip already takes the rebate into account – from the start of the tax year during which the employee will reach the required age.
(A similar situation could apply to a 74-year old employee who turns 75 before the end of the tax year.)
Why does this month's tax differ from last month, even though the income is the same?¶
There are a few common reasons for this:
- If you are working with a March payslip, the tax will almost always differ from that of the previous ones as March marks the start of the new tax year, meaning that the tax brackets, rates and rebates will all have changed.
- If the employee's income has fluctuated from month to month, the tax will differ. The receipt of irregular income could be a reason for such a fluctuation.
- If you have made a change / correction to the employee's date of birth during the month, the amount of tax could be different because the employee started / stopped qualifying for an age-related rebate (see discussion above).
You can view the Tax Trace to verify this – the calculation is explained on the linked help page above.
Why is there no tax being deducted on this payslip?¶
Again, there are a few possibilities:
- The employee's income is below the tax threshold
- The employee has already paid their entire tax liability for the year to date period / tax year
- A custom item was created and set to "taxed annually"
- As above, it could also result from a fluctuation in income
Here again, you can view the Tax Trace to verify this – the calculation is explained on the linked help page above.
Why is there Annual Leave Pay Extra on my payslips?
In line with BCEA requirements, SimplePay automatically calculates this amount when leave is recorded for employees who have fluctuating income. It is based on the employee's fluctuating leave rate, which can be found on their Record Leave screen. The fluctuating rate is calculated using the income of the previous three months, or a shorter period if they have only been employed for less than three months.
More information on the requirements for leave pay and how to remove Annual Leave Pay Extra from payslips can be found on the Leave Pay help page.
Why is tax calculated for 12 months if the employee has only been employed for a few months?
There are two standard methods for calculating employees' tax: the periodic method and the averaging / annual equivalent method. For more information about these two methods, please refer to the Tax (PAYE) help page.
Generally speaking, both of these methods are acceptable to SARS. However, in the case where an employee's tax period is shorter than a full tax year, SARS requires that the annual equivalent must be determined. Therefore, in such a case the tax is calculated on the income for a 12-month period.
More information can be found in the Guide for Employers in respect of Employees' Tax, which is published by SARS every year and available on the SARS website.
Are PAYE and Income Tax the same thing?
Income tax for individuals refers to the tax on your world-wide earnings, which can be divided into:
- Tax on employment earnings, such as your salary, fringe benefits and allowances; and
- Tax on non-employment earnings, such a rent income.
PAYE is a method of collecting income tax that applies to your employment earnings. Amounts subject to PAYE are taxed at the time of payment on the payslip. Some employment earnings are not subject to PAYE and the income tax on these is only payable on assessment e.g., subsistence allowances where the amount is above the prescribed rate.
Non-employment earnings are collected via provisional tax payments and on assessment.
Tax on assessment
Tax on assessment refers to the tax due after an individual submits their income tax return (ITR12) annually to SARS (usually via SARS eFiling). The tax due on assessment is the difference between the income tax calculated for the individual for the year and the amounts that they've paid throughout the year via PAYE and provisional tax.
Provisional tax
Provisional tax refers to payments made directly to SARS after registering and filing for provisional tax on eFiling. You can read more about provisional tax on this SARS webpage.
SimplePay only assists with the calculation of PAYE and not any of the other income tax collection methods. However, to reduce the amount payable on assessment, employees can opt to pay additional income tax via PAYE. This is done via the Voluntary Tax Over-deduction system item – this is only allowed if there is an agreement between the employee and the employer. More information on Voluntary Tax Over-deductions is available here.
How is the UIF cap applied to employees who are not paid monthly?
SimplePay applies the UIF cap to the cumulative earnings of the employee for the month. This means that a non-monthly paid employee will pay UIF of 1% of remuneration for that payslip, provided that the total contributions for the month do not exceed R 177.12. An employee could therefore have payslips with zero UIF calculated if their total UIF contributions from prior payslips in the same month reached the cap.
For example:
Suppose that an employee is paid R 6,000 weekly and a month has four weeks in it. The UIF per payslip will be calculated as follows:
| Week | Remuneration | 1% of Remuneration | UIF for the payslip* | Cumulative UIF for the month |
|---|---|---|---|---|
| 1 | R 6,000 | R 60 | R 60 | R 60 |
| 2 | R 6,000 | R 60 | R 60 | R 120 |
| 3 | R 6,000 | R 60 | R 57.12 | R 177.12 |
| 4 | R 6,000 | R 60 | R 0 | R 0 |
*The UIF for the payslip is 1% of remuneration, provided that the cumulative UIF for the month doesn't exceed the monthly cap of R 177.12
December 2020 UIF cap change
The above approach was implemented in December 2020.
Part of SimplePay's mission is to keep you compliant with legislation, which outlines the general payroll rules and regulations to follow. SARS and the Department of Labour often supplement these with interpretation notes and examples on how to approach common scenarios. However, it is nearly impossible for them to cater for all possible scenarios that could occur in practice. In these instances, payroll software providers often have to use their discretion when interpreting legislation and choose an approach that best meets the requirements. One of these instances is the application of the monthly UIF cap for employees who are not paid monthly.
Prior to December 2020, SimplePay used a different approach. The monthly UIF cap was divided by the number of pay periods in a month to determine a cap per payslip. The UIF per payslip was calculated as 1% of the remuneration on the payslip, up to a maximum of the cap per payslip.