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Annual Bonus

An annual bonus is a reward (often performance-based) paid to an employee, usually at the end of the year or in the employee’s birthday month. You can use the Annual Bonus system item as it applies the correct PAYE calculation for irregular income. To add an annual bonus to a payslip:

  1. Go to Employees, and select the relevant employee.
  2. Click on Add next to Payslip Inputs.
  3. Select Annual Bonus under Income.
  4. Enter an amount.
  5. Click Save.

Tax on a bonus

Employees are often alarmed by the higher PAYE on their payslips when they receive an annual bonus. They may ask the employer to split the tax or make provision for it so that less PAYE is deducted when the bonus is paid.

For PAYE purposes, SARS treats an annual bonus as irregular income. SARS does not provide a way to spread the PAYE on a bonus over multiple pay periods. If the employer and employee choose to manage the impact on the employee's cash flow by saving/provisioning for the additional PAYE in advance, that’s an internal arrangement. The additional PAYE is still reported to SARS in the pay period when the bonus is paid.

Some customers use a voluntary tax over-deduction to save/provision for the additional PAYE, but that’s not correct. If you specifically need to spread the tax on a bonus over several pay periods, you should use the Provision for Tax on Annual Bonus system item.

More information can be found on the Voluntary Tax Over-Deductions and Calculating PAYE on Irregular Income help pages.

Intended use: Provision for Tax on Annual Bonus

  • This system item is intended specifically for employers who need to help their employees save/provision for the additional PAYE on an annual bonus – it is not intended for general use.
  • Use this item only for guaranteed, non-discretionary bonuses.

We recommend obtaining the employee’s consent in writing before using this item.