Country Playbook
Region: EMEA
Country: South Africa
August 2015
Any US tax advice contained herein was not intended or written to be used, and cannot be
used, for the purpose of avoiding penalties that may be imposed under the Internal Revenue
Code or applicable state or local tax law provisions.
These slides are for educational purposes only and are not intended, and should not be relied
upon, as accounting advice.
This material has been prepared for general informational purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for
specific advice.
Region – EMEA
Country – South Africa
1. Country Currency/Abbreviation
Rand - ZAR
2. Tax Year Designation
Fiscal 3/1 to 2/28
3. Minimum Pay Frequency
Monthly
4. National Minimum Wage
Minimum wage is set by region and employment sector.
5. Workday/Workweek
The maximum normal working time for an employee is 45 hours per week.
This would mean a maximum of nine hours in any day if the employee
works for five days or fewer in a week, and eight hours in any day if the
employee works more than five days in a week.
6. Overtime Considerations
The maximum permissible overtime is 10 hours in any one week. A week is
defined as the period of seven days within which the working week of that
employee ordinarily falls. A day is defined as a period of 24 hours measured
from the time when the employee normally commences work. Employees
earning below the threshold must be paid 1.5 times the normal wage rate
for overtime worked except for Sundays. Overtime on a Sunday must be
paid at double the normal wage rate.
7. Employment Contracts *
Employment contracts are not required in South Africa, but employers are
required to provide written details of the employee’s minimum rights as an
employee. Written contracts are strongly preferred and are considered
best practice.
8. Social Security Program *
The South African social security program is funded by the government
and does not require employer or employee contributions.
9. Income Tax Withholding *
South Africa has established the Pay as You Earn (PAYE) program for
income tax withholding. Any employer registered or required to register in
South Africa should be withholding this employee tax and remitting
payments to SARS on a monthly basis.
10.
Unemployment Taxes *
Employers in South Africa are required to withhold 1% of wages
from the employee and contribute 1% of total gross wages to the
Unemployment Insurance Fund (UIF).
11.
Termination Notes *
There are extreme burdens placed on the employer when
considering terminating employees. Employers must adhere to
proper execution of dismissal procedures while also ensuring
dismissal was fair according to South African labor law.
12.
Other Special Payroll Considerations *
N/A
13.
Summary Analysis/Recommendation
Country Labor Climate:
The South African government is cognizant of employers’ false
classification of employees as independent contractors. It is
important that organizations thoroughly analyze employment
classification scenarios prior to making employment classification
decisions.
Employment Status Recommendation:
The decision tree should be used as a foundation for determining
employment status. If there is any ambiguity, BU should consider if
the contracted relationship specially relates to a piece or work, task
or project. This designation is required when classifying an
individual as an independent contractor in South Africa. Another
important consideration is ensuring the individual is registered as a
provisional tax payer.
Independent Contractor Payments:
If BU determines the status of the individual to be an independent
contractor, there is very little risk in making payments through
accounts payable.
Recommendation:
1. When BU contracts with a registered provisional tax payer to
perform a task, project, or piece of work, there is low level of risk
in classification as an independent contractor and payments
through accounts payable.
2. If all considerations are not met and there is no clear
determination of status, the conservative assessment should be
made and the relationship should be considered employeremployee.
Employee Payments:
When making the determination of risk and cost of establishing an
internal payroll program, numerous factors must be taken into
consideration. Within this document, sections denoted with an
asterisk “*” are some of the basic components of that analysis.
Once an individual is identified as an employee, there are many
requirements inherited by the employer. Those requirements range
from social benefit programs to employer related taxes directly
attributed to headcount and total wages. Factors such as risk of
being out of compliance, the capital cost associated with being in
compliance, and additional administrative costs to establish and
maintain the programs associated with the requirements are key
components of determining the best solution for paying employees.
Recommendation:
1. Due to the extensive requirements related to payroll processing
in South Africa, the recommendation is to seek a 3rd party vendor
to administer this program.
2. If possible, the best solution is to contract with an in country
staffing entity that will hire employees and own employeremployee requirements for a negotiated fee.