How to Pay Employees in South Africa Compliantly & Accurately

Payroll Landscape in South Africa in 2025

Running payroll in South Africa isn’t complicated – but it does require understanding a system that’s built on structure and accountability. The country’s labor and tax framework is designed to protect both employers and employees, and once you know how the pieces fit together, your payroll run in South Africa will go smoothly. Miss a deadline or skip a registration, and the South African Revenue Service (SARS) will quickly remind you why accuracy matters.

Here’s what employers need to know in 2025:

• Payroll Currency: South African Rand (ZAR)
• Payroll Frequency: Monthly for most full-time employees

Key Authorities:

• South African Revenue Service (SARS): South Africa’s national tax authority responsible for collecting income tax and administering payroll-related taxes such as Pay As You Earn (PAYE), contributions to the Unemployment Insurance Fund (UIF), and the Skills Development Levy (SDL). SARS also enforces employer tax compliance through monthly and annual filings, making it the key institution governing payroll accuracy in South Africa.
• Department of Employment and Labour: Enforces the Basic Conditions of Employment Act (BCEA) and related employment laws
• Unemployment Insurance Fund (UIF): Provides unemployment, illness, and maternity leave benefits

2025 Updates and Trends

• National Minimum Wage: ZAR 28.79 per hour (effective 1 March 2025)
• Tax Year: 1 March 2025 – 28 February 2026
• Average Salary Increase: 5–6%
• Trends to Watch: The continued rise of remote and hybrid work, streamlined SARS eFiling, and South Africa’s new Remote Working Visa, which is drawing more global employers to the region.

South Africa’s payroll environment rewards consistency. Employers who take the time to understand the system – or who partner with a local expert – can run compliant, predictable payroll cycles while focusing on growing their team and business in the country.

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3 Payroll Processing Options for South African Employees

When your company expands into South Africa, you have three main ways to pay employees. Each approach offers a different balance of control, cost, and compliance responsibility. The right choice depends on your hiring goals, how quickly you want to scale, and how much infrastructure you’re ready to build.

Let’s dive in:

1. Local Entity Setup: Full Control, High Commitment, High Cost

Setting up a local legal entity gives your company complete control over operations, payroll, and employment terms. It’s the right option if you’re planning to hire a larger team or establish a long-term presence in South Africa. But it also comes with a high level of responsibility for compliance, filings, and tax management.

What this involves:

You’ll need to register your business with the Companies and Intellectual Property Commission (CIPC) and the South African Revenue Service (SARS) for Pay As You Earn (PAYE), contributions to the Unemployment Insurance Fund (UIF), and the Skills Development Levy (SDL). You’ll also need a local bank account and payroll system that aligns with taxes in South Africa and BCEA.

Benefits:

• Total Control: You define contracts, benefits, and pay structures that fit your company culture – useful for designing competitive compensation in 2025’s rising wage environment.
• Local Credibility: A registered entity shows commitment to South Africa’s market and attracts talent seeking direct employment and long-term security.
• Long-Term Cost Efficiency: Setup costs are high upfront, but managing payroll in-house becomes cheaper as your team grows beyond 15–20 full-time employees.
• Operational Integration: Payroll runs within your existing HR and finance systems, giving you better visibility and control during audits or annual SARS filings.

Drawbacks

• Setup Cost: Expect legal and registration fees of roughly ZAR 50,000–100,000 annually, covering incorporation, tax consulting, and compliance setup.
• Setup Time: Incorporation and tax registration can take 6–12 weeks, and SARS backlogs have been known to cause delayed PAYE and UIF approvals.
• Administrative Burden: You’ll handle all SARS eFiling, PAYE, and UIF submissions (or appoint a specialist to do this for you) – each with strict deadlines that require consistent oversight.
• Compliance Risk: South Africa’s system is transparent but strict; late filings can lead to penalties of up to 10% of the outstanding amount, plus daily interest.
• Limited Flexibility: Exiting or downsizing an entity is slow, as terminations must follow the Labour Relations Act (LRA) and formal deregistration with CIPC and SARS.

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Not Ready to Set Up an Entity Yet?

Not ready to set up a local entity? Playroll’s EOR Solution lets you hire in South Africa instantly, test the market, and scale faster – you can always transition to your own entity later if needed.

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2. Using EOR Services: Fast, Flexible, Fully Compliant

An Employer of Record (EOR) allows your company to hire and pay employees in South Africa without setting up a local entity. It’s the best option if you want to enter the market quickly, stay compliant with local employment laws, and avoid the upfront cost and admin of incorporation.

What this involves:

An EOR (like Playroll) acts as the legal employer on your behalf. Your company directs the employee’s day-to-day work, while Playroll manages compliant onboarding, benefits, plus payroll processing with all statutory requirements accounted for. This includes PAYE deductions, contributions to the UIF, and Skills Development Levy (SDL) filings with the SARS.

Benefits:

• Speed to Hire: You can onboard employees in a matter of days – ideal for the current competitive hiring environment, where global companies are moving quickly to secure talent.
• No Entity Setup Required: You can test the South African market without the expense or delay of local incorporation.
• Built-In Compliance: All payroll taxes, benefits, and statutory filings are handled by Playroll in accordance with BCEA and SARS requirements.
• Reduced Legal Risk: The EOR structure protects your company from worker misclassification and local compliance breaches.
• Scalable Growth: You can hire one employee or ten with equal ease – perfect for scaling teams flexibly as you learn the market.
• Cost Savings: A single flat monthly fee per employee keeps costs predictable – and can even give you access to group benefit discounts and preferred insurance rates that smaller teams wouldn’t typically access.

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Drawbacks:

• Limited Flexibility: Custom benefit schemes or complex compensation structures may be harder to implement under this employment framework.
• Perception of Control: The EOR is listed as the legal employer, which may affect how your company is represented in contracts or certain corporate disclosures.
• Transition Considerations: Moving from an EOR model to your own entity requires careful planning to maintain compliance and employee continuity. Look for an EOR that provides dedicated migration support (like Playroll).

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3. In-Country Payroll Provider: Control with Local Expertise

If your company already has a South African entity but wants to reduce admin and compliance risk, using an in-country payroll provider offers the perfect balance. You remain the legal employer, while a provider like Playroll manages all local payroll processes, filings, and compliance obligations for you.

What this involves:

A payroll provider manages the full process of calculating employee salaries, issuing payslips, and handling statutory deductions and submissions such as PAYE, UIF, and SDL. The provider ensures payroll is processed in line with local labor and tax laws, while integrating payroll data with HR and finance systems for visibility across markets.

For example, Playroll automates these end-to-end payroll functions within its global platform, keeping every payment compliant with South Africa’s BCEA and SARS requirements and feeding accurate data back into your HR and finance tools.

Benefits:

• Compliance Confidence: A reliable provider ensures payroll runs in full compliance with local labor and tax laws – especially important as enforcement of employer filings becomes more stringent.
• Automation and Accuracy: Taxes, social contributions, and deductions are calculated automatically, removing the risk of missed deadlines or manual errors.
• Integrated Systems: A good payroll provider connects payroll with your existing HR and finance tools, giving teams a single, consistent view of payments, taxes, and reporting across all locations.
• Employee Trust: When payroll runs accurately and on time, employees gain confidence in the process and in your company’s reliability as an employer.
• Reduced Risk: A reliable provider continuously monitors labor laws and tax updates, applying any required changes automatically so you stay compliant without constant manual checks.

Drawbacks:

• Provider Dependency: You rely on your provider’s infrastructure and accuracy, so choosing a trusted partner is essential.
• Coordination Required: Internal HR teams still need to align with Playroll on contract changes, bonuses, or terminations.
• Limited Local Autonomy: While payroll execution is outsourced, your company remains responsible for HR decisions and documentation accuracy.
• Vendor Cost: Outsourcing payroll carries a service fee – though this is typically offset by the time and resources saved on internal administration.

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Run Payroll Anywhere Without the Admin

Already established in South Africa? Hand off the heavy-lifting of payroll processing, payslips, and SARS submissions to Playroll – so you stay compliant and in control while freeing up your internal team.

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Legal Requirements Before Paying Employees

Before your company can start paying employees in South Africa, there are a few important legal steps to check off. At Playroll, we’ve seen how small setup details can make a big difference later. Getting these foundations right upfront saves you from penalties, delays, and unnecessary admin headaches down the line.

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Stay ahead of every regulation with the Playroll Compliance Hub

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Step 1: Register with the South African Revenue Service (SARS)

Employers must register with SARS for:

• Pay As You Earn (PAYE): Deducted from employee salaries according to income tax brackets.
• Contributions to the Unemployment Insurance Fund (UIF): 1% from the employee and 1% from the employer.
• Skills Development Levy (SDL): 1% employer contribution if payroll exceeds ZAR 500,000 annually.

Step 2: Follow Key Legislations: BCEA, LRA, and Income Tax Act

You’ll need to make sure your company complies with:

• Basic Conditions of Employment Act (BCEA): Covers wages, working hours, and leave entitlements.
• Labour Relations Act (LRA): Defines employee rights and dismissal processes.
• Income Tax Act: Regulates PAYE and employer responsibilities for taxes in South Africa.

Step 3: Set Up a Payroll System

Once your company is registered and ready to pay employees, the next step is setting up a smart payroll system. It needs to calculate earnings, apply the correct deductions, and handle tax filings – all while staying fully aligned with South Africa’s legal and reporting standards.

A compliant payroll system should:

• Calculate Gross-to-Net Pay Accurately: Factor in income tax, benefits, overtime, and statutory deductions like UIF and SDL, so employees are paid correctly every time.
• Generate BCEA-Compliant Payslips: Every payslip must include gross pay, deductions, PAYE, UIF, SDL, and remaining leave balances – these are legal requirements under the BCEA.
• Submit EMP201 &EMP501 Filings: These SARS submissions record your company’s monthly and biannual payroll taxes. It’s required to maintain tax compliance and avoid penalties.
• Store Payroll Records For Five Years: Employers are required to keep detailed payroll records for auditing and employee reference purposes.

Managing all of this manually can be time-consuming and error-prone, especially as your team grows. That’s where automation makes a real difference.

Playroll’s payroll infrastructure handles calculations, payslips, and SARS submissions automatically, ensuring every payment meets legal and tax standards. You also gain real-time insight into  your payroll data and easier reporting, meaning less risk of making manual errors.

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Ready to run payroll in South Africa?

From tax rates to public holidays, our South Africa Payroll Guide covers everything you need to stay compliant and pay teams with confidence.

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How to Pay Employees Compliantly in South Africa

Once your company is registered and set up, you can start your first  payroll run. When paying employees in South Africa, you need to build trust among your team that every payslip, deduction, and tax filing will be handled accurately every time.

Consistency is everything. A single late payment or incorrect deduction can raise red flags with the SARs or damage employee morale. The goal is to make payroll so seamless that your team never has to think about it – they just know it’s handled, correctly and on time.

How Salaries Are Paid

Most full-time employees are paid monthly in ZAR via direct bank transfer. Employers can also use global platforms that manage tax compliance and exchange control requirements. Paying in local currency protects employees from conversion losses and helps meet legal wage standards.

Payslip Rules

Payslips are a legal requirement in South Africa and a cornerstone of transparent employment. A well-structured payslip will keep your company compliant and help employees understand how their pay is calculated.

Payslips must include:

• Employer and employee details
• SARS tax number
• Pay period, gross pay, deductions, and net pay
• Leave balances, benefits, and UIF contributions

Every payslip must comply with the Basic Conditions of Employment Act (BCEA), and employers are required to keep payroll and payslip records for at least five years.

Typical Pay Dates and Payroll Cycle

Payroll timing in South Africa follows a predictable monthly rhythm, which makes planning easier for both employers and employees. Most companies align their pay cycles with SARS submission schedules to keep reporting simple and consistent.

Most South African employers:

• Process payroll between the 25th and 30th of each month – this refers to when you run the payroll calculations internally (e.g., collecting data, calculating deductions, preparing payslips).
• Pay employees on the last working day or the first business day of the following month  – this is the actual payment date when funds reach employees’ bank accounts. In South Africa, while many companies pay by the 25th, legally the employer may pay salaries up to the 7th of the next month.
• Submit your monthly South African Revenue Service (SARS) EMP201 filings by the 7th of the following month – employers must declare and pay withheld taxes (PAYE), UIF and SDL by this date.

Using eFiling for Tax Compliance

South Africa’s SARS eFiling system is the hub of digital tax compliance. It’s where your company will handle nearly all payroll-related submissions – from monthly declarations to annual reconciliations.

SARS eFiling allows employers to:

• File EMP201 and EMP501 returns
• Pay PAYE, UIF, and SDL online
• Generate IRP5 employee tax certificates for staff

Payroll Taxes and Contributions in South Africa

Getting payroll deductions right is one of the most important parts of compliance. South African tax and labor law require employers to make accurate deductions for income tax, unemployment insurance, and skills development – all of which fund essential national programs.

Employers must handle:

• Pay As You Earn (PAYE): Progressive tax up to 45%, based on employee income brackets
• Contributions to the Unemployment Insurance Fund (UIF): 1% each from employer and employee
• Skills Development Levy (SDL): 1% from the employer if the annual payroll exceeds ZAR 500,000

In addition to these statutory deductions, you’ll also be responsible for benefits under the Basic Conditions of Employment Act (BCEA) – including maternity leave, paid annual leave (PTO), and overtime pay. Accurate recordkeeping and automated calculations go a long way in keeping these obligations on track.

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Payroll Service Providers for Employee Payments in South Africa

When it comes to payroll in South Africa, you can choose from a range of providers. But not every platform can handle both local payroll precision and global compliance standards – and that’s what often makes the difference.

Here are some of the most recognised options on the market:

• Playroll: Combines global compliance expertise with both EOR and in-country payroll services for South Africa (and globally) – ideal for companies that want to grow flexibly without compromising on accuracy or control.
• SimplePay: A local payroll platform designed for small and medium-sized businesses that need straightforward compliance tools.
• PaySpace: Enterprise-grade HR and payroll software built for complex local operations and large South African employers.
• Sage Payroll South Africa: A long-established payroll solution offering detailed functionality for domestic payroll management.
• Deel/Remote: Global EOR providers that support South African hiring but tend to be more expensive compared to localized or hybrid payroll solutions.

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How Playroll Makes Paying South African Employees Easy and Compliant

Global hiring is the engine of modern growth – but scaling across borders demands infrastructure that keeps every hire, payslip, and tax submission compliant and connected. HR and finance teams need their own system of record: one source of truth for the entire global workforce.

Playroll provides that foundation. It’s the payroll and compliance layer in your global stack, integrating with your existing systems to help you hire, pay, and manage employees in 180+ countries. Built for distributed teams, Playroll combines local expertise with global visibility – transparent, scalable, and ready for wherever you grow next.

Book a demo to see how our team can help yours pay employees compliantly, manage taxes in South Africa, and build a high-performing global workforce with confidence.