South Africa has strong worker protections and strict employment laws that can make business expansion challenging. You’ll need to follow all of the country’s labor laws when setting up payroll in South Africa.
Instead of worrying about the details, G-P can simplify the process. Here’s an overview of key aspects to consider when setting up payroll in South Africa
Taxation rules in South Africa
South Africa’s taxation rules vary based on whether a company employs non-residents or residents of South Africa. The country taxes residents on their worldwide income, while non-residents are taxed only on income earned in South Africa. Employers will need to file with the South African Revenue Service (SARS) for 2 different taxes — standard income tax on employees (SITE) and pay as you earn (PAYE).
South Africa does not have a comprehensive social security system; therefore, there are no significant social security taxes levied. Nevertheless, employer contributions amount to roughly 2.65% of the employee’s salary.
The Unemployment Insurance Fund (UIF) gives short-term relief to workers when they become unemployed. The rate for employers is 1% of the employee’s remuneration.
The personal income tax rate varies based on how much a worker earns each year and ranges between 18% to 45% (on earnings above ZAR 1,817,000).
South Africa payroll options for companies
Every company is different in its primary functions and how it runs day-to-day operations. The following South Africa payroll options are meant to provide a solution for every kind of company — these choices include:
- Internal: Larger companies that are committed to staying in South Africa long-term may hire additional team members and set up payroll at their South Africa subsidiary. However, this option is more expensive and time-consuming.
- South Africa payroll processing company: A payroll processing company based in South Africa can take the hassle out of setting up your own payroll. However, you will still be held liable for issues of compliance.
- Partnering with an EOR: The most convenient South Africa payroll option is partnering with an EOR like G-P. We will manage your payroll needs and make sure all team members are compensated in compliance with local laws — no entity setup required.
How to set up payroll in South Africa
Companies expanding to South Africa will need to spend a good amount of time setting up a South Africa payroll. The entire process can take anywhere from 2 to 6 months. Non-resident employers will need at least ZAR 2.5 million to invest in the business, as well as register for a variety of taxes and file with the registrar’s office.
Before hiring employees, the law requires a written employment contract that includes certain entitlement and termination terms. Employers need to give employees notice of termination, which ranges anywhere from 1 week to 4 weeks, depending on the employee’s time of service. Severance pay is also required based on the reason for termination.
Streamline global payroll management with G-P.
G-P streamlines each step of the payroll management process with our market-leading Global Growth Platform™. Pay your team with confidence anywhere in the world in 150 currencies with our 99% on-time automated payroll system — all with just a few clicks. Our products also integrate with leading HCM solutions, syncing employee payroll data across platforms automatically to create one reliable, convenient source of truth for HR teams.
Contact us to learn more about how we can support you.