What is payroll and when to register for PAYE
Payroll is crucial and the reason for this is employee satisfaction, legal compliance, and financial management.
It ensures that employees are paid accurately and on time. Payroll is the process of managing and calculating the salaries or wages that a company pays to its employees. It includes tasks like tracking hours worked, calculating earnings, deducting taxes and other deductions, and issuing payslips.
It ensures that your employees and your company is complying to legal requirements, and doing payroll manages salaries by tracking costs related to employees.
A company needs to register for PAYE (Pay As You Earn) when you start employing people and paying them a salary or wage. According to the BCEA(Basic conditions of employment act), when an employee works more than 24 hours a month, they are regarded as an employee and therefore need to be on the companys payroll.
It is important that your company complies to this law, as an employer is responsible to withhold the tax and UIF deducted from an employee and pay that over to SARS. Within 21 working days after becoming an employer you must be registered for PAYE.
Differences between the SARS PAYE and UIF registrations and the Department of Labour.
The registration processes for SARS PAYE (Pay As You Earn) and UIF (Unemployment Insurance Fund) with the Department of Labour differ in their requirements and purposes.
SARS PAYE registration is mandatory registration for employers to deduct tax from their employees’ salaries. This is calculated based on the tax tables provided by SARs. The amount withheld from an employee will be paid over to SARS in the form of an EMP201, by the Employer.
While UIF registration is compulsory to contribute towards employees'
unemployment insurance benefits. The submission to the department of labour is done in the form of a UIF declaration, must be submitted by the Employer. The important thing to understand is when a company has employees that fall above the tax threshold and have to register for PAYE, you automatically must register for UIF at department of labour.
Registering at SARS for PAYE you receive a PAYE number always starting with a 7, and registering at department of labour you receive a UIF number. This is a mandatory number when the submissions are made.
How it works is, all the tax withheld from employees within a month and all the UIF deducted is declared to SARS on a monthly basis in the form of a EMP201. As soon as the PAYE liability is paid by the Employer, SARS takes the UIF portion and pays that over to the department of labour. That UIF monies will be unallocated under your company name at the department of labor. When a UIF declaration is made by the employer the department of labor can allocate the UIF contributions to every personnel.
This ensures that the UIF contributions made by the employees are allocated and should they need to claim UIF they have a seeming less process.
In short SARs handles tax-related matters, while the Department of Labour oversees labor-related issues like UIF registration. Always register for both to ensure that you are complaint with legal.