Employer Contributions in South Africa

Employers in South Africa make three social security contributions -  UIF - Unemployment Insurance Fund, SDL - Skills Development Levy and Compensation for Occupational Diseases.  UIF and SDL payments are made monthly (defined below), are made on a monthly, while the Compensation for Occupational Diseases is paid once a year.

Employer Social Security contribution breakdown

Employee Contributions in South Africa

Employees in South Africa pay income tax via PAYE—Pay As You Earn—and contribute to the Unemployment Social Fund.

In addition to these figures, there are also certain rebates and thresholds associated with age:

Tax rebates and thresholds

• Primary rebate: R17,235 (€862)
• Secondary rebate (65 and older): R9,444 (€472 )
• Tertiary rebate (75 and older): R3,145 (€157)

Tax thresholds

• Below 65 years: R95,750 (€4,788)
• 65 years and older: R148,217 (€7,411)
• 75 years and older: R165,689 (€8,284)

The EUR figures have been determined by applying an exchange rate of 1 ZAR = 0.05 EUR.

Employee social security contribution breakdown

As noted above, UIF is paid by both employer and employee, each contributing 1% each month of salary for a total of 2% per month, per employee.

Working from Home Policy in South Africa

Remote work in South Africa is not specifically governed by employment law legislation. However, an employer may designate an employee's home address as the place of work in their employment contracts, with the flexibility to amend this if necessary according to the company’s operational requirements. Remote work policies are not mandatory in South Africa but are recommended to ensure clarity, consistency and to avoid disputes.

Health and safety at home

Employers are responsible for ensuring the health and safety of their employees, even when they work from home. This involves implementing a Hybrid Working and Flexible Working Hours Policy to address potential hazards and assess risks in work-from-home environments. Employers should provide reasonable support to set up a safe home office, including potential contributions to internet costs and ergonomic furniture.

Security of information

Employers should ensure the security of sensitive information in a remote work setup. Employment agreements should specify the ownership and confidentiality of the IP developed during employment. Employers should implement stringent data protection measures and maintain compliance with POPIA.

Workspace guidelines

Employers should develop guidelines for home workspaces to promote productivity and safety. This includes providing the necessary equipment and support for employees to establish a functional and ergonomic home office. Regular check-ins and assessments may be required to ensure the workspace meets the necessary standards and to address any issues promptly.

Working conditions

Working conditions for remote employees must comply with South African employment laws. There are no restrictions on the maximum number of hours an employee may work per week if they earn above the Earnings Threshold. However, employers must regulate working hours with due regard to the health and safety of their employees. Employees are entitled to at least 15 working days of statutory annual leave per year, and employers can offer additional annual leave if desired.

Workspace guidelines in South Africa

General Employee Pay Regulations in South Africa

Minimum wage

The stipulated national minimum wage rate in South Africa is currently ZAR27.58 per hour. Paying below the National Minimum Wage constitutes an offence, which an employee can dispute.  If the employee is successful, they could be awarded the difference between their current earnings and the National Minimum Wage, retrospectively as well as prospectively.

Frequency

Employers must remunerate employees at agreed-upon intervals, which can be daily, weekly, fortnightly, or monthly. The usual interval for salaried employees is monthly.

Payday

There is no statutory requirement specifying a particular date for wages/salaries to be paid within a month. Employers have the flexibility to set a payday, and it is common for payments to be made on the 24th of the month or the last working day of the month.

The BCEA regulates these leave policies, which ensure that employees are protected and can balance their work and personal responsibilities. Employers are encouraged to offer additional leave benefits to enhance employee welfare and satisfaction.

Holiday Leave in South Africa

Holiday entitlement

Employees are entitled to a minimum of 21 consecutive days of annual leave per year. For employees who work a five-day week, this equates to 15 working days. For those who work a six-day week, this translates to 18 working days. Annual leave accrues at a rate of 1 day for every 17 days worked or 1 hour for every 17 hours worked.

Employers should allow employees to carry over statutory leave they have accrued into the next annual leave cycle. Only at the end of that next annual leave cycle may it be forfeited if untaken.  This must be confirmed in a leave policy to enforce the forfeiture.

Upon termination of employment, employees are entitled to be paid out for any accrued but unused annual leave.

Bank holiday

South Africa has 12 public holidays.

Holiday calendar

Types of Leave in South Africa

Sick leave

Employees who work five days a week are entitled to 30 days of paid sick leave in a three-year cycle. During the first six months of employment, employees can take one day's paid sick leave for every 26 days worked. A medical certificate may be required for absences longer than two consecutive days or if the employee is absent on more than two occasions during an eight-week period in order to be paid for their sick leave.

Maternity leave

An employee is entitled to four consecutive months of unpaid maternity leave. Maternity leave can begin anytime from four weeks before the expected date of birth. The employee may not work for six weeks after the birth unless a medical practitioner certifies her to do so. If the employer does not pay full maternity benefits, the employee may apply for maternity benefits from the UIF.

Adoption leave

An employee who is an adoptive parent of a child less than two years old is entitled to adoption leave of ten weeks consecutively. If an adoption order is made in respect of two adoptive parents, only one may apply for adoption leave and the other for parental leave.  The selection of choice may be exercised at the option of the adoptive parents. If the employer does not pay adoption leave benefits, the employee may apply for adoption leave benefits from the UIF.

Commissioning parental leave

An employee who is a commissioning parent in a surrogate motherhood agreement is entitled to ten weeks of commissioning parental leave consecutively. Commissioning parental leave may commence on the date a child is born as a result of a surrogate motherhood agreement. If the employer does not pay commissioning parental leave benefits, the employee may apply for commissioning parental leave benefits from the UIF.

Parental leave

Parents who are not on maternity, commissioning or adoptive leave are entitled to ten consecutive days of parental leave after the birth of their child. If the employer does not pay parental benefits, the employee may apply for parental benefits from the UIF.

Family responsibility leave

All employees who have been in employment for longer than four months and who work four days or more each month for the employer are entitled to three days paid family responsibility leave during each annual leave cycle in instances where the employee’s child is ill, or on the death of a spouse or life partner, parent, adoptive parent, grandparent, child, adopted child, grandchild or sibling.  Unused family responsibility leave is forfeited at the end of each annual leave cycle.  Employees may use their annual leave or apply for unpaid leave to care for their children where family responsibility leave has been exhausted.

Unpaid leave

Employees can take unpaid leave if they have exhausted their paid leave entitlements. Employers and employees can agree on the terms and duration of unpaid leave. Unpaid leave may also be used for extended sick leave, maternity leave, or other personal reasons.

Independent Contractor Contract & Employment Guidelines in South Africa

What makes someone an employee?

An employee is any person, excluding an independent contractor, who works for either an individual, company, or the State and is remunerated for that.

To determine if someone should be an independent contractor or an employee, the South African courts apply what is called a dominant impression test, which takes factors such as:

1. Control and Supervision
2. Integration
3. Economic Independence
4. Provision of tools and equipment
5. Workplace presence
6. Benefits and entitlements
7. Durance and Permanence of Relationship
8. Mutual Obligation

Employee vs contractor

• Employee: Employees are usually engaged under indefinite or fixed-term contracts directly related to the employer's core operations, requiring commitment and continuity. A variety of employment laws protect them.
• Independent contractor: Typically engaged for specific work, projects, or results that are not considered essential to the employer's core operations. Their contracts can be more flexible and often linked to the duration of a specific project, service agreement, or result. The independent contractor may be required to perform the service personally or through others.

Independent contractor contract length allowance

No limitation on the use or length of genuine contractors earning above the earnings threshold of R254 371.67 per annum as of 1 April 2024.

Penalties for Misclassification in South Africa

Misclassifying an employee as an independent contractor can lead to various legal consequences, including:

• Obligations to pay backdated employment benefits.
• Fines and penalties for non-compliance with employment and tax laws.
• Legal action for unfair dismissal if the misclassified individual claims they are an employee and, therefore, were dismissed unfairly.

Fixed-term employment contract limitation

There is no legal requirement regarding the specific length of fixed-term contracts for employees earning above the Earnings Threshold (R254 371.67). However, renewing or extending these contracts even once carries an unfair dismissal risk due to the potential reasonable expectation of continued employment.

Standard Hours in South Africa

• Normal working hours: The standard working hours in South Africa are 08h00 to 16h00 or 09h00 to 17h00.
• Weekly hours: Standard work hours typically include 40-45 hours per week, spread over 5 days.

Maximum Working Hours & Overtime Laws in South Africa

While no statutory maximum hours are prescribed for employees over the Earnings Threshold, practical limits should align with health and safety regulations, typically not exceeding 12 hours per day.

Overtime compensation

For employees earning above the Earnings Threshold, there is no statutory requirement to pay overtime unless included in the company’s policies and procedures.  

Break rights

• Rest periods: Only employees earning below the Earnings Threshold are entitled to a daily rest period of at least 12 consecutive hours and a weekly rest period of at least 36 consecutive hours.
• Meal breaks: Only employees earning below the Earnings Threshold are entitled to a meal break of at least one continuous hour after five hours of work.

Sunday work and public holidays

Only employees earning below the Earnings Threshold are entitled to double pay for work on Sundays and public holidays (if it is not an ordinary day) or 1.5 times the normal rate if the employee normally works on Sundays and public holidays.

Night workers

Night work is defined as work performed after 18:00 and before 06:00. Only employees earning below the Earnings Threshold are entitled to night work. Such employees must be compensated with an additional allowance or a reduction in working hours and must be provided with transportation between their residence and workplace at the start and end of the shift.

Time tracking obligations in South Africa

There is no legal requirement for employers to track working hours for employees earning above the Earnings Threshold. However, for compliance and management purposes, employers may maintain records of hours worked.

Employee Termination Procedures & Guidelines in South Africa

Termination procedure

In South Africa, termination of employment must comply with the LRA and the BCEA regarding notice pay. Employers must ensure the termination process is fair and justified and follows proper procedures to avoid claims of unfair dismissal.

With the agreement of the parties

Employment can be terminated by mutual agreement between the employer and the employee. This typically involves a mutual separation agreement outlining the terms and conditions of the termination, including any severance payments, notice periods, and other relevant conditions.

Termination with notice

The LRA only recognises three grounds of dismissal, and all dismissals must be substantively and procedurally fair. Therefore, an employee may only be fairly dismissed if a proper procedure has been followed and for a fair reason. The termination notice must be given in writing. The employer must ensure that the notice period is in line with the BCEA requirements or as specified in the employment contract.

The notice period cannot be shorter than:

• One week if the employee has been employed for six months or less.
• Two weeks if the employee has been employed for more than six months but not more than one year.
• Four weeks if the employee has been employed for one year or more or is a farm worker or domestic worker who has been employed for more than six months.

Termination without notice

Termination without notice is generally reserved for cases of gross misconduct. The employer must conduct a disciplinary inquiry to allow the employee to defend himself/herself against the allegations. If the employee is found guilty of gross misconduct, the termination can be immediate without the need for notice.

Disciplinary procedure

Employers have to follow a set number of steps:

1. Investigation: Upon allegations of misconduct, the employer must conduct an investigation to gather evidence.
2. Notification: If there is sufficient evidence, the employee must be given a written notice detailing the allegations against them and the date, time, and venue of the disciplinary hearing.
3. Hearing: The employee must be given at least 48 hours notice of the hearing. They are entitled to representation by a fellow employee or a trade union representative. During the hearing, both the employer and the employee can present evidence and cross-examine witnesses.
4. Decision: An impartial chairperson will make a decision based on the evidence presented. If the employee is found guilty, the chairperson will consider any mitigating and aggravating factors before deciding on the appropriate sanction, which may include dismissal.

Incapacity procedure

There are different forms of incapacity.  If an employee fails to meet the required standard of performance, an incapacity process for poor work performance must be embarked upon.  This process involves the following steps:

1. Counselling: Meet and agree on measurable performance objectives. Document and monitor the employee’s progress.
2. Improvement period: Provide a reasonable period of improvement based on the nature of issues, length of service and seniority. Offer the necessary resources and support.
3. Written warning: If there is no improvement, issue a written warning. Allow further opportunity to improve.
4. Incapacity enquiry: If performance remains unsatisfactory, conduct an inquiry similar to a disciplinary hearing. Present evidence and allow the employee to defend themselves.
5. Decision: If found incapacitated, the outcome may include dismissal.

Unfair Dismissal Guidelines in South Africa

Employee termination protection

An employee can challenge an unfair dismissal by referring the dispute to the CCMA or the relevant bargaining council. If the dismissal is found to be unfair, remedies may include reinstatement, re-employment, or compensation of up to 12 months’ remuneration or up to 24 months’ remuneration for automatically unfair dismissals.

Penalties for unfair dismissal

If an employee is dismissed unfairly, the employee may refer an unfair dismissal dispute to the Commission for Conciliation Mediation and Arbitration, a statutory arbitrational tribunal.  If successful, the employee could be awarded reinstatement (with or without full back pay), re-employment or compensation for 12 to 24 months depending on the case.

Other End-of-Employment Guidelines in South Africa

Notice period

The notice of termination must be in writing and have to fulfil the following timelines:

• One week, if the employee has been employed for six months or less
• Two weeks, if the employee has been employed for more than six months but not more than one year
• Four weeks, if the employee has been employed for one year or more.

An employee’s contract of employment may provide for periods longer than those but not shorter. If an employer chooses not to retain the employee’s services during a period of notice, the employee may be released early, and the employer must pay the employee in lieu of notice.

Probation period

The probation period must be reasonable, considering the nature of the job, and agreed upon in the employment contract. During probation, the employer must provide guidance, training, and evaluation to help the employee meet performance standards.

If the employee’s performance is unsatisfactory, the employer must embark upon an incapacity process, assessing the employee’s performance throughout the probation, before deciding to proceed to an incapacity enquiry to seek to terminate employment. An employer may not unilaterally terminate an employee at the end of the probation period.

Severance

Employees are entitled to one week’s remuneration for each completed year of service. Severance pay applies primarily to cases of redundancy or retrenchment.

Resignation

The employee must provide a written notice of resignation. The notice period should be in line with the BCEA requirements or as stipulated in the employment contract. The employer cannot refuse the resignation but may negotiate a shorter or longer notice period. If an employee fails to resign in line with their contract of employment, the employer’s consent is required.

Employee Cost in South Africa

Thinking of employing someone in South Africa? As with every other country, certain costs are associated with employing a worker that come on top of the gross salary that you are offering. For South Africa, those include 1% to the Unemployment Insurance Fund, 1% to the Skills Development Levy and a contribution based on a predetermined tariff to the Compensation for Occupational Diseases.

Employee take-home pay in South Africa

In South Africa, employees pay a number of taxes, which are deducted from their gross salary by their employers. The amount of income tax that the employee contributes depends on the amount of income that they earn and on their personal circumstances. All employees contribute 1% to Unemployment Insurance Fund. There are several tax credits and reliefs that may offset employees’ tax liabilities.

South Africa employee cost and take-home pay calculator

Use our interactive employment cost calculator to see the total salary costs in South Africa outlined in the sections above. You can also get a detailed employee cost breakdown in pdf (like this one but with actual data), which will show the take-home pay that employees will get.

Employment Conditions in South Africa

Public interest score

The PI (Public Interest) score is a measure used in South Africa to determine the level of financial reporting, audit, and review requirements for companies. This scoring system was introduced by the Companies Act, 2008, and its purpose is to assess the public interest impact of a company. The PI score is calculated annually and is based on various factors which reflect the company's size, complexity, and impact on the public. Here’s how it works:

Factors in PI score calculation

1. Number of employees: Score 1 point for every employee (or the average number of employees during the financial year).
2. Third-party liability: Score 1 point for every ZAR 1 million (or part thereof) of third-party liabilities (including long-term and short-term debts).
3. Turnover: Score 1 point for every ZAR 1 million (or part thereof) of turnover (revenue) during the financial year.
4. Beneficial interest: Score 1 point for each individual who, at the end of the financial year, is known to directly or indirectly have a beneficial interest in any of the company's issued securities.

Employees records

Employers are required to maintain accurate and up-to-date records of employees' personal information, employment history, and remuneration. They should keep the records for a minimum of three years after the end of employment.

Post-termination restrictions

Non-compete (restraints of trade) and non-solicitation clauses are common but should be reasonable in scope, territory and duration.  Other considerations that the court will take into account are the seniority of the employee, their ability to damage the employer’s competitive advantage and whether the employer has a protectable interest.  Employers should either add appropriate restraint of trade clauses in employment agreements or create separate agreements for that.

Business transfer

When a business (whole or in part) is transferred, employees either automatically transfer to the new employer with their existing terms and conditions, or on terms and conditions of employment that are at least any less favourable to their existing terms and conditions.

Intellectual property protection

Employment contracts typically include clauses on the ownership of intellectual property created during employment.  This is crucial in information and technology industries.

Probation period

While the LRA does not mandate a probation period, employers may include it in the employment contract. The probation period should be reasonable and related to the job's nature, allowing the employer to assess the employee's performance. The duration should be pre-determined and can be extended if necessary, based on performance evaluation. Employers must follow proper procedures if they decide to terminate employment during or after the probation period, which includes but is not limited to, following an incapacity procedure for poor work performance and monitoring the employee’s performance during the probation period.

General Employee Rights in South Africa

Employment contract

Written contracts outlining terms of employment, including salary, benefits, and job responsibilities are required in law in terms of the BCEA. Employers are required to provide a written employment contract with all particulars to their employees.

Health and safety

Under South African law, employers have a duty to create a safe working environment for their employees. Every employer must provide and maintain this environment, which must be safe and without risk to the health of their employees. This is achieved through the implementation of health and safety policies and conducting regular risk assessments to identify workplace hazards and evaluate risks associated with an employee’s role. Employers must also provide ongoing safety training, monitor and update safety measures, and take appropriate measures to identify and address hazards and assess risks based on codes of practice, standards, procedures and instructions.

If hazards are identified, the employer must provide appropriate health and safety training and a communication programme to detail those risks. An inspection system and the appointment of competent supervisors are also necessary. The employer is obliged to provide PPE equipment. Generally, the employer provides the necessary equipment. In the case of white collar employees, employers may provide a monetary amount for the set up of a home office (e.g. suitable furniture and office equipment).

Employee Protections in South Africa

Anti-discrimination

In South Africa, anti-discrimination employment practices are governed by a robust legal framework.  The EEA places a positive obligation on all employers to promote equal opportunities and eliminate unfair discrimination in the workplace. Employers are expected to take proactive steps to promote equality in the workplace.

Equal treatment

Employers must treat employees fairly in terms of remuneration, benefits, and working conditions. Fair labour practices are promoted and unfair labour practices, unfair dismissals and unfair discrimination are prohibited. Unfair labour practices include unfair conduct related to promotion, demotion, suspension or the provision of benefits. There are minimum standards for employment conditions ensuring fair treatment when it comes to working conditions for employees. The EEA prohibits unfair discrimination ensuring there is no discrimination based on a listed and arbitrary grounds such as race, gender, sex, pregnancy, marital status, religion and culture and more. Dismissals based on a listed ground are automatically unfair and considered the most egregious form of dismissal.

Protection from harassment

An employer must adopt a sexual harassment policy. The objective of the sexual harassment policy is to inform employees to refrain from such conduct of “harassment”, including sexual harassment, as provided for in the Code of Good Practice on the Prevention and Elimination of Harassment. In addition, employers should establish procedures to raise grievances with the assurance that the appropriate measures will be taken.

Protection against dismissal

There are only three acceptable grounds for dismissal.  Those grounds are misconduct, incapacity (which includes poor work performance, ill health and incompatibility) and operational requirements (which is retrenchment/redundancy).  All dismissals must be substantively and procedurally fair.

If an employee is dismissed unfairly, the employee may refer an unfair dismissal dispute to the Commission for Conciliation Mediation and Arbitration, a statutory arbitrational tribunal.  If successful, the employee could be awarded reinstatement (with or without full back pay), re-employment or compensation for 12 to 24 months depending on the case.

Job Security in South Africa

Union membership

Employees have the right to join trade unions and participate in collective bargaining. Employees have the right to strike, subject to the relevant provisions of the LRA being adhered to.

Mandatory Benefits in South Africa

Medical examination of new hires

Certain industries, such as mining, construction, automotive and industrial, require an occupational medical assessment/examination for new hires. This is to ensure that employees are fit for the designated roles and to identify any pre-existing conditions. A medical examination may only be done if it is an inherent requirement of the job. This can be done via private medical practice, and the employer bears the cost.

Occupational safety and health training

There is a duty to create a safe working environment under South African OHS law. This is achieved through implementing health and safety policies and conducting regular risk assessments to identify workplace hazards and risks inherent in employees’ roles and workplaces. Employers must take appropriate measures to address and identify hazards and assess risks based on codes of practice, standards, procedures and instructions as prescribed by the OHSA.

If hazards are identified, an employer must provide the appropriate health and safety training, along with a communication programme to detail those risks. An inspection system is also necessary, along with the appointment of competent supervisors. Additionally, it is recommended for an employer to provide personal protective equipment (“PPE”) and safety equipment for employees to safely carry out the work. In the case of white-collar employees, this may include the provision of a monetary amount for the set-up of a home office (e.g. suitable furniture and office equipment).

Non-Mandatory Benefits in South Africa

Additional days off

Companies may offer extra annual leave days beyond the statutory minimum (15 working days per year), such as personal days, mental health days, or extended vacation days. It is usual for employers in South Africa to add a few additional days of annual leave over and above the statutory minimum.

Healthcare

Healthcare is not a requirement under South African employment law, and medical aid and disability benefits are both commonly provided for by South African employers.

Transportation

Offering a transportation allowance or company-provided car is fairly common, especially for senior-level employees or those in sales and client-facing roles. Reimbursements for fuel or public transport are also typical.

Supplementary pension

Many companies offer supplementary pension schemes, often with employer contributions matching a percentage of the employee's salary, typically ranging from 5% to 10%.

Supplementary health insurance

Enhanced medical aid coverage is a common benefit, covering additional health services like dental, optical, and specialist consultations. Many employers cover a significant portion of the medical aid premiums.

Supplementary life insurance

Providing additional life insurance coverage is standard, often offering coverage equivalent to 2-3 times the employee’s annual salary.

Cash bonus

Annual performance-related bonuses are common, with amounts varying based on company performance and individual achievements. Bonuses typically range from one month's salary to as much as six months' salary for top performers.

Flexibility

Flexible working hours and remote working options have become increasingly common, especially since the COVID-19 pandemic. Many companies offer flexible start and end times, and some allow compressed work weeks.

Telephone costs

Reimbursement for business-related telephone and internet expenses is standard, with many companies providing company phones or stipends for communication costs.

Hardware

Employers typically provide the necessary hardware, such as laptops and monitors, especially for roles that involve remote work or significant computer use. Some companies also offer a budget for setting up a home office.

Fitness allowance

Fitness allowances or gym memberships are common perks, aimed at promoting employee health and wellness. These allowances may cover gym fees, fitness classes, or wellness programs.

Training budget

Allocating a training budget for professional development is standard. Companies often fund courses, certifications, and workshops that are relevant to the employee’s role and career growth.

Wellness

Comprehensive wellness programs, including mental health support, stress management workshops, and access to counselling services, are widely offered to support employee well-being.

Meals

Providing meals during work hours or meal allowances is common, particularly for employees who work long hours or shifts. Some companies offer vouchers for use at local restaurants or cafeterias.

Relocation

Relocation support is typically offered for senior positions or when an employee is required to relocate for a specific role. This support usually includes relocation expenses, temporary housing, and sometimes a settling-in allowance.

Referral program

Employee referral programs with cash bonuses are standard, incentivising employees to refer qualified candidates. Referral bonuses usually range from R5,000 to R15,000, depending on the role. They are typically not offered to senior management who make a referral.

Equity

Offering shares or stock options is common in startups and larger corporations, providing employees with a sense of ownership and investment in the company’s success.

Business travel insurance

Comprehensive business travel insurance is typically provided, covering health, accident, and travel delay coverage for employees travelling on business. This ensures employees are protected while away from their usual place of work.

Hiring employees in South Africa at a glance

CURRENCY

Rand - ZAR

WORKING HOURS

45 Hours

PUBLIC/BANK HOLIDAYS

12

CAPITAL

Pretoria (executive), Bloemfontein (judicial), and Cape Town (legislative)

LANGUAGE

English (primary), Afrikaans, Zulu, Tsonga, Northern Sotho, Southern Sotho, Swati, Xhosa, Tswana, Venda, Ndebele

REMOTE WORKERS

26%

MINIMUM HOURLY SALARY

R27.58

TAX YEAR

1st Mar - 28th Feb

DATE FORMAT

DD/MM/YYYY

MISCLASSIFICATION PENALTIES

Penalty of backdated wages, labour authority fines, reinstatement and compensation for unfair dismissal for employee misclassification.

FUN FACT

Cape Town is often referred to as "Silicon Cape" due to its booming tech industry.

Taxes in South Africa

Read more

Employment tax: 

2% + compensation fund

1% of employee salary for Unemployment Insurance Fund (UIF) and 1% for Skills Development Levy (SDL)

Compensation fund: the annual assessment fee due to the Compensation Fund is calculated based on employees' earnings according to an assessment tariff based on the risks associated with the type of work being done.

Employee tax: 

18%-45%

Contribution to Unemployment Insurance Fund (UIF) equal to 1% of salary

Income tax:

GROSS INCOME	PROGRESSIVE TAX RATE
R0 - R237,100	18%
R237,101 - R370,500	R42,678 + 26% of taxable income above R237,100
R370,501 - R512,800	R77,362 + 31% of taxable income above R370,500
R512,801 - R673,000	R121,475 + 36% of taxable income above R512,800
R673,001 - R857,900	R179,147 + 39% of taxable income above R673,000
R857,901 - R1,817,000	R251,258 + 41% of taxable income above R857,900
Above R1,817,001	R644,489 + 45% of taxable income above 1,817,000

AGE GROUP	TAX REBATE	TAX THRESHOLD
Below 65 years	R17,235 (€862)	R95,750 (€4,788)
65 years and older	R9,444 (€472)	R148,217 (€7,411)
75 years and older	R3,145 (€157)	R165,689 (€8,284)

Salary calculator

Use our handy calculator to understand what are all the employment costs you have to consider in South Africa.

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Employer of Record in South Africa

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An Employer of Record is the legal employer of a worker in South Africa. As such, the Employer of Record takes care of all compliance aspects of employment, including payroll, taxes, statutory benefits, employment contracts and more.

The employer of Record is responsible for:

Ensuring employment is compliant with local employment laws

Processing local payroll

Filing employment related taxes and returns

Issuing payslips to the employee

Distributing salary payments

How Employer of Record works

COMPANY

Maintains a direct relationship with the employee, allocates them work tasks, and manages their performance.

BOUNDLESS

Takes care of payroll, taxes, benefits, ensuring the employee and the company are compliant with all legal regulations.

EMPLOYEE

The third party to the agreement, the employee, fulfils all of their obligations as a worker for the company.

Statutory benefits in South Africa

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Social security contributions

Employers in South Africa make three social security contributions - Unemployment Insurance Fund (UIF), Skills Development Levy (SDL) and Compensation for Occupational Diseases.

Occupational safety and health

Employers must take appropriate measures to address and identify hazards and assess risks based on codes of practice, standards, procedures and instructions as prescribed by the Occupational Safety and Health Administration (OHSA).

Common non-mandatory benefits in South Africa

Read more

Additional days off

Supplementary pension and life insurance

Fitness allowance

Healthcare and supplementary health insurance

Cash bonus

Telephone costs

Transportation

Flexible working hours

Professional development and wellness budget

Employee rights and protections in South Africa

Read more

Employment agreement

Protection from harassment

Safe place of work

Protection against dismissal

Anti-discrimination and equal treatment protection

Union membership

Leave in South Africa

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Paid time off: 21 days + 12 public holidays

Adoption: 10 weeks

Sick leave: 30 days every 3-year cycle

Parental: 10 days

Maternity: 16 weeks unpaid leave

Probation in South Africa

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While the Labour Relations Act  (LRA) does not mandate a probation period, employers may include it in the employment contract. The probation period should be reasonable and related to the job's nature, allowing the employer to assess the employee's performance.

Payment frequency in South Africa

Employers must remunerate employees at agreed-upon intervals, which can be daily, weekly, fortnightly, or monthly. The usual interval for salaried employees is monthly.

End of employment in South Africa

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In South Africa, termination of employment must comply with the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA) regarding notice pay. Employers must ensure the termination process is fair and justified and follows proper procedures to avoid claims of unfair dismissal.

The LRA only recognises three grounds of dismissal, and all dismissals must be substantively and procedurally fair. The termination notice must be given in writing and the employer must ensure that the notice period is in line with the BCEA requirements or as specified in the employment contract.

Frequently asked questions

What are my options if I want to hire a worker in South Africa?

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in South Africa, outlining the potential cons.

1. HQ country employment & payroll
   What it is: While the person is in South Africa, they are employed and payrolled directly by the company’s HQ entity.
   Cons: This may appear attractive, but it generally isn't legal in the long term. Also, HQ payroll won't be possible if the person is not a tax resident in the HQ country.
2. Independent contractor agreements
   What it is: People are locally registered as sole traders or limited liability company owners in South Africa and invoice for their work. There is no direct employment relationship.
   Cons: In South Africa, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.
3. Direct local employer setup
   What it is: The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
   Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.
4. Partnering with an Employer of Record or full-service Professional Employer Organisation
   What it is: Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.
   Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

How long does it take to set up a company in South Africa?

Generally, the process of registering a company with the Companies and Intellectual Property Commission (CIPC) in South Africa can take anywhere from a few days to a few weeks, depending on the complexity of the company structure and the completeness of the application.

However, the difficult part comes after the initial setup when payroll needs to be calculated and run every month, taxes filed, benefits extended, and changes of rules and regulations followed. Here is an overview of everything you will find yourself needing to do.

Can I employ people as independent contractors in South Africa?

While many employers practice employing remote workers as independent contractors, it's a bad practice. If an individual is giving their full and undivided attention to your company in South Africa, treating them as an independent contractor is likely a breach of South African employment laws and of those in your country.

Your company could be liable for fines on owed holiday pay, sick pay, social welfare payments, paternity benefits, maternity benefits, or other legal measures. Since the individuals you are working with do not receive the benefits of local employment laws and protections that are often afforded to people working full-time hours. Read more on why hiring remote people as independent contractors is a bad idea.

What does HR compliance mean in South Africa, and why does it matter?

When you hire employees in South Africa, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices.

Complying with local employment law in South Africa is fundamental for the correct running of your business - not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but also to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, annual leave, minimum wage, tax credits, and working hours regulations.

How much does it cost to employ someone in South Africa?

As with every other country, there are certain costs associated with employing a worker in South Africa that come on top of the gross salary you are offering. In South Africa, those are the Unemployment Insurance Fund (UIF), the Skills Development Levy (SDL) and Compensation for Occupational Diseases.

To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

What does Employer of Record mean in South Africa?

It means that Boundless is the legal employer of the individual, as far as the South African government, tax, and employment authorities are concerned.

We are responsible for:

• informing you about any pre-employment requirements
• ensuring employment is compliant with South African employment law
• informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
• providing a locally compliant employment contract
• processing local payroll
• filing employment-related tax returns
• issuing payslips to the employee
• distributing salary payments
• payments to the local tax authorities

Customers that work with an Employer of Record in South Africa are responsible for:

• sourcing and recruiting their own workers
• managing the employee’s day-to-day workload
• contributing to the personal/professional development of the employee through their work
• following any guidance we give on employment and HR best practices or legal obligations in South Africa, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
• ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Who is responsible for filing and paying employees' taxes and social insurance contributions in South Africa if employing through an Employer of Record?

Boundless as the Employer of Record files all pertinent taxes and UIF, SDL and other contributions as they relate to the compliant employment of an individual in their home country.

How does Boundless as an Employer of Record ensure HR compliance in South Africa?

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including South Africa. They ensure the South African employment contracts and any other relevant documents required for new employees comply with the local jurisdiction.

We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice periods or work-from-home regulations. Whenever a potentially sensitive issue arises in South Africa, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

What are the legal responsibilities of a company when they use an Employer of Record service like Boundless in South Africa?

The company remains responsible and informs employees of the day-to-day management of the people and teams employed through Boundless, including any disciplinary or performance issues. Boundless ensures compliance with South Africa-specific procedures, practices, and labour laws while employing people and teams on behalf of the company.

Do employees get all their rights and benefits when employed through an Employer of Record in South Africa?

Any new employee who is locally employed through an Employer of Record gets full employment rights and benefits as specified in South African employment law. They get a locally compliant employment contract, statutory parental leave, annual leave, illness benefits, any relevant tax credits, and many more.

Healthcare is not a requirement under South African employment law, and medical aid and disability benefits are both commonly provided for by South African employers as non-mandatory benefits.

What taxes do I need to pay in South Africa?

In South Africa, both employers and employees have to pay taxes. For employers, these include three social security contributions toward the Unemployment Insurance Fund (UIF), the Skills Development Levy (SDL) and Compensation for Occupational Diseases.

For employees, they include income tax via PAYE and contributions to the Unemployment Social Fund. To get a clear overview of both employee and employer taxes, use our salary breakdown calculator to submit any additional data needed and get a downloadable PDF like this one.