PAYE, UIF and SDL explained: what every South African employer must deduct

When you hire your first employee in South Africa, three sets of letters start following you around: PAYE, UIF and SDL. They get lumped together because they all land on the same monthly form, but they are genuinely different things — different amounts, different rules, and crucially, a different answer to the question *who actually pays?*

This guide unpacks all three in plain language. You will learn how PAYE brackets, rebates and medical credits fit together (with a full worked example for someone earning R25 000 a month), why UIF is split 1% and 1% with a monthly ceiling, and when SDL kicks in — or doesn't. By the end you will be able to read your own payroll and know exactly where every Rand is going.

The three deductions at a glance

Before the detail, here is the shape of it. PAYE is the employee's income tax, withheld from their pay. UIF is a small contribution towards unemployment insurance, shared between you and the employee. SDL is a skills levy that comes entirely out of your own pocket as the employer.

Keep that last column in mind. A common and costly mistake is deducting SDL — or your half of UIF — from the employee. You may not. For a fuller walkthrough of the whole monthly cycle, see how to run payroll in South Africa.

PAYE: the employee's income tax

PAYE stands for Pay-As-You-Earn. Rather than letting employees face one enormous tax bill at year-end, you withhold income tax from every payslip and pay it over to SARS on their behalf. South Africa uses a sliding scale, so only the portion of income that falls inside each band is taxed at that band's rate.

Rebates and thresholds

Everyone gets a primary rebate of R17 235 a year, which is subtracted from the tax the table produces. People aged 65 and older get an additional secondary rebate of R9 444, and those 75 and older get a further tertiary rebate of R3 145. Because of these rebates, there is a level of income below which no PAYE is due at all — the tax threshold: R95 750 for those under 65, R148 217 for ages 65–74, and R165 689 for those 75 and older.

Medical scheme tax credits

If the employee belongs to a registered medical scheme, they also receive a fixed monthly medical scheme tax credit that further reduces PAYE: R364 for the main member, R364 for the first dependant, and R246 for each further dependant after that. These are credits against tax, not deductions from income — so they come off the tax figure directly.

A worked example: R25 000 a month

Let us run the full calculation for an employee under 65, earning R25 000 a month, with no medical aid. PAYE is always worked out by annualising the salary, applying the table, subtracting rebates and credits, then dividing back by 12.

1. 1Annualise the salary: R25 000 × 12 = R300 000 a year.
2. 2Find the bracket: R300 000 falls in the R237 101 – R370 500 band, so tax = R42 678 + 26% of (R300 000 − R237 100) = R42 678 + 26% of R62 900 = R42 678 + R16 354 = R59 032.
3. 3Subtract the primary rebate: R59 032 − R17 235 = R41 797 annual tax.
4. 4Divide by 12: R41 797 ÷ 12 = R3 483,08 PAYE per month.

So on a R25 000 salary, roughly R3 483 is withheld for PAYE each month. If that same employee belonged to a medical scheme as the main member, you would subtract a further R364 a month in tax credits before arriving at the final figure. This is exactly the kind of arithmetic OrigamiPay handles automatically — you enter the salary, and it applies the right bracket, rebate and credits for you.

UIF: shared 1% and 1%

The Unemployment Insurance Fund gives workers a safety net if they lose their job or take maternity leave. It is funded by a 2% total contribution on the employee's remuneration — 1% deducted from the employee and a matching 1% paid by you, the employer.

There is a catch worth knowing: UIF only applies up to a monthly remuneration ceiling of R17 712. Above that, the contribution stops climbing. So the most either side ever pays is R177,12 a month (1% of R17 712). For our R25 000 employee, the salary exceeds the ceiling, so the employee's UIF is capped at R177,12 — not R250 — and you match it with another R177,12.

SDL: the levy that's all yours

The Skills Development Levy funds national training and skills programmes. It is 1% of your total leviable payroll, and unlike UIF it is paid entirely by the employer — never deducted from anyone's pay.

The good news for very small businesses: if your total annual payroll is R500 000 or less, you are exempt from SDL altogether. Many one- and two-person businesses fall under this line and pay no SDL at all. Once your payroll grows past it, the 1% applies.

How it all lands on the EMP201

Every month these three amounts come together on a single SARS form: the EMP201, the Monthly Employer Declaration. It totals the PAYE, UIF and SDL you owe for the month, and it is due by the 7th of the following month (or the last business day before the 7th if that falls on a weekend or public holiday). You submit and pay it through SARS eFiling.

Twice a year you also file an EMP501 reconciliation and issue IRP5/IT3(a) certificates so employees can do their own tax returns. The monthly maths has to be right all year for those reconciliations to balance. Our step-by-step EMP201 submission guide covers the filing itself in detail.

Putting it on the payslip

Whatever you deduct must be shown clearly to the employee. The Basic Conditions of Employment Act requires every payslip to state the amount and purpose of each deduction — so PAYE and the employee's UIF must each appear as a named line, not buried in a single lump. SDL and your employer UIF share are your costs and do not appear as employee deductions. For the full list of what a compliant payslip must contain, see our guide to creating a BCEA-compliant payslip.

If your business has grown to the point where doing this by hand each month is eating your evenings, it may be time to look at when to switch payroll software. The right tool keeps every statutory figure current and your records audit-ready — South African employers must keep payroll records for at least three years.