Payroll guide
Hiring your first employee: the payroll you suddenly need
Registering with SARS and the UIF, issuing a payslip that complies, and deciding between software and a bureau for one person.
Hiring your first employee turns a business into an employer, and that brings registrations, deadlines and a payslip that has to comply. None of it is difficult. All of it has a date attached.
The registrations you now need
Register as an employer with SARS for PAYE, and for SDL if your payroll will exceed the threshold. Register with the Unemployment Insurance Fund, and register with the Compensation Fund under COIDA.
Do this before the first payday. Registering afterwards means your first EMP201 is late by definition, and the penalty is calculated on the amount owing rather than being nominal.
What has to be on a payslip
The Basic Conditions of Employment Act sets out what a payslip must contain. Employer and employee details, the period it covers, the remuneration, every deduction listed separately, and the actual amount paid.
This is why a payment reference on a bank statement is not a payslip. Any real payroll product produces a compliant one automatically. A spreadsheet will not unless you build it carefully, and it will not update when requirements change.
Software or a bureau
For one or two employees, a payroll bureau is often genuinely cheaper than software and removes the compliance burden entirely. You send the hours and the changes, they produce payslips and tell you what to pay SARS.
Software wins once the payroll changes every month, once you have several employees, or once you want the data connected to your accounting. SimplePay starts around R235 a month for ten employees, and Sage Payroll starts at R97 a month for one or two, which is the point at which doing it yourself starts to make sense.
The contract and the records
An employee is entitled to written particulars of employment. Get the contract right at the start, because the terms you set now become very hard to change later without agreement.
Keep payroll records properly. You need them for the twice yearly reconciliation, for the annual Return of Earnings, and for the retention periods the law requires. A shoebox of payslips is not a record system, and this is exactly the sort of thing that becomes urgent at the worst moment.
The calendar you now live by
EMP201 and payment by the seventh of the following month, every month. Employer reconciliation twice a year. Return of Earnings annually. Leave accruing from the first day, whether or not anybody is tracking it.
Put all of these in a calendar the day you hire. The most common first employer mistake is not a calculation error. It is a deadline that passed while somebody was busy running the business.
Leave starts accruing on day one
Annual leave, sick leave and family responsibility leave all begin accruing from the first day of employment under the Basic Conditions of Employment Act. Nobody notices in month one and everybody notices when the employee resigns.
Untaken annual leave has to be paid out on termination, so an untracked balance becomes a bill you did not budget for. Track it from the start, even if you only have one employee and a spreadsheet.
Common questions
01What do I need to register for when I hire my first employee?
PAYE with SARS, the Unemployment Insurance Fund, the Compensation Fund under COIDA, and SDL once your annual payroll exceeds R500 000. Register before the first payday.
02Do I need payroll software for one employee?
Not necessarily. A bureau is often cheaper and removes the compliance burden. Software becomes worthwhile at several employees, or sooner if pay changes monthly or you want it linked to your accounting.
03What must a South African payslip include?
Employer and employee details, the period covered, remuneration, each deduction shown separately and the net amount paid, as set out in the Basic Conditions of Employment Act.
Editorial note
This guide is general buying guidance and not accounting, legal or tax advice. Amounts and deadlines set by SARS change, so confirm the current figures for your own business before you rely on them.