PAYROLLS

“WORD OF THE LEARNING UNIT….”

 PAYROLL INTRODUCTION
 Payroll pertains to both salaries and wages.
 Managerial, administrative, and sales
personnel are generally paid salaries.
 Salaries are often expressed in terms of a specified
amount per month or year.
 Store clerks, factory employees and manual laborers are
normally paid wages
 Wages - based on a rate per hour.
 Payments made to professional individuals who
are independent contractors are called fees.
PAYROLL ACTIVITIES
Payroll activities involve four functions:

1 Hiring employees,

2 Timekeeping,

3 Preparing the payroll, and

4 Paying the payroll.

 TIMEKEEPING
 Hourly employees are usually required to record time
worked by “punching” a time clock. Times of arrival
and departure are automatically recorded by the
employee by inserting a time card into the clock.
 In large companies time clock procedures are often
monitored by a supervisor or security guard to make
sure an employee punches only one card.
 The employee’s supervisor:
1 Approves the hours shown by signing the time card
at the end of the pay period and
2 Authorizes any overtime hours for an employee.
 SAMPLE TIMESHEET
Name: A.N. Author Wage Rate / R12,50
Hr
Week ending: 6/2/2021
Time In Time Out Hours
Saturday 09h00 12h30 3:30
Sunday
Monday 07h30 15h30 8:00
Tuesday 07h30 15h30 8:00
Wednesday 07h30 14h00 6:30
Thursday 06h30 16h30 10:00
Friday 07h00 17h00 10:00
TOTAL 46:00
HOURS:
 WAGES
 Gross pay/earnings is the total compensation earned by an
employee.
 It consists of wages or salaries, plus any bonuses and
commissions.
 Total wages are determined by multiplying the hours
worked by the hourly rate of pay.
 Most companies are required to pay a minimum of 1 and
a 1/2 the regular hourly rate for overtime work.
 Sometimes double-time (2x) is paid for Sundays or Public
holidays
 WAGE CALCULATIONS
 Assume Total worked time = 46 hours
 Normal working time = 40 hours
 Worked 6 hours overtime (46 - 40 hrs): 3.5 hrs
overtime during weekend (Saturday); 2.5 hrs during
the week
 Assume overtime at time-and-a-half during week
 Overtime at double-time during weekends
 Gross pay calculated as follows:

Normal Time 40 hours Rate R12.50 p/h R500.00

Overtime – Normal 2.5 hours Rate R18.75 R46.88
- Weekend 3.5 hours Rate R25.00 R87.50
GROSS PAY R634.38
 WAGE CALCULATIONS

Example 1:
 Teddy earns R22.75 per hour, with time
and a half for regular overtime, and
double time on holidays. His normal
working time is 40 hours during the week.
He worked 62 hours the week of 1st
January 2024 (New Years day) and 8 of
those hours were on the 1st of January
Overtime hours worked during the week
is 12 hours. Calculate his gross pay.
 GROSS PAY
 Gross pay is the total amount, negotiated with the
employer, that will be payable each pay period to the
employee.
 This gross amount is the wage or salary, before
deductions, paid to the employee.
 It is called a wage if it is an amount based on an hourly
rate, or a salary if it is a fixed amount, usually payable
monthly. Wage earners normally work a 40-hour week,
but this may vary from business to business.
 It is important to note that gross pay is typically different
from an employee's take-home pay or net pay, which is
the amount of money they receive after all deductions
are made from their gross pay.
 NET PAY
 Net pay is an employee's take-home pay after all
deductions have been made from their gross pay.
 This includes Personal income taxes, Retirement fund
contributions, UIF contributions, Garnishments and staff
loans.
 Net pay is the actual amount of money an employee
receives in their bank account and can use for their
personal expenses.
 It's important to note that the net pay is lower than gross
pay, due to the taxes, deductions, and contributions that
are withheld from an employee's gross pay.
 SALARIES
 A salary is a fixed amount of money paid to an
employee for their work, usually expressed as an
annual figure.
 It is typically paid in regular intervals, such as
monthly or bi-weekly, and does not vary based on
the number of hours worked (unlike hourly
wages).
 A salary can be distributed in various forms, such
as cash or electronic transfer.
 SALARIES
A typical salary includes the following components:
 1. Base pay: This is the basic amount of money paid to an employee
for their work, usually expressed as an annual figure.
 2. Bonuses: Some employers offer bonuses for exceptional
performance, reaching certain targets, or as part of employee
retention programs.
 3. Benefits: Many employers offer a range of benefits to their
employees, such as health insurance, life insurance, retirement plans
or pensions, sick leave, and vacation time.
 4. Allowances: This includes any payments that employees receive
in addition to their base salary, such as housing or transportation
allowances.
 5. Deductions: Deductions such as taxes and contributions are
typically subtracted from an employee's gross pay to determine their
net pay or take-home pay.
SARS Allowable Deductions
 Expenses allowed by the SARS for different types of income
are the following:

 Pension fund contributions

 Retirement annuity fund contributions
 Provident fund contributions (only from 1 March 2016)
 Legal costs – under certain qualifying circumstances
 Wear–and-tear – in respect of certain assets
 Donations – to approved bodies
 Repayable amounts – amount received for services rendered
as refunded by that person
 Bad and doubtful debts – employment related.
 PAYROLL DEDUCTIONS
U.I.F (Unemployment insurance Fund)
 An amount of 2% of gross earnings is payable each month as
a contribution to the Unemployment Insurance Fund.
 Half of this amount is deducted from the employee and the
other half is borne by the employer.
 There is a maximum amount payable (presently R177.12 per
month)
 PAYROLL DEDUCTIONS
Pension Fund Contributions
 Contributions to a pension fund are usually shared by
the employer and employee.
 The employer often contributes the larger share.
 The contribution is again normally calculated on gross
earnings, e.g. the employer might contribute 7% of the
employee’s gross earnings to the fund and the employee
5%, making a total contribution to the fund on behalf of
the employee of 12% of his / her gross earnings per
month.
 Rules generally vary from fund to fund, which means
that the contributions will mostly vary.
 PAYROLL DEDUCTIONS
P.A.Y.E (Pay as you Earn)-Income
• Deducted by employer on behalf of the government agent
SARS.
• Paid by the 7th day of the following month.
• Amount of P.A.Y.E to be paid depends on gross pay.
• A tax schedule available to be used to calculate P.A.Y.E due
to the government.
 Medical Tax Credit
 A medical tax credit is available in respect of medical
scheme contributions for taxpayers under the age of 65.
This rebate replaced the deduction that was previously
available. For the tax year commencing on 1 March
2024, the monthly rebates for medical scheme
contributions are as follows:

◦ Taxpayer: R364.
◦ First dependant: R364.
◦ Every subsequent dependant: R246.
 Tax rebates
 A taxpayer is entitled to so-called tax rebates that are
deducted from tax payable. The rebates have the effect
of establishing tax thresholds below which no tax is
payable.
 For the 2025 tax year (i.e. the tax year commencing on 1
March 2024 and ending on 28 February 2025), the
following rebates apply:

◦ Primary rebate: ZAR 17,235 for all natural persons.

◦ Secondary rebate: ZAR 9,444 if the taxpayer is 65 years of
age or over.
◦ Tertiary rebate: ZAR 3,145 if the taxpayer is 75 years of
age or over.
 TYPES OF TAXES IN SOUTH
AFRICA
 Pay As You Earn (PAYE)
 Income Tax
 Value Added Tax (VAT)
 Provisional Tax
 Capital Gains Tax
 Donations Tax
 Customs and Excise
 Transfer Duty
 Dividend
 2025 Tax Schedule (1 March
2024 – 28 February 2025)
Taxable Income (R) Rates of tax (R)

R1 – R237 100 18% of taxable income

R237 101 – R370 500 R42 678 + 26% of taxable income

above 237 100
R370 501 – R512 800 R77 362 + 31% of taxable income
above 370 500
R512 801 – R673 000 R121 475 + 36% of taxable
income above 512 800
R673 001 – R857 900 R179 147 + 39% of taxable
income above 673 000
R857 901 – R1 817 000 R251 258 + 41% of taxable
income above 857 900
R1 817 001 and above R644 489 + 45% of taxable
income above 1 817 000
 Calculating monthly/
weekly Tax
 Tax payable using this table is calculated
as follows:
1. Convert the weekly or monthly gross
earnings to an annual figure. To do this
multiply weekly earnings by 52 or monthly
earnings by 12.
2. Calculate the tax payable using the result of
(1) above, using the table.
3. Divide the result by 52 if weekly earnings or
by 12 if monthly earnings
 Example
Example 2:
 Calculate the tax payable on gross weekly
earnings of R1 754.43.
 Example
Example 3:
 Calculate the tax payable on gross monthly
earnings of R23 398.50.
 Calculation of tax
(SALARIES)

➢ Salary xxxx Taxable income xxxx

➢ Bonus xxxx Income as xxx
determined by
tax table
➢ Allowances xxxx Less: Primary (xxx)
rebate
Gross Income xxxxx Medical tax credit (xxx)
= Normal tax xxx
payable
Deductions (xxx) Less: Tax paid by (xxx)
employer
➢ Pension fund xxx Tax payable or xxx
contributions refundable by
SARS
 Sample Payslip (WAGES)
NAME: A.N. Other WEEK ENDED: 31 March 2023

GROSS PAY Hours Rate / Hour Amount

Normal Time 40 R150 R6 000
Overtime – x 11/2 8h50[8+50/60] R225 R1 987.50
Overtime – x 2 3h20[3+20/60] R300 R1 000
Total Gross R8 987.50
▪ DEDUCTIONS
Pension [contributes R240
4%]

P.A.Y.E RXXX

Total Deductions RXXX

Nett Pay RXXX
 Sample Payslip (SALARIES)
NAME: A.N. Other MONTH: May 2023

GROSS PAY Amount

Salary R12 000.00
Commission R8 525.00
Total Gross: R20 525.00

▪ DEDUCTIONS
Pension [Contributes 5%] (R600.00)

P.A.Y.E (R3 599.83)

Staff loan (R1 500.00)
Total Deductions (R4 756.95)

Nett Pay R10 068.22

 Class Exercise 1
 Complete the blank pay slip below to reflect the
correct net pay for Jackson, a sales manager, for the
month of May 2023 from the information that
follows:

 i. His monthly salary is R23 250 per month

 ii. He earns commission of 0.5% on his monthly sales,
and his sales for the month of May were R275 000
 iii. U.I.F. of 1% is to be deducted, based on gross
earnings, up to a maximum of R177.12.
 iv. PAYE is to be calculated on gross earnings, based
on the 2024 Personal Income tax schedule.
 Class Exercise 1 (CONTINUED)
 v. Jackson borrowed R10 000 from the company at the
beginning of year 2023 and has agreed to repay R500
per month as from end of February 2023.
 vi. Jackson is a member of the company’s pension fund
and contributes 4% per month to the fund. His
contribution is based on his salary only. The company
also contributes 6.5% per month to the pension fund for
Jackson based on his salary only.
 Class Exercise 2
 Helen works for OK Furnishers Polokwane as a
salesperson. She is employed on a three-year contract
basis and is remunerated weekly based on the number of
hours worked. You are furnished with the following data
about Helen’s hours and remuneration details for the
week ending 31 March 2023. The table below shows her
arrival and departure times. Two unpaid breaks, tea
break 15 minutes and lunch break 50 minutes are
allowed only on the company’s stipulated times. Tea
break starts at 10h30 and lunch break starts at 13h15.
 Class Exercise 2 (CONTINUED)
Sun Mon Tues Wed Thurs Fri Sat

Arrive 09h10 09h10 09h05 09h00 08h55 08h45 09h00

Depart 14h30 17h00 17h00 17h00 17h00 16h30 13h30

Class Exercise 2 (CONTINUED)
 i. Normal working days are from Monday to Friday.
 ii. Helen’s normal time wage rate is R45.00 per hour.
 iii. Normal working time is from 09h00 to 17h00.
 iv. Overtime is paid at one-and-half of the normal wage rate, for
hours worked outside the normal working time and double the
normal wage rate for hours worked on weekends and during public
holidays.
 v. U.I.F. of 1% is to be deducted on gross earnings. Maximum
UIF contribution is R177.12.
 vi. PAYE is to be calculated on gross earnings
Class Exercise 2 (CONTINUED)
 vii. Helen is a member of the company’s pension fund.
The company contributes 7.5% and Helen contributes
3.5%. The pension contributions are based on normal
earnings, whether normal hours are worked or not.
 viii. Helen earns 2% commission on her weekly sales
and her sales for week in question were R17 000.