PAYE (Pay As You Earn) is South Africa’s system for collecting income tax from employees. Your employer calculates and deducts tax from your salary each month, then pays it to SARS on your behalf.
How PAYE Works
- Your employer calculates your monthly tax based on your annual salary projection
- Tax is deducted from your gross salary before you receive payment
- Employer pays SARS by the 7th of the following month
- You receive a payslip showing gross pay, deductions, and net pay
Why monthly tax varies
PAYE is calculated on your projected annual income. If you get a raise mid-year, your monthly tax may increase more than expected as your employer adjusts for the higher annual projection.
What’s Included in PAYE
PAYE applies to most forms of employment income:
- Basic salary
- Bonuses and 13th cheque
- Commission
- Overtime pay
- Allowances (travel, housing, etc.)
- Fringe benefits (company car, medical aid contributions)
PAYE Calculation Steps
Your employer follows these steps each month:
Step 1: Calculate Gross Income
Add up all taxable income including salary, allowances, and benefits.
Step 2: Apply Deductions
Subtract allowable deductions:
- Pension/provident fund contributions (up to 27.5% of income, max R350,000/year)
- Retirement annuity contributions
- Donations to approved PBOs (up to 10% of income)
Step 3: Calculate Annual Tax
Using the tax tables, calculate tax on the annual taxable income.
Step 4: Apply Rebates
Subtract age-based rebates:
- Primary rebate: R17,235 (all taxpayers)
- Secondary rebate: R9,444 (age 65+)
- Tertiary rebate: R3,145 (age 75+)
Step 5: Apply Tax Credits
Subtract medical aid tax credits based on dependents.
Step 6: Calculate Monthly PAYE
Divide annual tax by 12 for monthly deduction.
Use our calculator
Try our free PAYE calculator to see exactly how much tax you’ll pay based on your salary.
PAYE vs Provisional Tax
| PAYE | Provisional Tax |
|---|---|
| Deducted by employer | Paid directly to SARS |
| For employees | For self-employed/businesses |
| Monthly deductions | Twice-yearly payments |
| Employer handles submission | You submit IRP6 |
Common PAYE Questions
Do I need to file a tax return if I only have PAYE income?
Not always. You don’t need to file if:
- Your total income is below R500,000
- You have only one employer
- You have no other income sources
- You don’t claim additional deductions
What if my employer deducted too much PAYE?
File a tax return after the tax year ends (March-October). If you overpaid, SARS will refund the difference.
Can I reduce my PAYE?
Yes, through:
- Increasing retirement contributions
- Medical aid membership
- Tax-free investments (up to R36,000/year)
Employer Obligations
Employers must:
- Register for PAYE with SARS
- Deduct correct tax amounts
- Pay SARS by the 7th of each month (EMP201)
- Issue IRP5 certificates to employees
- Submit annual reconciliation (EMP501)
Check your payslip
Always verify your payslip shows correct PAYE deductions. If something looks wrong, speak to your payroll department immediately.