Payroll Concepts > Statutory Deductions and Contributions (ZA) > Tax (PAYE) (ZA) > PAYE Methods

As a general rule, where an employer pays, or is liable to pay, remuneration to an employee, the employer has an obligation to deduct employees’ tax (PAYE – Pay as You Earn) and must register for PAYE with SARS. Employee’s tax must be calculated using one of the two standard methods outlined by SARS and paid over monthly. This article outlines the two methods for determining PAYE.

The procedural aspects of paying over PAYE are discussed in the following section

Filing and Processes > Monthly Submissions > EMP201

Methods for Calculating PAYE

There are two standard methods for calculating employees’ tax – periodic and averaging / annual equivalent – both of which are acceptable to SARS:

  • The periodic tax basis calculates tax on each payslip in isolation using the monthly tax tables. This method is not supported by SimplePay.
  • Tax averaging takes into account an employee’s total income for the entire tax year to date (YTD) and uses an annual equivalent to calculate tax. SimplePay uses this method as it provides the most accurate results, especially in cases of fluctuating income (please see below for more on this).

To learn how to calculate PAYE using the tax averaging method, refer to the following articles:

For a comparison of the two methods, refer to the following help article:

Where an employee is in non-standard employment or has received a tax directive from SARS, tax will not be calculated as mentioned above. Please see the following sections for more on each of these aspects:

Payroll Concepts > Non-Standard Employment

Tax Directives – Other

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