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Chapter 13 - Small Business Law

Registrations as an employer

An employer must be registered as an employer for the following:  

• Employee’s tax: which is called registering for SITE/PAYE (SITE stands for Standard Income Tax on Employees, and PAYE stands for Pay As You Earn)
• Skills Development Levy
• Unemployment Insurance (UIF)
• Regional Service Levies
• Compensation for Occupational Injuries and Diseases (Compensation Commissioner – WCA)

The following is a summary of the statutory registrations required for employers:

Employee’s tax - SITE/PAYE

Employee’s tax is money that is deducted by an employer from an employee’s wage or salary on a regular (usually monthly) basis. The amount of tax that should be deducted is written in tables that are issued by the South African Revenue Services (SARS).  Every employer who pays wages or salaries which have to be taxed, has to register with SARS as an employer for employees’ tax purposes.

There are two types of tax an employer can deduct from an employee’s wages: SITE and PAYE. An employer will deduct SITE tax from the wages of employees who earn less than R60 000 per year and have no other form of income. In this case employees do not need to complete a tax return. Employers must deduct PAYE from employee’s wages where they earn over R60 000 per year. Employers must pay the tax that has been deducted to SARS. The employer must register with the SARS as an employer and submit an EMP201 return with the payment every month.

How to register as an employer for SITE/PAYE

In order to register with SARS an employer must fill in a form called an EMP101 form and send it to SARS. This form can be collected from SARS or you can print the form from SARS’s website: www.sars.gov.za

It is advisable to get professional help from an accountant or a lawyer to help with the registration. SARS regularly changes the requirements for registration a well as the documentary evidence needed.

The SARS will let the owner of the business know that it has received the EMP101 form. SARS will ask for more information if necessary. When the employer has given the information that SARS asked for, SARS will issue a letter confirming registration.

Returns are issued monthly from SARS E-filing.

What must the employer do every month?

When the employer pays the employees, she or he must deduct tax from their wages. At the end of every month, the employer pays the tax to SARS. The employer must:

• add up all the tax deducted from each employee's wages and write it on the form called an EMP201 form
• write out a cheque for the tax made out to SARS (unless payment is being made electronically)
• submit the form EMP201 electronically on SARS E-filing and make an electronic or manual payment.

Electronic payments can be made directly into the SARS banking accounts at First National Bank, Absa Bank, Nedbank or Standard Bank or via the Internet banking facilities. In all instances it is very important that the correct payment reference as indicated on the specific EMP201 Return is provided to ensure that tax payments can be identified and correctly allocated when SARS receives the payment.

The following two items are essential in order to ensure that payments are processed correctly:

• SARS beneficiary account ID; and
• A 19-digit bank payment reference number. This allows the allocation of such payment to a specific tax type and period.

The SARS website: www.sars.gov.za provides details and information relating to bank payment limits and bank payment reference number structuring.

SARS must receive the form and the cheque or electronic payment by the 7th of the next month. For example, the SITE/PAYE for January must reach SARS by 7 February. If it is late, SARS will fine the employer. If the seventh day falls on a weekend or public holiday the Return and payment must be submitted on the last working day before the weekend or public holiday.

SARS will send a receipt to the employer which must then be filed.

Manual payment can also be made at most commercial banks.

What must the employer do every year?

Twice a year, SARS will ask the employer to add up all the SITE/PAYE tax paid for that  period. . The employer must add together all the amounts shown on the receipts and fill in a form, called an IRP501 form. At the end of February every year, the employer must give each employee a form called an IRP5 form, which says how much the employee has earned that year, what deductions have been made and how much tax the employee has paid that year. The employee must keep the form in a safe place.

In cases where the employer has, for valid reasons, not deducted employees’ tax, the employer must provide the employee with an IT 3(a) certificate.

Special situation for members of CCs and directors of companies
(not applicable to sole traders)

If you are a director of a company or a member of a close corporation, you have to pay employees’ (PAYE) tax every month.

Employees normally earn a salary, which means that an employee earns the same amount every month. The PAYE is therefore easy to work out. But the members of the CC or the Directors of the Company, who are often the owners of the business, often do not earn the same amount of money every month. The law around payment of tax for CC members and company directors is therefore complicated and difficult to work out.

Look up the Small Enterprise Development Agency (SEDA) website: www.seda.org.za for more information on these procedures.

Casual employees and tax

An employer must deduct 25% from a casual employee’s wages as PAYE tax.  This will apply employees who:

• work for an employer for less than 5 hours per day (or 22 hours per week) - OR-
• work for an employer without reference to a specific period of time
• work on a daily basis, who are paid daily and whose wages are more than R75 per day.

Examples include:

• Casual commissions paid, for example, spotters fees
• Casual payments to casual employees for irregular/occasional services
• Payments made to office bearers of organisations or clubs

Exemptions to this rule are as follows:

• If an employee works regularly for less than 22 hours per week and provides the employer with a written undertaking that they do not work for any other employer then they will be regarded as being in standard employment and tax must be deducted according to the standard weekly or monthly tax tables.

An employee who is in standard employment, in other words, he or she works for one employer for at least 22 hours per week.

Unemployment Insurance Fund (UIF)

An employer must register all employees for UIF with SARS. Every month the employer must deduct UIF from the employee's wages which is 1% of the employee’s wage. The employer must make an equal contribution of 1% of the employee’s wages and send the money to the Department of Labour. For information on how to register or make a payment, or to download the relevant forms for registrations, declarations and payment, look at the following website which is linked to the Department of Labour: www.ufiling.gov.za. The information that follows is based on information contained in this website. If the employer is registered for PAYE this will be done on the EMP201 submission to SARS.

Who must contribute to UIF?

The Unemployment Insurance Act (No 63 of 2001) and Unemployment Insurance Contributions Act apply to all employers and employees, but not to -

• employees working less than 24 hours a month for an employer;
  
• learners;
  
• public servants;
  
• foreigners working on contract;
  
• employees who get a monthly Old Age Grant; or
  
• employees who only earn commission or do piece work.
  

Example: Zama designs and cuts patterns for dresses. He pays Trevor to sew the pieces together. Trevor works from his house. Trevor is not employed by Zama and Zama cannot deduct tax or UIF from the money he pays Trevor.

Domestic employers and their employees have been included under the Act since 1 April 2003.

A working member of a close corporation or working director of a company must now pay UIF. All employees who earn above an amount of  R12 478 per month (or R149 736 per year) have to pay 1% of their earnings to UIF, but only up to this ceiling amount. For example, if Fred earns R16 000 per month, he will have to pay 1% of R12 478 and not 1% of R16 000. If Fred wants to claim UIF in the future he will only be paid a percentage of R12 478 and not a percentage of his salary.

The employer cannot claim money from the UIF if the business fails and has to close down.

Who must register for UIF?

All employers must register either with SARS or directly with the Unemployment Insurance Fund. 

Employers must register directly with the UIF; unless they -

• are required to register as employers under the Income Tax Act; or
  
• pay the skills development levy under the Skills Development Act.
  

Employers who are required to register their employees with SARS for the payment of PAYE (Pay As You Earn) and/or SDL (Skills Development Levy) must register with SARS for their UIF.

How to register for UIF

There are various ways to register with the UIF. It is employers’ responsibility to fill in and send the forms to register themselves and their employees.

Registering Online

If you want to register online you can follow these steps:

Step 1: Get the necessary information ready

Get information like the ID numbers and addresses of employers and employees ready before registering.

Step 2: Complete the online registration

Go to the website: www.ufiling.gov.za (set up by the Department of Labour) and complete the online registration forms:

for Commercial employees

for employers of domestic workers

Registering Via E-mail

If you want to register by e-mail you can follow these steps:

Step 1: Get the forms

Get the Form UI-8 and UI-19 (for business employers) or the UI-8D and UI-19D (for domestic employers) from the website: www.ufiling.gov.za .

Step 2: Fill in the forms

You must complete the forms for both yourself and your employees. The form for the registration of employees asks for an employer reference number. If you do not have a reference number yet, you can leave this part open. The UIF will create a reference number and send it to you. Also ignore the part asking for a signature.

Step 3: E-Mail the forms

Domestic Employers:
E-mail the forms to the UIF at domestics@uif.gov.za.

Commercial Employers:
E-mail the forms to the UIF at webmaster@uif.gov.za.

Registering by telephone

If you want to register by telephone you can follow these steps:

Step 1: Get the necessary information ready

Get information like the ID numbers and addresses of employers and employees ready before phoning the UIF.

Step 2: Phone the UIF

Phone the UIF at (012) 337 1680 and follow the instructions of the UIF official.

Registering by fax

If you want to register by fax you can follow these steps:

Step 1: Call the UIF fax line

Call the UIF fax line from your fax machine at 086 712 2000 and follow the voice prompts. Wait for the forms to be faxed to you.

Step 2: Fill in the forms

You must complete the forms for both yourself and your employees. The form for the registration of employees asks for an employer reference number. If you do not have a reference number yet, you can leave this part open. The UIF will create a reference number and send it to you.

Step 3: Fax the forms back

Fax the completed forms back to the UIF at 086 713 3000.

Registering by mail

If you want to register by mail you can follow these steps:

Step 1: Get the forms

Get the Form UI-8 and UI-19 (for business employers) or the UI-8D and UI-19D (for domestic employers) from the website or at any labour centre.

Step 2: Fill in the forms

You must complete the forms for both yourself and your employees. The form for the registration of employees asks for an employer reference number.If you do not have a reference number yet, you can leave this part open. The UIF will create a reference number and send it to you.

Step 3: Mail the forms

Mail the forms to the UIF at
The UIF
Pretoria
0052
 
Postage is payable on all mail sent to the UIF.

Registering at a Labour Centre

If you want to register at a labour centre you can follow these steps:

Step 1: Get the necessary information ready

Get information like the ID numbers and addresses of employers and employees ready before going to the labour centre.

Step 2: Get the forms

Get the Form UI-8 and UI-19 (for business employers) or the UI-8D and UI-19D (for domestic employers) from the labour centre staff.

Step 3: Fill in the forms

You must complete the forms for both yourself and your employees. The form for the registration of employees asks for an employer reference number. IF you do not have a reference number yet, you can leave this part open. The UIF will create a reference number and send it to you.

Step 4: Hand in the forms

Hand in the forms to the labour centre staff.

Every employee will be registered on an electronic database system and their details and contributions to the UIF will be recorded. Every time a new employee is employed the employer must register this person on the UIF database.

An unemployed person wanting to apply for UIF will only have to present their bar-coded ID document to receive unemployment payments.

What must the employer do every month?

Once you have registered yourself and your employees with the UIF, you must do the following:

• deduct 1% of every employee’s salary
• add another 1% for every employee - this is paid by the employer
• pay the 2% contribution every month to the SARS or UIF
• declare any new employees or change in an employee’s salary to the UIF

How to Pay the UIF

There are various ways to pay the UIF. It is your responsibility as an employer to deduct money from your employees and pay it and your own contributions to the UIF or SARS.

Paying by stop order

If you want to pay with a stop order you can follow these steps:

Step 1: Go to your bank

Go to your bank and fill in the forms they give you to pay the money into the UIF account. You can use one of the following accounts of the UIF:

FNB (employers of domestic employees only)
Account number: 62052400547
Branch code: 25-31-45

FNB (commercial employers)
Account number: 51420056941
Branch code: 25-31-45

ABSA (all employers)
Account number: 4055481885
Branch code: 32-31-45

Standard Bank (all employers)
Account number: 010032185
Branch code: 00-45

CDI No: 0068730083641

Nedbank (all employers)
Account number: 1454041560
Branch code: 14-54-05

The name of the account holder is Unemployment Insurance Fund.

Ask the bank to use your employer reference number as reference.

Step 2: Send the payment advice

The UIF sends employers the payment advice form every month. You can also get it on the website. Complete this form when you pay and send it in one of the following ways:

• Mail it to:
  UIF
  Pretoria
  0052
• Fax it to: (012) 337 1931
• E-mail it to:enquiries@uif.gov.za

Paying by cheque

The UIF no longer accepts cheques as a form of payment. You will have to use one of the other forms of payment methods.

Paying by Direct Bank Deposit

If you want to pay the money directly into the UIF account you can follow these steps:

Step 1: Go to your bank

Go to your bank and fill in a deposit slip. You can use one of the following accounts of the UIF:

FNB (employers of domestic employees only)
Account number: 62052400547
Branch code: 25-31-45

FNB (commercial employers)
Account number: 51420056941
Branch code: 25-31-45

ABSA (all employers)
Account number: 4055481885
Branch code: 32-31-45

Standard Bank (all employers)
Account number: 010032185
Branch code: 00-45

CDI No: 0068730083641

Nedbank (all employers)
Account number: 1454041560
Branch code: 14-54-05

The name of the account holder is Unemployment Insurance Fund.

Use your employer reference number as reference when you fill in the slip.

Step 2: Send the payment advice

The UIF sends employers the payment advice form every month. You can also get it on the website. Complete this form when you pay and send it in one of the following ways:

• Mail it to:
  UIF
  Pretoria
  0052
• Fax it to: (012) 337 1931
• E-mail it to:enquiries@uif.gov.za

Paying by Internet Banking

If you want to use internet banking to pay the UIF you can follow these steps:

1. Set the UIF up as a beneficiary

You can use one of the following accounts of the UIF:

FNB (employers of domestic employees only)
Account number: 62052400547
Branch code: 25-31-45

FNB (commercial employers)
Account number: 51420056941
Branch code: 25-31-45

ABSA (all employers)
Account number: 4055481885
Branch code: 32-31-45

Standard Bank (all employers)
Account number: 010032185
Branch code: 00-45

CDI No: 0068730083641

Nedbank (all employers)
Account number: 1454041560
Branch code: 14-54-05

Declaring new employees

Employers must also inform the UIF of changes (for example, new employees appointed or changes in salary) before the 7th of every month. You can mail, fax or e-mail the UI-19 or UI-19D forms or do the declarations online. If employers want to send declarations they must use the following steps:

Step 1: Fill in the form

Employers must fill in the UI-19 or UI-19D form (the same form you use to register employees) with the new details for employees. The forms are available at your nearest labour centre or on the website. You can also do the declarations online.

Step 2: Send in the form

Employers can send the form to the UIF by -

• mailing it to:
  UIF
  Pretoria
  0052
• faxing it to: (012) 337 1636

e-mailing it to:domestics@uif.gov.za if you are an employer of a domestic worker orenquiries@uif.gov.za if you are a commercial employer.

Employers with electronic payroll systems must send their information to declarations@uif.gov.za

Skills Development Fund and levy

The skills development levy is an amount of money that employers have to pay to the SARS for skills development of employees.

Who does the SDL apply to?

The Skills Development Levies Act applies to all employers except-

• the public service;
  
• religious or charity organisations;
  
• public entities that get more than 80% of their money from Parliament; and
  
• employers-
  • whose total pay to all its employees is less than R 500 000 per year; and
    
  • who do not have to register the employees with SARS for tax purposes (PAYE)

Registering with SARS

Employers who are required to pay a skills development levy must register with SARS.

Paying the SDL

Employers must pay a levy of 1% of the total amount paid in salaries to employees (including overtime, leave pay, bonuses, commissions, lump sum payments) every month.  The levy may not be deducted from the employees’ pay. The levy must be paid by the 7th day of each month.

Distributing the SDL funds

SARS pay 80% of the levy money over to the Sector Education and Training Authorities (SETAs). When employers register, they must tell SARS which (SETA) they belong to. Employers who fall under more than one SETA must consider the following when deciding which one is best for their workplace:

• composition of their workforce;
• pay of the different employees; and
• training needs of the different employees,

Employers can claim back from the SDL up to 70% of the levy, provided they can prove that they have undertaken training for their staff. SARS will supply the correct forms to fill in (SDL201 return form).

The Skills Development Fund gets 20% of the money, which is used for special training.

Payments of employees' tax, SDL and UIF contributions must be paid together into the SARS account and must be reflected correctly and separately on the EMP 201 form in order to ensure that payments are correctly allocated.

For more information on the Skills Development Fund and Levy and how to register, view the following website: www.labour.gov.za and click on ‘Skills Development Levy’.

See Skills Development Act.

Compensation for occupational injuries and diseases

Employees who get hurt at work, or become sick from diseases caused by their work, can claim Compensation from the Compensation Fund. Employers pay into the Fund. If a worker gets hurt and can claim from the Fund, she or he can't take the employer to court. However, there is a legal duty on the part of employers to report any accident at work where a worker has been hurt or injured.

See Compensation Fund.

The Fund does not pay the worker if the accident is the employer's fault. The employee will have to sue the employer in court.

How to register for compensation

As soon as a business employs someone, the owner of the business must register with the Department of Labour to pay compensation.

The owner must get a registration form from the Department of Labour (see the website: www.labour.gov.za) The owner of the business must fill in the form and send it to the Compensation Commissioner in Pretoria.

The Commissioner will send the owner a registration number in about 6 weeks. The Commissioner will also tell the owner of the business how much to pay to the Compensation Fund every year. The owner of the business only pays once a year. The amount depends on how dangerous the work is.

Does the employer pay compensation for all employees?

COIDA applies to the following people:

• all employers; and
• casual and full-time employees who, as a result of a workplace accident or work-related disease:
  • are injured, disabled, or killed; or
    
  • become ill.

This excludes -

• employees who are totally or partially disabled for less than 3 days;
• domestic employees;
• anyone receiving military training;
• members of -
• the South African National Defence Force, or
  
• the South African Police Service;
  
• any worker guilty of wilful misconduct, unless they are seriously disabled or killed;
  
• employees working mainly outside the RSA and only temporarily employed in the RSA

What must the employer do when someone gets hurt at work?

Report the accident - The employer must report the accident to the compensation office in Pretoria as soon as possible, but not later than 7 days after the accident. The employer reports the accident by filling in form W.CI.2.

Submit a claim for compensation - A notice of an accident and claim for compensation must be completed by an employee or on their behalf on Form W.Cl.3. Claims for compensation must be submitted to the Commissioner or employer within 12 months of the date of an accident or death.

Employees may apply for more compensation if they have an accident due to the carelessness of -

• he employer; or
  
• an employee who acts for the employer; or
  
• anyone in charge of machinery.