PAYE Registrations – Assistance in Determining Employment Status
The requirements for PAYE registrations at the South African Revenue Service (SARS) can be confusing. We provide small business owners and start-ups assistance with PAYE registrations, and thus help our clients to be fully tax compliant.
How the PAYE System Works
It is a system that allows for tax deduction where the employer is responsible for calculating and deducting the income tax payable by the employee each time salary or wages are received. The employer must also do the calculations and deductions for liabilities to pay income levies.
SARS Guide to PAYE
SARS provides a guide to assist employers in determining the requirements which they must meet, and special problems that they may encounter. The guide consists of several sections dealing with specific parts of PAYE.
Section 1-9 provides an overview and full description of pay and the procedures that the employer must follow. Section 10 deals with the employer duties that must be performed before the new tax year starts and Section 11 addresses the procedures regarding new employees, while Section 12 addresses the various aspects of employment cessations. Section 13 is related to Pay Related Social Insurance, while Section 14 covers payment of PRSI contributions and tax. Section 15 is focussed on the duties of the employer at the end of the tax period and Section 16 deals with the online service of SARS. The final section covers the correct procedures for handling the income and parking levy in urban areas.
How to Determine Whether an Employee Qualifies for PAYE
The confusion about PAYE comes in when having to determine the employment status of a worker. There is a difference between a contract of service and contract of employment. The employment contract refers to a conventional employer and employee relationship, whereas the contract of service refers to the relationship of client and self-employed contractor. The employment status of the worker is not negotiable.
The conditions and circumstances surrounding employment determine the employment status. A person is an employee when they only supply labour and falls under the control of another individual in the direction of how work is to be carried out, and they receive a fixed monthly, weekly or hourly wage.
The person doesn’t sub-contract work and is not allowed to do so, and doesn’t supply materials for the particular job to be completed. The person doesn’t supply the equipment, except for essential small tools of the trade. The worker doesn’t take on management or investment responsibilities of the business, and works a set number of hours in a day, week or month. The person is entitled to expense payments and extra pay for overtime. The worker doesn’t have the opportunity to profit from management and works for one business. Finally, the person isn’t exposed to any personal risk regarding the finances of the work to be carried out.
It is, however, more complicated than the above states and we can thus provide you with the professional assistance that you need in determining the employment status of the worker, as well as assistance with PAYE registrations.