This document defines a salary and the means by which they are paid to staff members. The compulsory and noncompulsory deduction, medical aid, and pension fund contributions are defined and explained how to administer them in means of IFRS and in the financial statements.
, 1. Introduction
Relationship between employers and employees is regulated by several acts and include:
o Basic Condition of employment act no 75 of 1997 (as amended)
o Labour Relations act no 66 of 1995 (as amended)
o Income tax owed by employees - Income Tax act no. 58 of 1962 (as amended)
Payroll administration aims to comply with these acts
o certain compulsory deductions from salaries and wages
o certain contributions that are made by the employers
o correct tax calculation
Payroll system is either computerized system or manual. Basic principles:
o Correct calculations, keep records for 3 years, have written policies regarding types of
deductions and contributions, etc.
2. Administrative Requirements
Employers keep various records, e.g. employee name; date of birth; physical & postal address; ID
number; dependents; tax reference number and contact details
Employment contract:
o forms the basis of relationship - if dispute arises it is referred to
o provides pertinent information for payroll administration: job title, working hours, nature
of appointment (i.e. full-time, temporary, permanent, part-time etc.), remuneration,
benefits (e.g. vacation leave, sick leave, maternity leave)
Employers register an employee with Department of Labour for UIF, SARS, Regional Services
Council (RSC) levies.
Most entities use an electronic payroll package to calculate salaries & wages.
3. Salaries and Wages (gross remuneration)
Gross remuneration is annual amount before any statutory (e.g. tax, UIF) and non-statutory
(e.g. contribution to staff tea club) deductions.
Net remuneration is amount after deductions (paid into bank account)
o Example: Thandi Maleka earns gross remuneration of R120 000 pa (R10 000 pm). Tax of
R1 800 pm is deducted. Net remuneration is R8 200.
Management staff generally offered a salary package - includes benefits such as travel
allowances, housing subsidies, etc.
Wages are normally calculated at an hourly rate, therefore fluctuate according to hours worked
& normal and overtime and rates
4. Costs involved in Employment
Skills Development Levy (SDL)
The levy grant scheme, legislated through the Skills Development Levies Act, 1999, serves to
fund the skills development initiative in the country
The intention is to encourage a planned and structured approach to learning, and to increase
employment prospects for work seekers
Employers can offer training programs & claim costs from SDL fund
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