How a bonus is taxed in South Africa
A bonus, 13th cheque or performance incentive is fully taxable remuneration. Payroll must add it to the employee's annual taxable income, work out the tax on the new annual total, subtract the tax already withheld for the year, and deduct the difference in the bonus month. Bonuses are reported under SARS source code 3605.
Payroll Africa Editorial · SARS Payroll Compliance Team
The Payroll Africa editorial team is composed of registered tax practitioners, payroll administrators and BCEA specialists who maintain the SARS PAYE, UIF, SDL and ETI engines that power the platform. Every article is reviewed against the current SARS BRS and Basic Conditions of Employment Act before publication.
- SARS registered tax practitioners
- SAPA-affiliated payroll administrators
- BCEA and LRA compliance reviewers
Last updated 26 Aug 2026
Why the bonus deduction looks so big
PAYE is an annual tax collected monthly. When a bonus is paid, the employee's taxable income for the year jumps, and part of the bonus is often taxed in a higher bracket than their salary. The payroll then collects that extra tax in one month, which makes the effective deduction on the bonus look far higher than the employee's normal PAYE percentage.
Nothing is being over-taxed. The employee pays exactly the same total tax as they would have paid if the bonus had been spread over the year — the timing is simply concentrated.
- Annualise salary, add the bonus, apply the SARS table
- Subtract rebates and medical scheme fees tax credits
- Subtract PAYE already withheld year to date
- Deduct the balance in the bonus month
- Report the bonus separately under source code 3605
Non-recurring versus recurring income
A bonus must be flagged as a non-recurring payment. If payroll treats it as normal monthly income, it annualises the bonus twelve times over and deducts a wildly excessive amount of PAYE, which the employee only recovers on assessment.
Payroll Africa marks bonus components as non-recurring by default, so the annualisation is correct on the first run.
Spreading bonus tax over the year
Some employers accrue for a guaranteed 13th cheque monthly, deducting a slice of the expected bonus tax each month so the December payslip is not a shock. This is legal provided the total PAYE for the year is correct and the accrual is disclosed on the payslip.
Where the bonus is discretionary and uncertain, accruing is risky — if the bonus is not paid, the over-deducted PAYE must be refunded through payroll before the tax year closes on 28/29 February.
- Guaranteed 13th cheque — accrue monthly to smooth the deduction
- Discretionary bonus — tax in full in the month it is paid
- Correct any over-deduction before the tax year ends
- UIF still applies, subject to the monthly remuneration ceiling
- SDL applies to the bonus as part of the leviable amount
Frequently asked questions
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