How to calculate PAYE in South Africa
To calculate PAYE, annualise the employee's taxable remuneration, apply the SARS tax table for the current year, subtract the age-based rebates and any medical scheme fees tax credits, then divide the annual tax by the number of pay periods in the year. Bonuses are added to the annualised figure rather than taxed at a flat rate.
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 15 Aug 2026
The five-step method
Every PAYE calculation follows the same sequence, whether you do it by hand or the payroll system does it for you.
- 1. Add up taxable remuneration for the period, including taxable allowances and fringe benefits
- 2. Subtract allowable deductions such as pension, provident and retirement annuity contributions (limited to 27.5% of the greater of remuneration or taxable income, capped at R350,000 per year)
- 3. Annualise: multiply the monthly figure by 12
- 4. Apply the SARS tax table, then subtract the primary rebate (and secondary or tertiary if 65 or 75 and older) and the medical scheme fees tax credits
- 5. Divide the annual tax by 12 to get the monthly PAYE
Worked example — R25,000 a month, age 40
Annualised remuneration is R300,000. That falls in the R237,101 to R370,500 bracket, so annual tax before rebates is R42,678 plus 26% of R62,900, which is R42,678 + R16,354 = R59,032. Subtract the primary rebate of R17,235 and annual PAYE is R41,797, or R3,483.08 per month.
Worked example — with a medical aid
Take the same employee as a member of a medical scheme with one dependant. The medical scheme fees tax credit is R364 for the main member plus R364 for the first dependant, R728 per month or R8,736 per year. Annual tax becomes R41,797 − R8,736 = R33,061, so monthly PAYE is R2,755.08.
Worked example — an annual bonus
Bonuses are not taxed at a flat percentage. Add the bonus to the annualised remuneration, calculate tax on the higher total, and the PAYE on the bonus is the difference between that and the tax on the salary alone.
The same employee receiving a R25,000 bonus is taxed on R325,000 for the year: R42,678 + 26% × R87,900 = R65,532, less the R17,235 rebate = R48,297. Subtract the R41,797 that would have been payable without the bonus and PAYE on the bonus is R6,500.
Where manual calculations go wrong
The mistakes that surface at EMP501 time are consistent, and each one is avoided automatically by payroll software that annualises correctly.
- Taxing a bonus at a flat 18% or at the top marginal rate
- Forgetting to move an employee to the secondary rebate in the year they turn 65
- Applying the medical tax credit twice — in payroll and again on assessment
- Using last year's tax tables after 1 March
- Calculating PAYE on net rather than gross remuneration
Frequently asked questions
Related guides
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