South Africa payroll in 2026: PAYE, UIF, SDL + COIDA guide

If you're hiring your first South African employee, migrating from a payroll bureau, or just trying to verify what your accountant is doing — the 2026 tax year (1 March 2026 to 28 February 2027) brings a meaningful set of changes you need to factor in. Inflation-adjusted PAYE brackets after a two-year freeze, a sharp jump in the VAT registration threshold, an updated UIF ceiling, and a bumped retirement-fund deduction cap all landed in Budget 2026.

This guide walks through what South African payroll actually looks like in practice — every component, what it costs, when to remit it, and the specific Budget 2026 changes that affect employers.

The South African payroll stack

A typical South African payroll run involves five statutory components:

Component	Side	Rate	Capped?
PAYE (Pay-As-You-Earn)	Employee deduction	18%–45% progressive	No
UIF (Unemployment Insurance Fund)	1% employee + 1% employer	1% + 1%	Yes — earnings cap R17,712/month
SDL (Skills Development Levy)	Employer only	1% of total payroll	No, but exempt under R500K annual payroll
COIDA (workplace injury insurance)	Employer only	Industry-rated	Annual return, not monthly
Retirement fund	Voluntary (most companies match)	Typically 7.5% + 7.5%	27.5% deductible cap, R430K/year

There is no separate national health insurance levy, no industrial training fund, and no Nigerian-style NHF or Kenyan-style SHA. The five components above plus retirement contributions are essentially the whole picture.

PAYE 2026/27 — brackets, rebates, and medical credits

Budget 2026 was the first inflation-adjusted PAYE table since 2023/24 — a 3.4% lift across all brackets. Per the SARS Budget Tax Guide 2026, the table for the 2026/27 year of assessment (income earned 1 March 2026 to 28 February 2027) is:

Annual taxable income (ZAR)	Tax rate
0 – 245,100	18%
245,101 – 383,100	26% on amount above 245,100
383,101 – 530,200	31% on amount above 383,100
530,201 – 695,800	36% on amount above 530,200
695,801 – 887,000	39% on amount above 695,800
887,001 – 1,878,600	41% on amount above 887,000
1,878,601 and above	45% on amount above 1,878,600

The brackets are then reduced by rebates — flat amounts deducted from total computed PAYE based on the employee's age:

• Primary rebate (everyone): R17,820 (2026/27, up from R17,235)
• Secondary (age 65+): additional R9,765
• Tertiary (age 75+): additional R3,249

The primary rebate creates an effective tax-free threshold of R99,000 per year for employees under 65 (R17,820 ÷ 18%). Below that level, no PAYE is withheld at all.

Medical scheme tax credits further reduce PAYE for employees on registered medical schemes. The 2026/27 monthly credits are:

• R376 for the main member
• R376 for the first dependant
• R254 for each additional dependant

For a family of four, that's R1,260 off PAYE every month — meaningful relief that must be applied at source.

Worked example. An employee earning R30,000/month (R360,000/year) under 65, on a medical scheme covering them + spouse + 2 children:

• Annual PAYE before rebates: 18% × 245,100 + 26% × 114,900 = R44,118 + R29,874 = R73,992
• Less primary rebate: R73,992 − R17,820 = R56,172
• Less medical credits (12 × R1,260): R56,172 − R15,120 = R41,052/year ≈ R3,421/month PAYE

UIF and SDL — the two payroll add-ons

UIF is South Africa's unemployment + maternity insurance scheme. The rate is 1% from the employee + 1% from the employer, capped at the first R17,712 of monthly remuneration (raised from R14,872 in Budget 2026 — a 19% increase that took effect 1 March 2026). Maximum monthly contribution: R177.12 each side, R354.24 combined.

UIF goes to the Department of Employment and Labour via your monthly EMP201 submission.

SDL is the Skills Development Levy — 1% of total payroll, employer-side only, payable monthly via EMP201. Companies with annual payroll under R500,000 are exempt. The levy funds SETAs (sector education and training authorities) and your company can recover up to 20% of SDL paid as a Mandatory Grant by submitting a Workplace Skills Plan (WSP) and Annual Training Report (ATR) to your SETA by 30 April each year. Most SMEs leave this money on the table — the recovery is genuine and worth the paperwork.

COIDA — the annual one most people forget

COIDA (Compensation for Occupational Injuries and Diseases Act) is workplace injury insurance, administered by the Compensation Fund. Three things to know:

1. It's annual, not monthly. You file a Return of Earnings (ROE) between 1 April and 30 June each year, declaring total payroll for the prior year.
2. Rates are industry-specific. Your company gets classified by the Compensation Commissioner based on your business activity. Office-based services pay roughly 0.5%–1% of payroll; manufacturing and construction pay several percent.
3. You need a Letter of Good Standing. Many tenders, lease agreements, and bank facilities require proof of COIDA compliance — issued only after your ROE is submitted and assessed for the current year.

Late ROE submission triggers a 10% penalty plus interest. The 2025/26 earnings cap per employee was R633,168; the 2026/27 figure is updated by the Compensation Commissioner each year.

Two-pot retirement — what changed in 2024 (and why your payroll didn't)

The biggest South African retirement reform in decades took effect on 1 September 2024: the two-pot system. Per the National Treasury Two-Pot FAQ, every retirement fund contribution from that date is split:

• One-third → Savings Pot. Withdrawable once per tax year (minimum R2,000, maximum R30,000) without resigning.
• Two-thirds → Retirement Pot. Locked until retirement and must be annuitised — no early access.
• Pre-September 2024 balances → Vested Component. Old rules apply, untouched by the reform.

For employers, this is a non-event at the payroll level. Fund administrators handle the contribution split. SARS handles tax directives on Savings Pot withdrawals. There is no new payroll code, no IRP5 change for monthly contributions, and no employer cost difference. If you're already running retirement contributions through your payroll provider or fund administrator, two-pot was implemented for you.

What does change: employees may ask HR to facilitate Savings Pot withdrawals. The right answer is "speak to the fund administrator directly" — payroll plays no role in the withdrawal process.

The retirement fund deduction cap was raised in Budget 2026 from R350,000 to R430,000 per year (still subject to the 27.5% of remuneration ceiling). High-income employees who max out their retirement contributions get meaningful additional relief.

EMP201 — your monthly remittance

PAYE, UIF, and SDL are all remitted together via the EMP201 declaration, due on the 7th of the month following the payroll period. If the 7th falls on a weekend or public holiday, the deadline shifts to the last business day before the 7th.

Submit and pay through SARS eFiling or e@syFile™ Employer (free, downloadable software). Each EMP201 generates a Payment Reference Number (PRN) you must use when making the bank payment — paying without the PRN is the most common cause of "missing" remittances that surface during reconciliation.

ETI (Employment Tax Incentive — see below) reduces the PAYE you actually pay over via EMP201, not by issuing a refund cheque.

Budget 2026 changes that matter for SMEs

Per KPMG's Budget Guide 2026, the headline changes for SME employers:

1. VAT registration threshold raised to R2.3 million (from R1 million), effective 1 April 2026. Voluntary registration threshold raised to R120,000 (from R50,000). Roughly 30,000 small businesses with turnover between R1M and R2.3M can deregister or stay unregistered. The proposed VAT rate increase to 16% was withdrawn — the rate remains 15%.
2. PAYE brackets adjusted by 3.4% — the first inflation relief since 2023/24. Tax-free threshold up R3,250 to R99,000 per year for under-65s.
3. UIF earnings cap up to R17,712/month — first major adjustment in years. Affects employees earning above the old R14,872 cap.
4. Retirement deduction cap up to R430,000/year — favours higher earners maxing out contributions.
5. Medical tax credits up R12/month for primary + first dependant, R8 for additional dependants.
6. National Minimum Wage up to R30.23/hour from 1 March 2026, per SAnews — a 5% increase covering all workers including domestic and farm workers.

The VAT threshold lift is the most impactful for SMEs. If your annual taxable supplies are between R1M and R2.3M, you can voluntarily deregister and stop charging VAT — a real pricing advantage in cost-sensitive markets, but only worth it if you're not buying significant inputs that would generate input VAT recovery.

A first-employee checklist

Before your first South African payroll run, you need:

• SARS PAYE registration — register as an employer via SARS eFiling. PAYE reference number issued within 1–2 business days.
• UIF registration — separate, via the Department of Employment and Labour (uFiling). Required even if you only have one employee.
• SDL registration — only if your annual payroll will exceed R500,000. Toggle on within SARS.
• COIDA registration — via the Compensation Fund. Get your industry classification and rate confirmed before your first ROE.
• Bargaining council check — some industries (motor, hospitality, security, building) have sectoral wage and benefit agreements that override or supplement the base statutory framework.
• Employment contract — written, signed before day one. Must include role, remuneration breakdown, leave entitlements (BCEA minimum: 21 consecutive days' annual leave per year — substantially higher than Nigeria's 6-day floor), and notice period.
• Payroll software or provider — SARS eFiling does not run payroll for you. You need either an outsourced payroll bureau or software that produces compliant EMP201, IRP5, and IT3(a) submissions.

Once those six items are in place, you can run your first payroll and submit your first EMP201 by the 7th of the following month.

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AnooreHR runs South African payroll out of the box — PAYE 2026/27 tables, UIF and SDL with the new R17,712 cap, COIDA tracking and ROE export, medical tax credits, ETI for qualifying hires, and EMP201-ready monthly remittance reports. Two-pot retirement is handled at the fund-admin level so your payroll keeps running unchanged. See a walkthrough or start your free trial.

Related: How AnooreHR handles payroll · South Africa retrenchment and BCEA guide · See pricing