This article provides information on employee classification, which forms part of an employee’s setup.
You will automatically be directed to the classification screen as the first step when adding an employee individually. To navigate to this screen at any point (for example, to change an employee’s classification, or to set up the classification for an employee who was added in bulk):
- Go to the employee’s profile.
- Click on Edit Info > Classification.
Please note: Selecting any of the options on this page will have an impact on one or more aspects of the employee’s payroll calculations. Each option is discussed in greater detail below.
When selecting the checkbox for Director, a drop-down menu will appear which will allow you to classify the individual either as an RSA Resident Non-Executive Director, a Non-Resident Non-Executive Director, or a Director / Member of a CC.
Executive Director / Member of a CC
Prior to 1 March 2019, this option was used for deemed remuneration and for reporting a director’s remuneration under a separate SARS code (code 3615).
From 1 March 2019, SARS no longer distinguishes between an Executive Director / Member of a CC and a standard employee. An Executive Director / Member of a CC will therefore be subject to the same tax treatment as a standard employee. By selecting this classification, the system will report the remuneration under SARS code 3601.
RSA Resident Non-Executive Director
Classifying an employee as an RSA Resident Non-Executive Director will ensure that the individual’s basic salary is not subject to PAYE nor to UIF or SDL contributions. All of the individual’s income will be reported under the correct code (3620 / 3670) on an IT3(a). Note that they are also not eligible for Employment Tax Incentive (ETI).
An RSA Resident Non-Executive Director can elect to voluntarily deduct PAYE from their fees. If the Voluntary Tax Over-Deduction item is added to their payslip, then the individual’s income will be reported under codes 3620 /3670 and 4102. Because PAYE has been deducted, an IRP5 will be generated indicating the same. UIF and SDL contributions will still not be deducted.
Please see the following article for more information on Voluntary Tax Over-Deduction:
Non-Resident Non-Executive Director
Classifying an employee as a Non-Resident Non-Executive Director will ensure that the fees are subject to PAYE and SDL contributions. The fees will not be subject to UIF contributions. All of the individual’s income will be reported under the correct codes (3621 and 4102) on their tax certificates.
Please note: It will not be possible to add the Voluntary Tax Over-Deduction item on these individuals’ payslips.
If you did not mark an employee as being a director or member of the CC, you will be able to select the employee’s working hours as
- “Full time” (by default)
- “Less than 22 hours per week”
If you select the latter option, two further questions / drop-down menus will appear with regard to the employee’s particular circumstances. The answers to these impact their payroll calculations, as outlined below:
This refers to contractors whose remuneration is subject to PAYE as a result of meeting certain requirements. Selecting this checkbox has the following impact:
- These employees’ income will be reported under the correct code (3616) on their tax certificates.
- They will be subject to PAYE and SDL, if applicable but will not be liable for UIF.
- They will not accumulate leave.
Please see the following article for a detailed discussion of independent contractors in the context of payroll:
You should tick the box next to UIF Exempt only if the employee meets one of the requirements for exemption. You can select one of the following options:
|UIF Exemption Reason||Description|
|Works less than 24 hours per month||Employees who are employed by the employer for less than 24 hours a month are exempt from paying UIF.|
|Learner in terms of the SDL Act||This refers to learners employed and remunerated under a contract of employment as contemplated in Section 18(2) of the Skills Development Act. Prior to 1 March 2018, these employees were UIF and SDL exempt. Since 1 March, these employees are no longer UIF exempt but are still SDL exempt.|
|Foreigners, leaving SA at the end of service||Prior to 1 March 2018, foreigners who were temporarily working in South Africa and who would be leaving the Republic at the end of their contract of service, apprenticeship or learnership were exempt from UIF. These employees are no longer exempt and UIF will be calculated for them if you choose this option after 1 March 2018.|
|Earns commission only||Commission is specifically excluded from Remuneration for UIF. SimplePay excludes commission from all UIF calculations, regardless of whether or not you select this exemption reason. However, if an employee only earns commission for their entire duration of employment, this needs to be reported on the UIF Declaration so that there is a clear reason for them not contributing to the UIF.|
|Income from a pension, superannuation or retiring allowance only||Similar to commission earners, individuals who only earn an income from a pension, superannuation or retiring allowance need to be reported as such on the UIF Declaration.|
|Public Servant||The President, any Member of Parliament or individuals in any sphere of government are exempt from paying UIF.|
Please see the following article for more on UIF in general:
The exemption reason selected will result in one of the following non-contribution reason codes being added to the monthly UIF Declaration generated for your company: