Employee Classification

This help page 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 Edit Info > Classification.

Effect on payroll

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.

Director¶

When you tick the Director box, a drop-down will appear which will allow you to classify the individual as an Executive Director / Member of a CC, an RSA Resident Non-Executive Director or a Non Resident Non-Executive Director.

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 Voluntary Tax Over-Deductions help page for more information.

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.

Voluntary Tax Over-Deduction not available

It will not be possible to add the Voluntary Tax Over-Deduction item on these individuals' payslips.

Working Hours¶

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 or three further questions will appear, depending on your answers, with regard to the employee's particular circumstances. The answers to these impact their payroll calculations, as outlined below:

Question	Answer	Impact
Do you have a written declaration that the employee will not work for another employer while employed by you?	Yes	The employee will be taxed using the tax tables.
	No	You'll be asked whether the employee works at least five hours a day and earns less than the daily limit (see below).
Does the employee work at least 5 hours a day and receive less than The Non-Standard Employment Daily Limit per day?	Yes	The employee will be taxed using the tax tables.
	No	The employee qualifies as a non-standard employee and will be taxed at a flat rate of 25%.
Does the employee work less than 24 hours a month?	Yes	The employee won't accrue leave, will be UIF exempt and won't automatically be paid for public holidays that they don't work.
	No	The employee will accrue leave, will be subject to UIF and will automatically be paid for public holidays that they don't work.

See the Non-Standard Employment help page for the current daily limit.

Independent Contractor¶

This refers to contractors whose remuneration is subject to PAYE as a result of meeting certain requirements. Ticking this box 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.

For a detailed discussion of independent contractors in the context of payroll, see the Independent Contractors help page.

UIF Exempt¶

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 - Not UIF exempt from 1 March 2018, but still SDL exempt	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 2018, these employees are no longer UIF exempt but are still SDL exempt.
Foreigner, leaving RSA at end of service - not applicable from 1 March 2018	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 pension, superannuation or retiring allowance only (also SDL exempt)	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.

For more information on UIF in general, see the Unemployment Insurance Fund (UIF) help page.

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:

Code	Code Descriptor	Description
1	Temporary employees (less than 24 hours per month).	Employees who are contracted to work for less than 24 hours in the month are not required to contribute to UIF.
2	Learners in terms of the Skills Development Act.	This code is no longer valid from 1 March 2018.
3	Employees in the national and provincial spheres of Government.	Employees who work for the national or provincial government are not required to contribute to UIF.
4	Employees who are repatriated at the end of their service contract.	This code is no longer valid from 1 March 2018.
5	Employees who earn commission only.	The employee earned only commission. Since commission is excluded from the UIF calculation, no UIF was calculated.
6	No income paid for the payroll period.	The employee did not earn an income for the period and therefore did not contribute to UIF.
7	Employees in receipt of an Old Age Pension from the state.	The employee received only a pension payment from the government, which is not subject to UIF.
8	Employees who receive a pension payment from Employer.	The employee received only a pension payment from the employer, which is not subject to UIF.
9	Above the ceiling.	The employee's monthly earnings exceed the maximum threshold set by the UIF.