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Concepts
Foundational payroll, tax and employment terms - the building blocks every other entry assumes.
Accrual An accrual is the recognition of a cost or entitlement in the period it is earned or incurred, before the cash is actually paid out.Allowance An allowance is a fixed payment toward a category of expense, such as travel or a cellphone, taxed according to its own SARS treatment.Annualisation Annualisation is scaling a pay period's figures up to a yearly equivalent so SARS's annual tax tables can be applied, then scaling the result back down.Annuity An annuity is a contract that pays a stream of income over time - the A in retirement annuity, the vehicle a retirement annuity fund pays out through.Assessment An assessment is SARS's determination of the tax a person owes for a year of assessment, against which the PAYE already withheld is set off.Balance of remuneration Balance of remuneration is remuneration left after the amounts that reduce it for PAYE, and the figure the monthly tax calculation is applied to.Bank branch code A bank branch code is the number that routes an employee's net pay to the correct bank and branch when the salary payment is made.BCEA The BCEA (Basic Conditions of Employment Act) is the South African law setting minimum employment terms - working hours, leave, overtime and payslips.Benefit fund A benefit fund is an employer-linked pension, provident or retirement annuity fund set up in payroll, with its own contribution rules and clearance number.Clearance number A clearance number is a reference issued for a fund or statutory registration, stored against the employer or fund and used when reporting.Close corporation A close corporation (CC) is a South African business form with members rather than shareholders, relevant to how its people are classified for payroll tax.Code (payroll) Payroll uses several unrelated code systems - IRP5 source codes, SIC codes, nature-of-person codes, employee codes and bank branch codes - that share a word and nothing else.Contribution A contribution is money paid to a fund on an employee's behalf - to a retirement or medical fund - by the employee, the employer, or both.Cost to company Cost to company (CTC) is the total an employer spends on an employee in a year, including cash pay, employer contributions and the value of benefits.Declaration A declaration is the periodic statement an employer submits to SARS reporting what it withheld and owes for a period, such as the monthly EMP201.Deduction A deduction is an amount subtracted from an employee's earnings - statutory ones like PAYE and UIF, or voluntary ones like a loan repayment.Earnings Earnings are the positive pay components - salary, wages, allowances, overtime and bonuses - that an employee is paid before any deduction.SARS e@syFile Employer e@syFile Employer is SARS's desktop tool for preparing the EMP501 reconciliation and generating employees' IRP5 and IT3(a) certificates in bulk.SARS eFiling SARS eFiling is the online portal employers use to submit EMP201 and EMP501 declarations and to pay PAYE, UIF and SDL.Employee An employee is a person who renders services for remuneration under an employer's direction, and the unit every payroll calculation is run for.Employee code An employee code is the employer's own internal identifier for an employee, used to reference them in payroll, separate from any SARS code or tax number.Employer An employer is the person or business that pays remuneration for work and must register with SARS to withhold and pay over PAYE, UIF and SDL on its employees' behalf.Exemption An exemption is an amount or party that the law removes from a tax or charge, so it is not taxed or levied even though it would otherwise be.Fund (retirement/benefit) A fund is a pooled vehicle that holds contributions and pays a future benefit - a pension, provident or retirement annuity fund in payroll terms.Income tax number An income tax number is the unique reference SARS issues to a taxpayer, required on an employee's IRP5 and used to link their income and tax records.Journal (accounting) A journal is a dated record of debits and credits for transactions, the first place an entry is captured before it is posted to the ledger.Ledger A ledger is the book of accounts holding the running balance of every account, the destination journal entries are posted into.Levy A levy is a compulsory charge imposed by law for a specific purpose - in payroll, the Skills Development Levy that funds training.Liability A liability is an amount an employer owes - to SARS for PAYE, UIF and SDL, or to a fund - raised when payroll runs and cleared when it is paid.Pay cycle A pay cycle is the recurring schedule, and its set of periods, that groups the employees who are paid on the same frequency.Pay frequency Pay frequency is how often an employee is paid - weekly, fortnightly or monthly - which sets the period count that drives PAYE annualisation.Pay period A pay period is the slice of time one pay run covers - a week, fortnight or month - and the unit PAYE is calculated and reported against.Pay run A pay run is the act of calculating and finalising pay for every employee in a pay period, producing their payslips and the period's totals.PAYE reference number A PAYE reference number is the registration number SARS issues to an employer, identifying it on every EMP201, EMP501 and PAYE payment.Payment (to SARS) A payment is the money transfer that settles the PAYE, UIF and SDL liability an employer has declared to SARS for a period.Payroll Payroll is the whole process of calculating and paying employees and meeting the tax and statutory obligations that paying them creates.Payslip A payslip is the per-employee statement of earnings, deductions, contributions and net pay for a pay period, which the law requires the employer to give.Public benefit organisation A public benefit organisation (PBO) is a registered non-profit whose approved status lets donors claim a tax deduction for donations to it.Pensionable earnings Pensionable earnings are the portion of remuneration a retirement fund contribution is calculated on, also called retirement-funding income.Pro-rata pay Pro-rata pay is paying a fair fraction of a full-period amount when an employee works only part of a pay period, such as joining or leaving mid-month.Reconciliation Reconciliation is proving two sets of figures agree - in payroll, that the year's EMP201 declarations match the IRP5 certificates on the EMP501.Remuneration Remuneration is everything an employee is paid for their services, and the base figure from which PAYE, UIF and SDL are all calculated.SARS SARS (the South African Revenue Service) is the national tax authority that collects PAYE, UIF and SDL from employers and administers their payroll filings.Tax certificate A tax certificate is the year-end record of an employee's income and tax - an IRP5 where PAYE was deducted, an IT3(a) where none was.Tax period A tax period is the numbered period within a tax year for a given pay frequency, used to place a pay run in time and to annualise PAYE.Tax residency Tax residency determines whether a person is taxed in South Africa on worldwide income or only on South African-source income, which affects PAYE treatment.Tax year The tax year is the period SARS assesses income tax over - in South Africa, 1 March to the end of February - which resets year-to-date payroll totals.Taxable income Taxable income is the income left after allowable deductions on which income tax is ultimately assessed, the annual counterpart of the monthly PAYE base.Withholding tax Withholding tax is tax an employer deducts from pay at source and remits to SARS, rather than the employee paying their tax directly.Year-to-date Year-to-date (YTD) is the running total of an employee's earnings, deductions and tax from the start of the tax year, used for averaging and reconciliation.
