A payroll software checklist for South African employers

Running payroll in South Africa is not only paying salaries. Every month the employer works out tax and contributions, declares and pays them to SARS, and gives each employee a payslip. Every year it reconciles the year's declarations and issues certificates. Software that does the first part well and the second part badly leaves you with a bill in May.

What it has to calculate

• PAYE, the income tax withheld from each salary.
• UIF, at 1 percent from the employee and 1 percent from the employer.
• SDL, at 1 percent of payroll, for employers whose annual payroll is above R500 000.
• ETI, the incentive that reduces PAYE for qualifying young employees, where it applies.
• Employer contributions to the Compensation Fund under COIDA, which have their own annual return.

Ask the vendor whether tax tables update automatically when SARS changes them, and whether the update is included in the price. Software that needs a paid upgrade each tax year is a cost that belongs in your comparison.

What it has to produce

The full chain, and what each document is for, is in payroll returns: EMP201, EMP501 and IRP5. The register records which payroll products state support for these returns on their own pages. See the payroll sector page.

How it reaches SARS

There is a difference between software that prepares a return and software that submits it. Many products produce a file that you load into e@syFile or capture on eFiling yourself. Some transfer the figures directly. The first costs you an hour a month and a chance to mistype; the second does not. Ask which one you are buying, and ask to see it happen.

Taking a person on, and letting a person go

Payroll starts and ends with an employee, and both ends have data and documents that the software should handle.

• On starting: ID or passport number, tax reference, bank details, start date, hours and the pay structure.
• During: changes of pay, deductions, loans, leave and any increases, each with a date.
• On leaving: the final pay run, any accrued leave paid out, the UIF information, and the certificate that reaches SARS.

Ask the vendor to show you each in the demonstration, with a dummy employee. The two ends are where a product reveals how well it fits South African rules.

Leave, and the law behind it

Payroll and leave are connected: leave taken reduces pay, and accrued leave is owed when an employee leaves. If the product handles leave, check that it accrues each type by the rule that applies. BCEA leave: what HR software must accrue lists the minimums.

How it is priced

Payroll is priced in three ways on the register: a rate per employee, bands of headcount, and on request. A rate per employee is easy to scale. Bands change in steps, so the cost of the next employee depends on where you sit. A quote has to be turned into something you can compare, which how to ask for a quote explains.

• Is the price per employee, per band, or per company?
• Is VAT included? Read including and excluding VAT.
• Are several companies billed separately?
• Is there a minimum, or a different arrangement above a certain headcount?
• Is a bureau or accountant running payroll for clients priced differently?

Run it yourself, or have it run for you

Some vendors sell software you operate. Some also run payroll for you, and some are payments companies or labour law advisers whose payroll is part of a wider service. A payments company is not a payslip calculator, and the register lists what each vendor's own page says it does. If your staff are few and your time is short, a managed service may cost less than your hours; if you want control and a lower price, run it yourself.

The test that settles it

Take last month's payroll and run it in the trial. Compare every payslip to the cent against the one you actually issued: gross pay, PAYE, UIF, leave balance, net pay. Any difference is either an error in your old process or a gap in the new one, and both are worth knowing before you pay. The full method is in how to test software in a free trial.