Year-end payroll in South Africa: how to tax bonuses and leave pay-outs, and the dates to meet
A bonus or an encashed leave pay-out is taxed as an annual payment, not as ordinary monthly pay. This guide shows the SARS method with its own worked example, what UIF and SDL do on top, and when each month’s payment is due.
In short
- A bonus, a 13th cheque and encashed leave are all taxed as an “annual payment”. The tax is the difference between the tax on your employee’s annual salary plus the bonus and the tax on the annual salary alone.
- Leave is only income once it is paid. Leave paid out on resignation, retirement or encashment is taxed the same way as a bonus.
- UIF stops at R177.12 a month for each of you, so a bonus only adds UIF if the employee’s pay for that month is still under R17,712. SDL is 1% of everything you pay, bonuses and leave pay included, once your pay bill is above R500,000 a year.
- December pay is declared and paid to SARS on the EMP201 due Thursday 7 January 2027. November pay is due Monday 7 December 2026.
- Set the cash aside now. Bonus PAYE is not due on pay day, it is due the following 7th.
What counts as an annual payment
SARS treats a lump sum as an annual payment when it is paid under the employee’s conditions of service or your usual practice, or when it is worked out without reference to a pay period. Its guide for employers lists annual and incentive bonuses, merit awards, leave pay on resignation, encashed leave, and backdated payments for earlier years.
Whether you pay a bonus at all is a matter of the contract, your policy or your practice. Once you do, the tax follows one method.
How SARS expects you to tax a bonus
The method takes six steps, and your payroll software does them for you.
- Work out the tax on the regular monthly salary, using the monthly table.
- Multiply the monthly salary by 12 to get the annual equivalent.
- Add the bonus to the annual equivalent.
- Work out the tax on that total, using the annual table.
- Work out the tax on the annual equivalent alone, using the annual table.
- Subtract step 5 from step 4. The result is the PAYE on the bonus.
SARS gives its own example: an employee on R28,000 a month who receives a R14,800 bonus in October.
| Step | Amount |
|---|---|
| Tax on the R28,000 salary (monthly table) | R4,171 |
| Annual equivalent (R28,000 × 12) | R336,000 |
| Annual equivalent plus the R14,800 bonus | R350,800 |
| Tax on R350,800 (annual table) | R53,723 |
| Tax on R336,000 (annual table) | R49,945 |
| PAYE on the bonus (R53,723 less R49,945) | R3,778 |
| Total PAYE for October (R4,171 plus R3,778) | R7,949 |
These are SARS’s figures from its employer guide, so your own numbers will differ with the tax tables and the employee’s circumstances. The point is the shape of the calculation: the bonus is taxed at the employee’s marginal rates, on top of their salary. SARS also allows the tax on a bonus to be worked out at the start of the tax period and spread over the remaining pay periods, which some payroll systems offer as an option.
Leave pay: when it becomes income
Accrued leave has no tax value while it sits on the employee’s record. It becomes taxable remuneration when it is paid. SARS lists the usual triggers: the employee resigns or retires, leave is encashed because too much has built up, the employee becomes insolvent or dies (when it is paid to the estate), or an internal arrangement such as a promotion settles it.
- Encashed or paid-out leave is taxed like a bonus. SARS says accrued leave that is encashed must be taxed in the same manner as a bonus.
- It is not a severance benefit. SARS says leave pay is payment for services rendered and does not form part of a severance benefit, so it does not get severance treatment.
- Unpaid or forfeited leave is not income. Nothing is taxed until you actually pay it.
- It has its own code. SARS asks for leave paid on resignation or encashment to be reflected on the IRP5 or IT3(a) under code 3605.
UIF and SDL on December pay
| Levy | Rule | What it means for a bonus |
|---|---|---|
| UIF | 1% from the employee and 1% from the employer, on earnings up to R17,712 a month (R177.12 a side at most) | A bonus adds UIF only while the employee’s pay for that month is still under the ceiling. A higher earner pays no extra. |
| SDL | 1% of total pay, paid by the employer. Exempt if your pay bill is expected to stay at or below R500,000 over 12 months | Bonuses and leave pay count as pay, so a large December bill raises your SDL. |
Both go through the same EMP201 as PAYE. SARS publishes the UIF ceiling as R17,712 a month, so check that your payroll system has not been left on an old figure.
The dates to meet
PAYE, UIF and SDL are paid within seven days after the end of the month in which they were deducted. If the 7th falls on a weekend or public holiday, pay on the last business day before it. What decides the month is when you pay, not when the bonus was earned.
| You pay staff in | Declare and pay by | Note |
|---|---|---|
| November 2026 | Monday 7 December 2026 | Ordinary deadline |
| December 2026 | Thursday 7 January 2027 | Many businesses are only just back at work. Diarise it before you close. |
| January 2027 | Friday 5 February 2027 | The 7th is a Sunday, so the deadline moves back to the last business day before it. |
| Tax year ending 28 February 2027 | Annual reconciliation (EMP501) by 31 May 2027 | Covers 1 March 2026 to 28 February 2027, so every December bonus must be on it. |
The interim reconciliation for 1 March to 31 August 2026 was due on 31 October. If you missed it, file now, because late or inaccurate submissions can bring penalties and interest.
The cash flow trap
Staff get the bonus on pay day. SARS gets its share weeks later. The danger is spending the whole December bank balance, then finding that January needs the PAYE, UIF and SDL on a payroll that was larger than usual, at the same time as the new-year rent, salaries and insurance.
Work out the December PAYE, UIF and SDL when you approve the bonus run, and move that amount into a separate account. If the bill turns out to be bigger than you can pay, speak to SARS about a payment arrangement before the due date, not after. Our guide to what to do when you cannot pay SARS explains the options.
Mistakes that cost money
- Loading a bonus as ordinary salary. The system then taxes it as if it were earned every month, which can over-deduct PAYE and leave the employee short.
- Leaving encashed leave out of the annual-payment method. It is taxed like a bonus, not like a normal month.
- Forgetting SDL and UIF on the extra pay. Both apply to bonuses and leave pay, within their limits.
- Treating the January 7th as optional. The deadline does not move because the office is closed. A weekend shifts it, a holiday shutdown does not.
- Not telling the employee. Staff who expect the headline bonus and receive about half after tax blame payroll. Tell them the approximate net before pay day.
What to do now
- Decide the bonus and leave pay-outs this month, and list every employee they apply to.
- Run the numbers before pay day. Ask your payroll provider to show PAYE, UIF and SDL on the December run so you know the January bill.
- Move that cash aside the day you approve the run.
- Check the payroll system carries the 2026/27 tax tables and the current UIF ceiling.
- Diarise 7 January 2027, and the 31 May 2027 annual reconciliation.
- Tell staff the net amount they will actually receive.
Frequently asked questions
How is a bonus taxed in South Africa?
As an annual payment. The employer works out the tax on the employee’s annual salary plus the bonus, deducts the tax on the annual salary alone, and the difference is the PAYE on the bonus. It is paid to SARS on the EMP201.
Is a leave pay-out taxed?
Yes. Leave is taxable when it is paid, for example on resignation or when you encash it. SARS says accrued leave that is encashed must be taxed in the same manner as a bonus.
When is the December EMP201 due?
Thursday 7 January 2027. PAYE, UIF and SDL are due within seven days after the end of the month, and if that day is a weekend or public holiday the deadline is the last business day before it.
Do I pay UIF on a bonus?
Only if the employee’s earnings for that month are still below the R17,712 monthly ceiling. UIF is 1% from each of you and stops at R177.12 a month.
Do I pay SDL on a bonus?
Yes, if you are liable for SDL. It is 1% of total pay including bonuses and leave pay, and employers expecting to pay R500,000 or less in the next 12 months are exempt.
Sources and further reading
- Guide for Employers in respect of Employees’ Tax (2027), South African Revenue Service
- Pay As You Earn, South African Revenue Service
- Unemployment Insurance Fund, South African Revenue Service
- Skills Development Levy, South African Revenue Service
- SARS urges employers to act now as 31 October interim reconciliation deadline approaches, South African Revenue Service
- Payroll in South Africa 2026: what employers must calculate, file and pay, TBL Accounting
This article is general information for South African businesses. It is not tax, legal or financial advice, and it reflects the rules and figures at the date shown above. Tax rules change, so confirm the current position before you act. TBL's practitioners are registered tax practitioners.
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