1. Incorrect PAYE, UIF, and SDL Calculations
If you underpay SARS due to miscalculations, you’ll face penalties, interest, and audits. Overpaying affects your cash flow unnecessarily.
Tip: Ensure your payroll system is updated with the latest SARS rates and thresholds.
2. Missing or Late Submissions to SARS
Failing to submit EMP201s (monthly declarations) or EMP501s (bi-annual reconciliations) on time can lead to automatic late penalties and interest charges.
Many businesses miss deadlines simply because no one is tracking them properly.
3. Misclassifying Workers
Classifying employees as “independent contractors” when they don’t meet SARS’ criteria can result in backdated tax liability and legal issues.
Always assess worker status carefully using SARS guidelines.
4. Incorrect Overtime and Leave Calculations
Underpaying or overpaying employees for overtime, annual leave, sick leave, or public holidays not only creates employee dissatisfaction, but could lead to CCMA claims or Department of Labour penalties.
5. Not Keeping Proper Payroll Records
By law, businesses must keep payroll records for at least five years. Incomplete or missing documentation can cause compliance issues during audits.
Includes payslips, EMP201s, EMP501s, IRP5s, leave records, etc.
6. Manual Payroll Processing or Using Outdated Systems
Using Excel or handwritten records increases the risk of human error — miscalculations, missed deductions, duplicate payments.
Invest in a reliable, SARS-compliant payroll system like Sage, SimplePay, or PaySpace.
7. Ignoring Minimum Wage or BCEA Requirements
Failing to comply with the National Minimum Wage Act or Basic Conditions of Employment Act (BCEA) can lead to labour fines and reputational damage.
This includes things like not paying for overtime, not giving payslips, or not providing proper leave.
8. Incorrect Termination Pay
When an employee leaves, errors in calculating notice pay, leave pay, and severance can result in disputes, legal action, and financial penalties.
Ensure all final payments comply with the BCEA.
9. Not Issuing IRP5s or Tax Certificates
Employers are required to issue IRP5 tax certificates to employees for tax filing purposes. Delays or errors here can cause employee frustration and SARS follow-ups.
10. Failing to Update Employee Details
Incorrect bank info, tax numbers, or addresses can result in failed payments or compliance errors.
Keep employee records up to date and securely stored.
🛡️ How to Avoid These Payroll Pitfalls
- Use a professional payroll service or system
- Stay updated on SARS, UIF, and labour law changes
- Automate submissions where possible
- Reconcile payroll monthly
- Work with a registered accounting or payroll practitioner
✅ Let Prosperity Accounting Handle Your Payroll — Accurately and On Time
Avoid penalties, employee disputes, and wasted time. At Prosperity Accounting and Bookkeeping Solutions, we take care of your payroll from start to finish — compliance, calculations, submissions, and peace of mind.
👉 Book a FREE 15-minute consultation to find out how we can streamline your payroll process.
