Medical credits and retirement deductions in payroll
How South African payroll in Achekam applies medical tax credits and the retirement deduction limit from a confirmed table, and what employers check.
By Achekam · · 4 min read · For Financial services businesses in South Africa
An advice practice spends its days explaining medical scheme contributions and retirement annuities to clients. Its own payroll is where the same ideas turn into PAYE on a payslip, and where small errors repeat every month until somebody notices at year end.
Two items cause most of the confusion in a small South African payroll: the medical scheme fees tax credit, and the deduction for contributions to pension, provident and retirement annuity funds. Both reduce an employee's PAYE, both depend on figures SARS sets for each tax year, and both depend on the employer having the right information about each employee. This article explains how Achekam applies them and what you need to get right.
What the calculation applies from the confirmed table
Achekam's South African payroll calculation applies the tax brackets, the age rebates, the medical tax credits and the retirement-contribution deduction limit. It also caps UIF at the ceiling and applies the SDL exemption. Every one of those comes from a tax table stored as data, not from figures fixed in the software.
That design has one important consequence: the figures are only as good as the table, and the table is only used once someone takes responsibility for it. A payroll run is refused until a named person confirms that year's table. Confirming creates your own copy of it; the shared table stays unconfirmed for everyone else.
Medical scheme members and dependants
The medical tax credit reduces the PAYE due, and the amount depends on the employee's medical scheme membership and the people the scheme covers. SARS's guide for employers sets out how the credit is worked out and the amounts for the year.
For the credit to be right on the payslip, your payroll records need to be right first. In practice, that means:
- Know who is on a scheme. Ask each employee, in writing, whether they belong to a medical scheme and whether contributions are paid through payroll.
- Know who is covered. The people on the employee's membership affect the credit, so ask for the scheme's membership certificate rather than relying on memory.
- Update when life changes. A new baby, a spouse joining or leaving the scheme, or a child ageing off it all change the position. Make it part of your staff onboarding and annual check-in to ask.
If an employee pays their scheme privately rather than through payroll, record that clearly too, so nobody assumes the payslip already reflects it.
Retirement contributions and the deduction limit
Contributions to pension, provident and retirement annuity funds are dealt with through the retirement-contribution deduction, which works up to a limit that SARS sets and the confirmed table carries. Achekam applies that limit in the calculation.
What the employer controls is the information going in. For each employee, be clear about:
- Which fund contributions are made through payroll, by the employee and by the employer.
- Whether a retirement annuity premium is deducted from salary and paid over by the practice, or paid by the employee privately.
- When a contribution changes, for example after a salary increase or a change of fund.
Changes mid-year belong in that month's run. Each period's variable inputs, such as overtime, commission, allowances, reimbursements and unpaid leave, are entered on the run, and the run is approved by someone other than the person who prepared it. An approved run is never recalculated, so a contribution change missed this month is corrected in a later run, not by reopening the old one.
Age rebates
The age rebates depend on the employee's age, so the date of birth on each employee's record matters. An employee who reaches a qualifying age during the year can cause PAYE differences at year end if the date is wrong. Check dates of birth when an employee is added, especially if you imported staff from another system.
Confirming the year's table before the run
Only the 2025/26 South African table ships with Achekam, and it ships unconfirmed. For pay dates from 1 March 2026, you must start the 2026/27 table from last year's figures, update it to SARS's figures, and confirm it before payroll will run.
SARS's Guide for Employers in respect of Employees' Tax (2027) covers the 2026/27 tax year, with the individual tax tables, rebates and thresholds announced in the 2026 Budget and how employers must deduct PAYE. Check every figure in your table against it, including the medical credits and the retirement deduction limit, before the named person confirms. Keep a dated note of who checked what.
Checking the IRP5 at year-end
At year end, IRP5 and IT3(a) certificates are prepared from issued payslips and download as PDFs. A certificate cannot be issued while an employee's ID or tax number is missing. The EMP501 reconciliation shows month by month what was deducted, declared and paid, set against the tax certificates, and produces the file that SARS e@syFile Employer imports. Achekam submits nothing to SARS itself; a person files and records the reference SARS gives.
Before you file, look at the medical and retirement figures on each certificate and ask whether they match what you know about that employee's year. Errors found now are easier to explain than errors found by the employee when they file.
For the steps to set up and confirm the new year's table, see confirming the 2026/27 tax table before payday, and for the year-end certificates and reconciliation, read year-end IRP5, IT3(a) and the EMP501 reconciliation.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
