When an employer must pay the skills levy
When a South African employer must pay the skills development levy, how SARS's payroll test works, what counts as remuneration and who is exempt.
By Achekam · · 5 min read · For Running a business businesses in South Africa
The skills development levy is the payroll charge that small employers most often get wrong in one of two ways. Some pay it from their first employee, when their payroll is far too small to be liable. Others grow past the threshold without noticing and carry on not paying it, until SARS notices for them.
The levy itself is simple. The test for whether you owe it is where the care is needed, because SARS frames it as an expectation about the coming year rather than a look back at the last one. This article explains the rate, the test, what goes into the payroll figure, the employers that are exempt but still have to register, and how the exemption is applied in Achekam.
The levy is a percentage of total remuneration
SARS says the skills development levy is payable by employers at 1% of total remuneration paid to employees. It is an employer's cost. Nothing is deducted from the employee's pay for it.
SARS also says it is paid monthly with the EMP201, within seven days after month-end. That puts it on the employer's monthly declaration, so a business that is liable does not have a separate return to remember, but it does have one more line to get right each month.
The rate and threshold here are as SARS published them at the time of writing. SARS's skills development levy page sets out who must pay, what remuneration it is charged on and how it is declared, and is the place to confirm the current position.
The test looks forward, not back
SARS describes the threshold in two places, in slightly different words.
- Its table of other taxes says employers paying annual remuneration of less than R500 000 are exempt from paying the levy.
- Its skills development levy page says an employer becomes liable where it expects total salaries over the next 12 months to be more than R500 000.
The second wording is the one that changes how you watch your payroll. A business does not wait until it has paid more than R500 000 in a year and then start. The moment it can see that the coming 12 months' salaries will pass the threshold, for example because it has just signed up two new full-time staff, it is in.
A worked example in words: a small engineering workshop has run for years with a payroll comfortably below the threshold. In March it wins a long contract and hires a supervisor and three artisans, starting in May. Looking at the year ahead from that point, total salaries will now be over R500 000. Under SARS's wording, the business has become liable, even though nothing it has paid so far comes close.
So review the test whenever payroll changes materially, not once a year. A useful habit is to estimate the next 12 months' salaries each time someone is hired, and to note the result.
What counts as remuneration
The levy is worked out on more than basic salaries. SARS says SDL is 1% of the total amount paid in salaries, including wages, overtime, leave pay, bonuses, fees, commissions and lump sum payments.
That list matters in two ways:
- For the threshold test. A business whose basic payroll looks safely under the threshold may find that overtime in a busy season, an annual bonus round and commissions take the year's total over it.
- For the monthly amount. Once liable, the levy is charged on all of those items, so leaving out overtime or bonuses understates it.
When you estimate the coming year, add up every item on that list, not just the contracted salaries.
Exempt employers that must still register
Some employers are exempt from paying the levy whatever their payroll. SARS's employer guide names them: public service employers in the national or provincial sphere, public entities funded 80% or more by Parliament, qualifying public benefit organisations, and municipalities holding an exemption certificate.
The same guide makes a point that is easy to miss. These employers are exempt from paying SDL but are not absolved from registration. A qualifying PBO with a large staff still registers, and simply does not pay. Public service employers and those public entities must budget an equivalent amount for training their employees.
How a PBO's exemption works in practice is covered in SDL exemptions for PBO and public-sector clients. For a business below the R500 000 threshold, SARS's own pages describe the registration question differently, so confirm with SARS rather than relying on a summary. Remember too that SARS says an employer that needs to register for PAYE and/or SDL also needs to register to pay UIF contributions; the full sequence is in registering with SARS and the UIF as a new employer.
Applying the SDL exemption in Achekam
In Achekam, the South African payroll calculation applies the SDL exemption from the confirmed tax table, together with the tax brackets, age rebates, medical tax credits, the retirement-contribution deduction limit and the UIF ceiling.
The word "confirmed" is doing real work. Achekam ships its payroll tax tables pre-loaded but unconfirmed, and no payroll run uses a table until a named person at your business confirms your own copy. Only the 2025/26 South African table ships, so for a later year your business starts and confirms its own. Confirming creates your copy; the shared table stays unconfirmed for everyone else.
Before confirming, check the SDL exemption figure in the table against SARS's published threshold for the year. If it is wrong, every run that year applies the levy on the wrong basis.
The table holds the threshold; whether your business is above or below it, on SARS's forward-looking test, is a judgement someone at the business has to make and keep under review.
A short monthly check
| Question | When to ask it |
|---|---|
| Will the next 12 months' salaries, including overtime, bonuses and commissions, exceed the threshold? | Every time payroll changes materially |
| Are we one of the exempt employers SARS lists, and are we registered anyway? | Once, and when your status changes |
| Does the confirmed tax table's SDL exemption match SARS's figure? | Before confirming each year's table |
| Did the EMP201 include the levy, and was it paid within seven days of month-end? | Every month |
Put the forward-looking test on the agenda for every hiring decision. It is far easier to start paying the levy in the right month than to explain later why it was not paid.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
