Module 7: Trading Concern: Wages and Salaries


mainly applies to wage earners and not paid to employees who earn a salary. Some salaried employees get overtime pay, and some do not. The overtime rates are usually calculated at a higher rate than the basic rate.


The normal working hours per day excludes the lunch break as stipulated in the employee’s employment contract. Overtime hours is calculated daily – that is, everyday normal hours as well as overtime hours needs to be calculated. Employees who work outside of their contracted hours weekdays and/or Saturdays must be remunerated at 1½ (1.5 x) times the normal wage rate. Employees who work outside of their contracted hours on a Sunday or on work public holidays, must be remunerated at twice (2 x) times the normal wage rate. The employees’ normal rate is doubled.


7.3 Deductions


Businesses make provision for the employee’s retirement by means of a pension fund or for their medical benefits by means of a medical aid. In most cases businesses contribute to their employees’ pension and medical aid funds. The employer deducts the applicable contributions from the employee’s gross wage or salary and pays the deductions and contributions over to the various funds directly.


7.3.1 Pension fund


The employee normally contributes a fixed percentage of the basic wage or salary. The amount is paid into the pension fund – usually together with a similar contribution by the employer. When the employee retires, a pension from this fund is paid to the employee. If the employee were to die before retirement, the dependants, if any, receive the pension. Contributions are paid into the pension fund once a month.


Example Mr Goolam’s wages for the week amounts to R1 200. 10% of this has to be deducted as his pension fund contribution. The company contributes a further 8% to its employees’ pension fund. Calculate the contribution of Mr Goolam, as well as that of the company and determine the amount to be paid into the pension fund.


Mr Goolam’s contribution R1 200 × 10%


= R120.00 per week


Employer company contribution R1 200 × 8%


= R96.00 per week Therefore R120.00 + R96.00 = R216.00 is paid into the Pension Fund per week. 7.3.2 Income tax (PAYE – Pay As You Earn)


Employers are obligated to deduct tax from the employee’s salary or wages and to pay it to the SARS (South African Revenue Services) before the 7th day of the following month. If the employee receives weekly wages, PAYE tax should be deducted every week, and paid over to the SARS once a month.


The employee’s income tax is calculated on taxable income. Taxable income is gross wages or salary after employee contributions to a pension fund has been deducted.


In South Africa, PAYE is calculated on a sliding scale, where the more you earn, the more income tax will be deducted.


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