The Legal Requirements for Onboarding Employees in South Africa: Do’s, Don’ts, Regulations, and Payroll Obligations

Onboarding new employees is one of the most critical steps in establishing a professional and legally compliant employment relationship. While this process helps integrate employees into the workplace, it also involves various legal and procedural requirements that employers in South Africa must follow.

From employment contracts to payroll registrations, understanding the do’s and don’ts of employee onboarding and adhering to relevant labour laws can save your business from costly penalties and disputes. Here’s an in-depth guide on the legal requirements, payroll obligations, and best practices for onboarding employees.

Legal Requirements for Onboarding Employees

1. Employment Contracts:

• Written Contracts Are Mandatory: South African labour law requires a written employment contract before the employee starts work. Verbal agreements alone are insufficient and can result in disputes.
• Contents of the Contract: Include job title, duties, working hours, probation period (if applicable), remuneration, leave entitlements, termination clauses, and any additional terms.
• Updates and Amendments: Should the role or terms change, the contract must be updated and signed by both parties.

2. Employee Information:

• Collect necessary personal information such as a copy of their ID, proof of address, tax number, and banking details.
• Ensure compliance with the Protection of Personal Information Act (POPIA) by keeping this information secure and private.

3. Registration with the UIF and SARS:

• UIF (Unemployment Insurance Fund):
  • All employers must register their employees with the UIF. Both employer and employee contribute 1% of the employee’s monthly salary.
  • Employers need to submit monthly UIF returns via the UIF eFiling system.
• SARS (South African Revenue Service):
  • Register employees for Pay-As-You-Earn (PAYE) and deduct income tax as per their earnings.
  • Employers must submit monthly EMP201 returns to SARS and issue annual IRP5 certificates.

4. Occupational Health and Safety (OHS):

• Comply with the Occupational Health and Safety Act, especially in industries with physical labour or hazardous environments.
• Provide safety training and equipment where necessary to ensure compliance and reduce liability.

5. Work Permits for Foreign Nationals:

• Verify that foreign employees possess valid work permits or visas. Employing someone without the correct documentation is illegal and may result in fines or other penalties.

6. Background Checks:

• Conduct lawful checks, such as criminal history, credit reports, or qualification verifications, where relevant to the job. Ensure these checks comply with POPIA and only proceed with the employee’s consent.

Payroll Obligations When Onboarding Employees

Setting up an employee on payroll is one of the most critical aspects of onboarding. Employers must comply with the following:

1. Registration with SARS:

• Tax Reference Number: Ensure the employee has a SARS tax reference number. If not, assist them in obtaining one.
• PAYE (Pay-As-You-Earn): Deduct income tax from the employee’s salary based on SARS tax tables. Submit monthly PAYE returns via the EMP201 form.

2. Deductions and Contributions:

• UIF Contributions: Deduct 1% of the employee’s salary and contribute an additional 1% as the employer.
• Skills Development Levy (SDL): Employers with a payroll above R500,000 per year must contribute 1% of their payroll to the SDL.
• Provident and Pension Funds: If applicable, ensure contributions are deducted and submitted to the relevant fund.

3. Compensation for Occupational Injuries and Diseases Act (COIDA):

• Register with the Compensation Fund to cover employees in the event of work-related injuries or diseases.
• Submit annual returns to the Compensation Commissioner and ensure payments are up to date.

4. Payslip Requirements:

• Issue a detailed payslip each month, including:
  • Gross salary
  • Deductions (tax, UIF, etc.)
  • Net salary
  • Overtime (if applicable)
  • Bonuses or allowances
• This is required under the Basic Conditions of Employment Act (BCEA).

5. Annual Returns:

• Submit the EMP501 reconciliation twice a year to SARS, ensuring all PAYE, UIF, and SDL payments align with the IRP5 certificates issued to employees.

Do’s of Employee Onboarding

1. Have a Comprehensive Induction Programme:
   • Familiarise employees with company policies, code of conduct, and job expectations.
   • Provide a structured orientation to introduce them to their team, responsibilities, and workplace culture.
2. Document Everything:
   • Keep copies of signed contracts, tax forms, proof of UIF registration, and any correspondence related to the onboarding process.
3. Ensure Equity Compliance:
   • If your business falls under the Employment Equity Act, ensure your hiring and onboarding process promotes diversity and eliminates discrimination.
4. Provide Resources and Training:
   • Equip employees with the tools and knowledge they need to excel, including on-the-job training or access to company systems.

Don’ts of Employee Onboarding

1. Don’t Skip Contracts:
   • Never allow an employee to start working without a signed and legally binding employment contract.
2. Don’t Ignore Data Protection Laws:
   • Mishandling employee data can lead to breaches of POPIA and potential fines.
3. Don’t Delay Registrations:
   • Late UIF or SARS registrations can result in penalties or even legal action.
4. Don’t Disregard Safety Protocols:
   • Failing to comply with OHS regulations puts your business at risk of fines and liability for workplace injuries.

Key Regulations to Follow

• Basic Conditions of Employment Act (BCEA): Governs minimum employment standards.
• Labour Relations Act (LRA): Protects fair labour practices.
• Unemployment Insurance Act: Covers UIF requirements.
• Employment Equity Act (EEA): Promotes diversity and non-discrimination.
• Occupational Health and Safety Act (OHS): Ensures workplace safety.
• Protection of Personal Information Act (POPIA): Protects employee data.

Consequences of Non-Compliance

Non-compliance with onboarding or payroll obligations can lead to severe consequences, including:

1. Financial Penalties: Late UIF or PAYE submissions may result in interest and fines from SARS or the Department of Labour.
2. Labour Disputes: Employees may take unresolved issues to the CCMA or Labour Court.
3. Reputational Damage: A poorly managed onboarding process can tarnish your business reputation and deter top talent.

Onboarding employees can be a complex legal and procedural process, but you don’t have to navigate it alone. At Labour Law with Luzan, we specialise in helping businesses stay compliant with South African labour laws while streamlining their hiring processes.

📩 Contact us today for expert advice on employment contracts, payroll compliance, and more!