Payroll penalties usually don’t start with something dramatic. It’s normally small stuff: payroll ran a day late, the EMP201 wasn’t submitted on time, UIF/SDL was miscalculated, or the year-end reconciliation was rushed and incomplete. Then SARS adds a penalty, interest starts ticking, and suddenly payroll becomes a monthly anxiety.
If you’re searching things like “how to avoid payroll penalties”, “SARS payroll penalties”, or “late PAYE submission South Africa”, you’re likely trying to do the right thing—keep payroll clean, compliant, and predictable.
Let’s walk through the big payroll compliance issues that cause penalties, and how to prevent them with simple habits (not complicated theory).
First: know what SARS actually expects each month
For most employers, the “monthly rhythm” is the EMP201 (your monthly employer declaration and payment for PAYE, UIF and SDL where applicable). SARS states you must submit the EMP201 and pay within 7 days after month-end (typically by the 7th). If the 7th falls on a weekend or public holiday, it’s due on the last business day before.
Now here’s the part many businesses underestimate: SARS can charge both penalties and interest for late payment or outstanding amounts, and SARS’ employer guidance notes a 10% penalty (in addition to interest) can apply for late payments/outstanding employees’ tax, SDL, or UIF contributions.
Interest is charged at the prescribed rate, and that rate changes over time (SARS publishes updated interest rate tables).
So the simplest way to avoid SARS payroll penalties is boring—but powerful: treat payroll and EMP201 as a fixed monthly deadline, not an “end-of-month task we’ll get to.”
The most common SARS payroll penalties (and how they happen)
1) Late EMP201 payment (the classic one)
Late payment is where many penalties begin. You can run payroll perfectly, but if you miss the EMP201 deadline, SARS may still impose a late payment penalty and interest. SARS’ employer guidance is clear about penalties/interest for late payment or outstanding amounts.
How to prevent it:
Build your payroll process backwards from the EMP201 due date. If EMP201 is due by the 7th, aim to finalise payroll by the 2nd/3rd, review on the 4th, and submit/pay by the 5th. That gives you buffer for bank cut-offs, staff leave, and “surprise” corrections.
2) Problems at reconciliation time (EMP501 penalties)
A lot of employers are fine month-to-month, then get into trouble at reconciliation time. SARS highlights that you must send your reconciliation (EMP501) before the deadline to avoid penalties and interest.
SARS has also published that submitting an incomplete EMP501 or submitting after the due date can trigger administrative penalties of 1% of the year’s PAYE liability, increasing monthly up to 10%.
How to prevent it:
Don’t treat EMP501 as a separate “year-end problem.” Reconcile monthly. Make sure the totals you submit each month (EMP201) tie back to the payroll reports and your accounting records. When EMP501 season arrives, you’re not scrambling.
3) Under/over deductions because payroll wasn’t updated properly
This one is sneaky. Payroll runs, people get paid, but deductions are wrong because:
- employee details weren’t captured correctly,
- tax status changed,
- benefits/allowances weren’t treated correctly,
- or payroll changes weren’t applied consistently.
When SARS sees inconsistencies, it becomes a correction exercise (and correction exercises are where businesses lose time and often money).
How to prevent it:
Make “employee master data” a real thing in your business: ID numbers, address details, start dates, salary structure, benefits, and any changes—captured properly and updated the moment something changes.
4) Missing out on ETI because of non-compliance or missed claims
This isn’t a penalty, but it’s a painful “silent loss.” SARS notes that ETI can be forfeited if it’s not claimed by the due date of the last period within the ETI 6-month period.
How to prevent it:
If ETI applies to your business, treat it like a monthly check, not a year-end discovery.
Department of Labour payroll compliance issues that trigger trouble
Sometimes the issue isn’t SARS—it’s labour compliance. And often it’s not about “bad intent,” it’s about not having the basics documented.
Payslips aren’t optional
The Department of Employment and Labour states that each time workers are paid, employers must give them a payslip containing certain details.
Even if you pay by EFT and employees can see money came in, they still need the payslip details (period, earnings, deductions, etc.) because it protects both sides.
Record keeping matters (and there’s a time requirement)
The Basic Conditions of Employment Act requires employers to keep certain records (like employee details, time worked, remuneration paid), and it specifies these records must be kept for three years from the date of the last entry.
How to prevent it:
Keep a simple payroll file structure (digital is fine) with:
- employment contracts / appointment letters,
- payroll reports and payslips,
- leave records,
- and proof of payment/submission.
It’s not about being “perfect.” It’s about being able to prove what happened if you’re ever asked.
A realistic “no-drama” payroll system that avoids penalties
You don’t need a huge finance department to avoid payroll penalties. You need a repeatable process with checks.
Here’s a simple approach that works well for SMEs:
Run payroll with a buffer. Don’t run payroll on the last day of the month. Run it early enough that corrections don’t push you past the EMP201 deadline.
Do a two-person review (even in a small business). One person prepares payroll, another person reviews totals and anomalies (new staff, terminations, unpaid leave, big overtime jumps). This is where most “oops” moments get caught.
Reconcile monthly, not yearly. Each month, confirm payroll totals match what you’re declaring and paying to SARS (PAYE/UIF/SDL). When EMP501 season arrives, you’re not rebuilding the year from scratch.
Submit and pay before the deadline. Aim for the 5th, not the 7th—because weekends, public holidays, and banking cut-off times don’t care about your intentions.
Keep the “proof pack.” Keep proof of EMP201 submissions, payments, and payroll reports together monthly. If there’s ever a query, you can respond fast instead of panicking.
Quick checklist: the few things that prevent most payroll penalties
- EMP201 submitted and paid by the due date (or earlier).
- Payroll deductions reviewed for reasonableness (PAYE/UIF/SDL), especially for new joiners/terminations.
- EMP201 totals match payroll reports and accounting records.
- Payslips issued each pay period.
- Records stored and retrievable (3 years from last entry).
- EMP501 not left to the last minute (avoid 1%–10% admin penalties).
When “expert payroll support” is worth it
If payroll is starting to feel risky—like you’re one mistake away from penalties—outsourcing or getting expert support often saves money in the long run. Not just because of penalties, but because it protects your time, reduces rework, and keeps your compliance clean.
If you want help tightening this up, Zuva’s Payroll Services covers payroll processing and payslips so your monthly payroll stays accurate and on time.
