In short
- A written contract of employment is required.
- PAYE and UIF registration are needed before the first payroll run, not after.
- The true cost of an employee is more than the salary.
- COIDA registration applies to most employers.
- SARS, Pay-As-You-Earn
Hiring your first employee changes your obligations more than any other step a small business takes. Most of it is manageable, but almost none of it is optional, and the penalties fall on timing rather than intent.
Before your first employee is paid
- A written contract of employment. Required, and it should cover role, hours, remuneration, leave and notice.
- PAYE registration with SARS, where the employee earns above the tax threshold.
- UIF registration, with SARS and the Department of Employment and Labour.
- SDL, where your annual payroll exceeds the prescribed amount.
- COIDA registration with the Compensation Fund, which applies to most employers.
- A payroll process, even if it is a spreadsheet and a calendar reminder.
The order matters. Registrations first, then the first payment. Registering afterwards means late submissions from day one.
The cost is not the salary
| Cost | Notes |
|---|---|
| Gross salary | The number you agreed |
| UIF contribution | Employer contributes alongside the employee deduction, subject to a cap |
| SDL | Where your payroll exceeds the threshold |
| COIDA | An annual assessment based on payroll and risk category |
| Leave | Paid time when nobody is producing |
| Equipment and setup | Tools, phone, laptop, uniform, vehicle |
| Your time | Managing, training and administering |
Budget meaningfully above the salary. A business that can just afford the gross figure cannot afford the employee.
Leave and hours
Statutory minimums apply to annual leave, sick leave, family responsibility leave, notice periods and working hours. They are minimums, not targets, and you cannot contract below them.
Get the specifics right for your sector before drafting the contract, since some industries have their own bargaining council rules that override the general position.
Keep the records
- Signed contract
- Payslips for every payment
- Leave records
- Hours worked, where relevant
- Proof of every statutory payment
Employment records are the ones most likely to be examined at the worst possible moment, and reconstructing them afterwards is not possible.
Common questions
Can I hire someone as a contractor instead?
Only if the relationship genuinely is one. Whether someone is an employee is decided on substance, not on what the agreement is called.
Do I need PAYE for someone earning below the threshold?
Registration requirements depend on the amounts involved. Confirm your position with SARS rather than assuming.
What about a part-time employee?
Most statutory protections apply on a proportionate basis. Part-time does not mean informal.
Keep the money side straightforward while the rest of the business gets more complicated.
Start invoicing- Basic Conditions of Employment Act 75 of 1997
- SARS, Employers
Disclaimer: This content is for general information only and does not constitute legal, tax, accounting or financial advice. Always confirm important requirements with SARS, the relevant authority or a qualified professional.
