Since tax is a yearly liability and employees are paid in more intervals, salaries and wages must be prorated up to a full year to calculate the tax. The tax is then prorated down to the pay period again to get the PAYE deduction for that period.
For example:| Daily | Weekly | Monthly |
|---|---|---|
|
Daily wage: R 200 x 365. Calculate tax on R 73 000. Divide the resulting tax by 365. |
Weekly wage: R 2 000 x 52. Calculate tax on R 104 000. Divide the resulting tax by 52. |
Monthly salary R 10 000 by 12. Calculate tax on R 120 000. Divide the resulting tax by 12. |
You can also use the number of days worked when calculating weekly or monthly tax. For a monthly employee during January, the yearly equivalent can be calculated with salary / 31 x 365
When doing the pro rate calculation using the number of days, it is easy to see how the tax can be different because
of the difference in number of days per month during the year.
Below is an example of two employees earning the same salary, but using different methods of calculation, number of
days per month vs monthly. You will notice slight differences during the year, but since there is a correction on
the last pay period and tax is a yearly liability, you will notice that both employees pay the exact same amount in
total.
| Month | Salary | Prorated Months |
Prorated Days |
|---|---|---|---|
| Mar (31) | R 15 000.00 | R 1 527.75 | R 1 505.27 |
| Apr (30) | R 15 000.00 | R 1 527.75 | R 1 543.81 |
| May (31) | R 15 000.00 | R 1 527.75 | R 1 505.27 |
| Jun (30) | R 17 000.00 | R 1 942.08 | R 1 976.03 |
| Jul (31) | R 17 000.00 | R 1 942.08 | R 1 894.56 |
| Aug (31) | R 17 000.00 | R 1 942.08 | R 1 894.56 |
| Sep (30) | R 17 000.00 | R 1 942.08 | R 1 976.03 |
| Oct (31) | R 17 000.00 | R 1 942.08 | R 1 894.56 |
| Nov (30) | R 17 000.00 | R 1 942.08 | R 1 976.03 |
| Dec (31) | R 17 000.00 | R 1 942.08 | R 1 894.56 |
| Jan (31) | R 17 000.00 | R 1 942.08 | R 1 894.56 |
| Feb (28) | R 17 000.00 | R 1 625.11 | R 1 789.76 |
| Total | R 198 000.00 | R 21 745.00 | R 21 745.00 |