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Pro rata daily vs monthly comparison


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
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