Written by Alicia
Posted 19 May 2025
Have you ever noticed a difference between your contracted salary and the actual amount deposited into your bank account? This Q&A aims to clarify some common reasons for these discrepancies.
How do I know if my employer has deducted tax from my salary?
The monthly deposit into your bank account will likely be less than your gross salary. This is because your employer withholds Pay-As-You-Earn (PAYE) tax and other statutory deductions. You can verify the tax paid by checking your
IRP5 form, specifically
source code 4102.
My employment contract states a monthly salary of R6 500, but I received R6 435 in my first month. I thought I earned below the tax threshold so I should not be paying tax. My employer suggested I contact SARS. Could you explain why I received a lesser amount?
The R65 difference appears to be a 1% deduction for the Unemployment Insurance Fund (UIF). If you are a full-time employee, your employer is required to deduct UIF.
I was retrenched from my full-time job three months ago and received a severance package equivalent to three months' salary. However, the amount deposited was less than expected. My former employer mentioned SARS. Can you assist?
The first R500 000 of your severance pay is tax-free. Any amount above this will be taxed using the special tax tables for retirement lump sums. This means you should only be taxed on your severance package if it exceeds R500 000. For further details,
click here. You can find the severance amount and the tax deducted by SARS on your eFiling profile by following these steps:
How to see which tax directives SARS has on file for you.
My employment contract includes participation in the company's subsidized medical aid, with the company covering the full cost. However, my net pay is lower than anticipated. What could be the reason?
The medical aid subsidy would have been part of your gross salary package as per your contract. The discrepancy in your net pay is likely due to the medical aid contributions and the specific option you selected. Depending on the medical aid fund's rules, you might be able to change your option, which could align your net pay with your expectations.
I contribute to a private retirement annuity fund through my employer, and they currently provide the tax deduction monthly instead of waiting for the annual assessment. Can I change this during the tax year?
Yes, you can request your payroll department to stop applying the monthly tax deduction for your retirement annuity contributions. There isn't a specific timeframe for making this change. However, it's important to regularly confirm that your employer continues to make the monthly retirement annuity payments to the fund.
How does Pay-As-You-Earn (PAYE) work?
You may have seen the word PAYE on your IRP5 payslip or heard it mentioned by
your employer but have no idea what it means. All it really means is that you are
paying the tax you owe to SARS on your salary every month instead of all at once at
the end of the tax year, hence PAYE means Pay As You Earn.
This is a good thing as it saves the taxpayer from having to pay between 18% and 45% of their earnings
(the taxable amount) to SARS in cash once a year as a lump sum!
PAYE is calculated monthly and paid to SARS by your employer every month.
Employers must withhold these taxes from your salary and pay them to SARS using
the PAYE tax tables, which vary based on payment frequency (weekly, fortnightly, or
monthly). The PAYE is calculated by annualizing your earnings (multiplied by 52
weeks, 26 weeks, or 12 months) and applying the tax rate to determine your monthly
tax owed.
If employers cover expenses like medical aid, pension funds, or other deductions,
these expenses are taken into account when they calculate the PAYE. In some
cases, where the taxpayer has only worked part of a tax year, they may even be able
to claim a tax refund because of how their PAYE is calculated.
For example:
If you worked 3 months of the 2025 tax year, from 1 December 2024 to 28 February
2025. You earned R10 000 per month (10 000 x 3), so R30 000 in total during those 3
months. The employer deducted PAYE of: R363.75 x 3 = R1 091.25 in total.
However, for the 2025 tax year, your
income was under the tax threshold of R95 750
and you should not have paid tax at all. In this case, since the tax has been paid
already but none was due, when the employee submits their tax return, they will be
entitled to a full refund of R1 091.25 (if no other
taxable income was received). For further details,
click here.
This entry was posted in TaxTim's Blog
and tagged Medical, Deductions, PAYE & UIF, Source Code, Top 5 Weekly Questions .
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