Remuneration
Employee benefits and allowances
Allowances and benefits make up a large share of most South African packages, and each has its own tax rule. Getting the treatment right protects both the employee's net pay and the employer's compliance position.
Allowances
- Travel allowance: only a prescribed portion is subject to employees' tax, with the final position settled on assessment against logbook records
- Subsistence allowance: exempt within prescribed daily limits when travelling for work
- Cellphone, tool and uniform allowances: treatment depends on whether the expense is genuinely incurred for work
- Standby, shift and danger allowances: generally fully taxable remuneration
Benefits
Medical scheme membership, retirement funding and group risk cover are typically split between employee and employer portions. Employee amounts are deductions; employer amounts are cost and, for several benefits, a taxable fringe benefit for the employee — see employer cost.
Fringe benefits
The use of a company car, employer-provided accommodation, low-interest loans and employer-paid personal expenses are valued under prescribed rules and added to taxable income even though no cash changes hands.
Reporting on the payslip and IRP5
Each allowance and benefit has its own source code. Reporting a travel allowance under a general salary code, for example, changes the employee's assessment — see IRP5 certificates.
Frequently asked questions
Is a travel allowance taxable?
A prescribed portion of a travel allowance is subject to employees' tax each month, and the final taxable amount is determined on assessment based on business versus private kilometres supported by a logbook.
Is a cellphone allowance taxable?
Generally yes, unless it reimburses actual business expenditure under an arrangement that meets the requirements for a reimbursement rather than an allowance.
What is a fringe benefit?
A non-cash benefit an employer provides — such as a company car, accommodation or a low-interest loan — which is valued under the Income Tax Act and included in the employee's taxable income.
Do employer benefit contributions increase an employee's tax?
For several benefits, yes: the employer contribution is treated as a taxable fringe benefit for the employee, and may then attract a corresponding deduction within legislated limits.
Patuza reviews how each component of your packages is taxed, coded and reported, and corrects what is wrong.
Book a consultationRelated services
- Employee benefits administration →
Medical aid, retirement funds, group risk and allowances administered through payroll.
- Payroll processing →
Monthly and weekly payroll processing, calculations, payslips and statutory deductions.
- Payroll compliance →
PAYE, UIF, SDL, EMP201, EMP501 and IRP5 compliance managed end to end for SARS.
Related topics
- Package structure →
Structuring packages: guaranteed pay, variable pay, benefits and flexible components.
- Employee contributions →
What employees contribute to retirement, medical and statutory funds, and its effect on pay.
- PAYE →
Pay-As-You-Earn: how employees' tax is calculated, withheld, declared and paid to SARS.
- Net pay →
How take-home pay is derived from gross remuneration, deductions and tax.
Related insights
- Benefits and allowances in a package →
How each package component is taxed and what that means for the employee.
- Remuneration structuring guide →
Structuring packages for value and compliance.