Many small businesses owners make the mistake to think that their emoloyees are independent contractors because, according to them, the employees are not permanently employed and the employer then does not pay any taxes for these employees.
Any employee who works for more than 24 hours per month, should be paying UIF by law. The employee contributes 1% of his/her gross salary to the Unemployement Insurance Fund and the employer als contributres 1% of the employee’s gross salary to UIF.
If a worker receives R2000.00 in his pocket (nett salary), the employer should pay R20.20 and the worker should pay R20.20 to the Department of Labour for UIF. Thus, the gross salary (before deductions) is R2020.20. (The employee pays R20.20 and gets out R2000.00 and the employer also pays R20.20).
Any employee with a salary below the tax threshold, will only pay UIF and not yet PAYE (Pay as you earn).
(You are liable to pay PAYE tax if you earn more than a nett monthly salary of R5833.00 in the 2015 year of assessment, and are younger than 65 years of age.)
Even if your employees get paid per hour. It does not matter how little the salary is, if they work for more than 24 hours in a month, the employer is liable to pay over the UIF to the Department of Labour.
Who qualifies as independent contractors? (for whom you do not have to pay over any taxes – UIF or PAYE)
A contract worker issues an invoice for services delivered as agreed upon by both parties for the period they agreed on.
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