SARS Payroll Penalties: What They Are and How to Fix Them
SARS payroll penalties are designed to hurt — and they are applied by the system without human involvement, which means ‘I did not know’ and ‘my accountant forgot’ change nothing. This guide lays out each penalty in the payroll cycle, the criminal edge that catches employers who treat deducted tax as working capital, and the practical routes out: filing, remission, payment arrangements and compromise.
- ✔Late EMP201 payment: 10% penalty + interest, applied automatically.
- ✔Late EMP501: 1% of annual PAYE per month, capped at 10% — per year outstanding.
- ✔Deducted-but-not-paid-over tax is a criminal offence, not just a debt.
- ✔Remission is possible on reasonable grounds — but only after you are fully filed.
- ✔A SARS payment arrangement stops further penalties; defaulting on it removes that protection.
The SARS penalty table for payroll employers
| Failure | Penalty | Notes |
|---|---|---|
| Late EMP201 payment | 10% of the amount + interest | Automatic; interest compounds from the due date |
| Late/missing EMP501 | 1% of annual PAYE per month, max 10% | Applies to interim and annual alike; wilful non-submission is criminal |
| Failure to deduct PAYE/UIF | Employer personally liable for the tax + penalties + interest | SARS collects from you, not the employee |
| Incorrect returns (understatement) | Understatement penalties per the Tax Administration Act | Behaviour-based: from ‘substantial understatement’ up to ‘gross negligence’ |
| Paying deducted tax late or never | Criminal offence on conviction | Deducted tax is held for SARS — using it is misappropriation |
The criminal edge employers ignore
Two payroll behaviours are criminal offences, not administrative issues: wilfully failing to submit returns (including the EMP501) and failing to pay over tax you deducted from employees. The second is the dangerous one: the moment PAYE leaves the employee’s payslip, it is SARS’s money in your hands — spending it on rent or suppliers is misappropriation, and SARS prosecutes it as such.
If the business is short of cash, the payroll taxes are the LAST money you touch. A late supplier is a negotiation; late PAYE is a crime scene. If you are already in this position, get help now — the voluntary-disclosure route is far kinder than a SARS discovery.
Step one of any fix: file everything
Every remedy SARS offers requires your filings to be current first. File outstanding EMP201s (oldest to newest), submit the missing EMP501s, and only then engage on the debt. Unfiled returns block remission requests, payment arrangements and Tax Compliance Status — and each month adds its own penalty layer.
If records are missing, reconstruct from bank statements, payslips and employee files — SARS accepts reasonable reconstructions far more readily than continued non-filing. This is exactly the catch-up work Admin Boss does for clients; quotes on request.
Remission: getting penalties waived
SARS may remit (waive) administrative penalties where there were reasonable grounds for the failure — serious illness, natural disaster, system failures beyond your control, or a genuine first-time error quickly corrected. Remission requests go through eFiling or the SARS branch with the evidence attached.
Interest is much harder to escape than penalties — it compensates SARS for time, and remission of interest needs exceptional circumstances. The earlier you file, the smaller the interest component, which is why speed matters more than the strength of your excuse.
Payment arrangements and compromise
- Payment arrangement: SARS lets you pay the debt (and often the penalties) in instalments over months. An approved arrangement stops further collection steps — but default on it and the full debt plus new penalties becomes immediately due.
- Deferral: short-term relief where you can show the money is coming (a signed contract payment, for example).
- Compromise: for genuine inability to pay, SARS may accept a reduced settlement of the total debt — a formal application with full financial disclosure. It fixes the past but requires clean future compliance.
- Tax Compliance Status: once arrangements are active, your TCS can reflect ‘compliant’ again — critical for tenders (tender documents guide).
Admin Boss runs a dedicated SARS debt management service for companies — arrangements, deferrals and compromises, plus the back-filings that make them possible. Phone 074 918 7130.
Always confirm current requirements with the official source — rules and deadlines change.
- ✔SARS debt management for companies — request a quote
- ✔Payment arrangements & compromises
- ✔Get back to good standing
Frequently asked questions
What is the penalty for paying PAYE late?
A 10% late-payment penalty on the amount due, plus interest from the due date — applied automatically by SARS's system. The same penalty applies to late UIF and SDL payments on the EMP201.
What happens if I never submit an EMP501?
A penalty of 1% of your annual PAYE liability per month outstanding (capped at 10%) accumulates, and wilful non-submission is a criminal offence that can lead to prosecution. File the reconciliation as soon as possible — penalties stop growing once it is in.
Can SARS payroll penalties be waived?
Yes, through a remission request where you had reasonable grounds for the failure (illness, disasters, system failures, genuine first-time error). Your filings must be fully up to date before SARS will consider remission, and interest is rarely waived.
Is it illegal to use deducted PAYE for business cash flow?
Yes — tax deducted from employees is held on behalf of SARS, and using it for anything else is a criminal offence. It is treated as misappropriation, and SARS prosecutes. If cash is short, negotiate with SARS for an arrangement instead.
What can I do if my company cannot pay its payroll debt?
Apply for a payment arrangement (instalments), a deferral (if money is demonstrably coming), or a compromise (reduced settlement with full financial disclosure). All three require your returns to be current first — file everything, then negotiate. Admin Boss's SARS debt management service handles exactly this.
Last reviewed: July 2026 · How we research our guides
EmployerGuide.online provides general information about South African employer obligations — not legal, tax or professional advice for your specific situation. Laws, rates and deadlines change; confirm current requirements with the official sources linked above, or ask Admin Boss. See our disclaimer.