Labour
Determining Net Pay
FORMAT : Net Pay calculation
Normal pay - based on the hours actually worked
Overtime pay Normal overtime x 1,5
Bonus / incentives etc Double time x 2
GROSS REMUNERATION
Less: pension fund contributions Capped at
(calculated on normal wages) 7,5%
TAXABLE INCOME
Less : sundry deductions
UIF (employees deduction - 1% of gross wages)
Med Aid (calculated on pro rata basis contributions: employer/employee)
PAYE (calculated as a percentage of Taxable Income)
= NET PAY
Quick Warm-up Exercise
Example 1
Mr. Mlungu works a 45-hour normal week from Monday to
Saturday and gets paid at a rate of R80 per hour. His
overtime pay is “time plus a quarter” and for Sunday he gets
paid double time. For the week ended 18th July 2021 he
worked a total of 56 hours which included 4 hours on a
Sunday.
Calculate Mr. Mlungu’s gross remuneration.
An easy example to determine Net Pay
Example 2
Example 2
Step one: Work out the correct normal hours, normal overtime
hours, a Sunday and Public Holiday Hours
(Note: 3 different Tiers of Pay Scale)
Example 2
Example 2
Step two: Work out the deduction for “Employees Pension Contribution”
(Note: The difference between “Gross Remuneration” and “Employees
Pension Contribution = TAXABLE INCOME
Example 2
Step three: Work out the PAYE deduction on the Taxable Income amount
Example 2
Step four: Work out the UIF deduction and apply all other employee
deductions to arrive at the total amount of all deductions (excluding
employee’s pension contribution) as that has already been done in
calculating TAXABLE INCOME!
Example 2
Step five: Put it all together and show the employee’s final payslip where
NET PAY is being shown
Practice – Practice – Practice!!
Example 3
Example 3
Step one: Work out the correct normal hours, normal overtime
hours, a Sunday and Public Holiday Hours
(Note: 3 different Tiers of Pay Scale)
Day Hours Accumulative Hours
Monday
Tuesday
Wednesday
Thursday
Friday 50
Saturday Did Not Work 50
Sunday 6 56
Example 3
Step one: Work out the correct normal hours, normal overtime hours, a
Sunday and Public Holiday Hours
(Note: 3 different Tiers of Pay Scale). Calculate the different rates for
normal pay, normal overtime pay and Sunday and Public Holiday pay
Type of Pay Hours worked Rate per Hour Rand Amount
Normal Pay 40 R75 R3 000
Normal Overtime Pay 10 R75 x 1,3333333….. R1 000
Sunday and Public Holidays Pay 6 R75 x 2 R900
Note: All the Normal Overtime Rate is that in excess of the 40 normal hours
contracted to work between Monday and Fridays as no work was conducted on
Saturday!!
Example 3
Step two: Work out the deduction for “Employees Pension Contribution”
(Note: The difference between “Gross Remuneration” and “Employees
Pension Contribution = TAXABLE INCOME
Example 3
Step three: Work out the PAYE deduction on the Taxable Income amount
Example 3
Step four: Work out the UIF deduction and apply all other employee
deductions to arrive at the total amount of all deductions (excluding
employee’s pension contribution) as that has already been done in
calculating TAXABLE INCOME!
Example 3
Step five: Put it all together and show the employee’s final payslip for Mr.
Phindile where NET PAY is being shown
Practice – Practice – Practice!!
Example 4
Mr Malan and Mr Edwards are both artisans in a motor
manufacturing company. Mr Malan is remunerated at R75 per
hour and Mr Edwards at R55 per hour. Both work on average
40 hours per week. The following information is in respect of
medical aid and pension fund contributions, by employee and
employer, for both employees:
• Medical aid: 5% of normal wage per week for both
employer and employee
• Pension fund: 8% per week for both employer and
employee
• PAYE: 33% for Mr Edwards and 40% for M. Malan
• Both contribute 1% per week to the unemployment
insurance fund calculated on their normal wages
Example 4
The two persons worked as follows for the week ending
Sunday the 9th August 2020:
Edwards Malan
Hours Hours
Monday 10 10½
Tuesday 10½ 8
Wednesday 8 8
Thursday 9½ 9
Friday 8 8
Saturday 3 0
Sunday 0 3
Overtime is remunerated as follows:
• Normal overtime: 1½ times normal time
• Sundays and public holidays: twice the normal time
Example 4
Required:
Calculate the net wages payable to Mr. Edwards and
Mr. Malan for the week ending 9 August 2020.
Clearly indicate the hours worked, gross wage,
taxable income and net wage. Show all calculations.
Example 4
We are going to set out a pay slip denoting ‘net pay’ after
taking into account all of the information provided above
Example 4
The two persons worked as follows for the week ending
Sunday the 9th August 2020:
Edwards Malan
Hours Hours
Monday 10 10½
Tuesday 10½ 8
Wednesday 8 8
Thursday 9½ 9
Friday 8 8
Saturday 3 0
Sunday 0 3
Overtime is remunerated as follows:
• Normal overtime: 1½ times normal time
• Sundays and public holidays: twice the normal time
Example 4
Example 4
Example 4
The Final Hurdle
Example 5
Ndazana (Pty) Limited has the following information
available to prepare a payroll for employees for the
week ending 18th July 2021:
Employee hours worked and labour rate per hour:
Employee Hours worked Labour rate per hour
J Mandoza 55 R18
M Manto 21 R15
C Blanco 36 R19
J Sono 48 R20
I Vilakazi 50 R17
Example 5
Additional information:
• The normal working week consists of 48 hours
• Overtime is remunerated at time and a half
• J Mandoza spent two hours of his total hours of work
correcting work because of his poor workmanship
which the company is not liable to pay for
• Medical aid contributions are calculated at 5% of an
employee’s taxable income
• Unemployment Insurance Fund contributions are 1%
of basic wage
• PAYE is 18% of taxable income
• Pension is 7.5% of basic wage
Required:
Prepare an individual payroll for each of the employees for
the week given
Example 5
Mandoza Manto Blanco Sono Vilakazi
Hours worked 55 21 36 48 50
Normal hours -48 -48 -48 -48 -48
Unproductive hours -2
Overtime 5 0 0 0 2
Rate per hour R18.000 R15.000 R19.000 R20.000 R17.000
Medical aid 5.00% 5.00% 5.00% 5.00% 5.00%
UIF 1.00% 1.00% 1.00% 1.00% 1.00%
PAYE 18.00% 18.00% 18.00% 18.00% 18.00%
Pension fund 7.50% 7.50% 7.50% 7.50% 7.50%
Mandoza Manto Blanco Sono Vilakazi
Basic wage normal x rate R864.00 R315.00 R684.00 R960.00 R816.00
Overtime 1.5 of normal rate R135.00 R0.00 R0.00 R0.00 R51.00
Gross wage R999.00 R315.00 R684.00 R960.00 R867.00
Pension fund @ 7.5% of Basic (R64.80) (R23.63) (R51.30) (R72.00) (R61.20)
Taxable income R934.20 R291.38 R632.70 R888.00 R805.80
Other deductions (R223.51) (R70.17) (R152.36) (R213.84) (R193.49)
UIF @ 1% of Basic wage (R8.64) (R3.15) (R6.84) (R9.60) (R8.16)
PAYE @ 18% of TI (R168.16) (R52.45) (R113.89) (R159.84) (R145.04)
Medical aid @5% of TI (R46.71) (R14.57) (R31.64) (R44.40) (R40.29)
Net wage R710.69 R221.21 R480.34 R674.16 R612.31
Example 6
Example 6