We know that employees in standard employment must be taxed by reference to the tax tables or the official rates of tax. Those not in standard employment must be taxed at a flat rate of 25%, unless they are in possession of a tax directive. The tax so deducted must be classified as PAYE, not SITE. As such, casual employees must be taxed at 25%, which seems most unfair. Theoretically, they should submit a tax return to SARS at the end of the tax year, because they have had PAYE deducted from their remuneration. They would then almost certainly receive a refund of the tax they have had deducted, as their total earnings for the tax year would probably be below the tax threshold.
In practice, however, many such employees will be semi-literate at best, and certainly not aware of tax law. They will not submit returns to SARS and will therefore receive no refund.
The 2013 issue of the Guide for Employers in respect of Employee’s Tax issued by SARS sets out some rules to be obeyed in taxing casual employees, which serve to modify the harshness of this situation. Paragraph 14.1 DEEMED STANDARD AND NON-STANDARD EMPLOYMENT sets out the following rule to be applied:
Where an employee does not fall within the definition of standard employment, and employee will be deemed to be in standard employment if:
- The employee (including scholars and students) is required to work for less than 22 hours a week and the employee furnishes a written declaration that he/she will not render services to any other employer, for the period that employment is held; or
- The employee works at least 5 hours a day and receives less than R261 per day
Under the sub-heading Employee’s tax in the same paragraph, the following further rules are given:
- Employee is not in standard employment and works at least 5 hours per day and earns less than R261 for that day – no tax to be deducted.
- Employee is required to work at least 22 hours a week and is in standard employment – deduction tables.
- Employee is not in standard employment and works less than 5 hours a day and earns less than R261 for that day – 25% deduction.
- Employee is not in standard employment and works at least 5 hours a day and earns more than R261 for that day – 25% deduction.
The R261 per day is the tax threshold for the 2012 tax year and should change from year to year, but has not been changed for the 2013 tax year.
If an employee has a tax directive from SARS, his remuneration must be taxed in accordance with the instructions contained in the directive. These will normally be such as to cause less tax to be deducted than would result from a normal tax calculation.