Skills development is an important part of South Africa’s employment landscape. Businesses need people with the right knowledge and abilities to remain productive, competitive and adaptable, while employees benefit from opportunities to improve their qualifications and workplace skills.
The Skills Development Levy (SDL) helps fund this broader skills development system. Although SDL is a relatively small percentage of an employer’s payroll, understanding when it applies, how it is calculated and how it must be paid is an important part of payroll compliance.
For businesses that employ staff, getting SDL right means more than simply applying a percentage to the monthly payroll. Employers need to understand the threshold, qualifying remuneration, exemptions, registration requirements and reporting process.
What is the Skills Development Levy?
The Skills Development Levy is a compulsory levy used to support skills development and training in South Africa.
SARS collects SDL from qualifying employers on behalf of the Department of Higher Education and Training. The funds support the country’s skills development framework, including the work of Sector Education and Training Authorities (SETAs).
The levy is an employer cost. It should not be deducted from an employee’s salary.
When must an employer pay SDL?
For the 2026 tax year, SARS confirms that employers with annual remuneration of less than R500,000 are exempt from paying SDL. The levy remains set at 1% of total remuneration for qualifying employers.
This means that a business should not only look at its current monthly payroll. Employers should consider their expected remuneration for the relevant 12-month period when determining whether SDL applies.
Is SDL deducted from employees?
No.
This is an important distinction between SDL and certain employee-related payroll deductions.
SDL is an employer liability. The employer is responsible for paying the levy and should not reduce an employee’s salary by the SDL amount.
Payroll software should therefore treat SDL as an employer contribution rather than an employee deduction.
What remuneration is used to calculate SDL?
SDL is generally calculated using the remuneration that falls within the statutory definition for SDL purposes.
SARS indicates that the calculation can include items such as:
- Salaries and wages
- Overtime payments
- Leave pay
- Bonuses
- Commissions
- Certain fees
- Lump-sum payments
There are also amounts that are excluded under the relevant legislation, which means employers should not simply take every payment made to an employee and apply 1% without checking whether that payment forms part of the SDL calculation.
This distinction becomes particularly important when payroll includes bonuses, termination payments, retirement-related amounts or other less common forms of remuneration.
Which employers are exempt?
Not every employer that meets the general payroll criteria is required to pay SDL.
Certain organisations receive statutory exemptions. These include particular public-sector employers, qualifying public benefit organisations, certain public entities and municipalities that meet the applicable requirements.
An employer whose total remuneration subject to SDL is not expected to exceed R500,000 over the following 12 months can also qualify for exemption from the levy.
Exemption from paying SDL does not necessarily mean that every other payroll or tax obligation disappears. Businesses should consider PAYE, UIF and other statutory responsibilities separately.
Does an employer still need to register?
Where an employer is liable for SDL, registration with SARS is required.
SARS explains that employers liable for SDL must register as an employer and provide the relevant information, including their applicable SETA jurisdiction.
Employers should also keep their SARS registration information current. Changes to business circumstances, payroll size or employment arrangements can affect statutory obligations.
How and when is SDL paid?
SDL is reported as part of the employer’s monthly statutory payroll process.
The levy is included on the EMP201, alongside applicable PAYE, UIF and other amounts. SARS confirms that the monthly employer declaration is used to report these payroll-related obligations.
For the current 2026 guidance, SARS states that these monthly amounts are payable by the 7th of the following month, or by the preceding business day where the 7th falls on a weekend or public holiday.
For example, SDL relating to an applicable February payroll would generally be included in the March EMP201 process.
What happens to SDL after it is collected?
SDL contributes towards South Africa’s broader skills development system.
A significant part of the funding is channelled through SETAs, which have responsibilities relating to skills planning, training and development within their respective sectors. The wider system is intended to encourage workplace learning and help address skills shortages.
This means SDL is not simply another payroll tax with no connection to employee development. Its purpose is linked directly to improving skills and training opportunities within the South African economy.
Can employers benefit from the skills development system?
Potentially, yes.
Qualifying employers may be able to access certain SETA grants or other skills development opportunities when they meet the relevant requirements.
However, paying SDL does not mean that an employer automatically receives a refund or grant. There are separate requirements and processes associated with accessing available funding.
Employers interested in claiming skills development benefits should engage with their relevant SETA and ensure that their training plans, submissions and supporting documentation meet the applicable requirements.
Common SDL mistakes employers should avoid
SDL errors are often caused by payroll configuration or a misunderstanding of the rules.
1. Treating SDL as an employee deduction
SDL is an employer liability. It should not be deducted from the employee’s take-home pay.
2. Ignoring the R500,000 threshold
A business should assess its expected remuneration rather than looking only at the size of one month’s payroll.
3. Applying 1% to every payment automatically
Not every payment necessarily falls within the SDL remuneration base. Payroll teams need to distinguish between included and excluded amounts.
4. Forgetting that payroll circumstances can change
A business that initially falls below the threshold may grow during the year. Hiring additional employees or increasing remuneration can change its SDL position.
5. Using incorrect payroll settings
A payroll system should reflect current statutory rates and rules. An outdated configuration can result in repeated errors across multiple pay periods.
6. Missing the monthly submission deadline
Late statutory submissions or payments can create unnecessary compliance problems. Payroll teams should have a reliable calendar and review process.
SDL, PAYE and UIF are not the same
These three terms often appear together in payroll, but they serve different purposes.
PAYE is tax deducted from employees’ remuneration and paid to SARS.
UIF provides qualifying workers with financial support in circumstances such as unemployment, illness and certain forms of family-related leave.
SDL is an employer-paid levy intended to support skills development and training.
Understanding these differences helps businesses avoid incorrectly treating all payroll statutory amounts in the same way.
How payroll teams can stay compliant
A good SDL process starts with accurate payroll data.
Employers should regularly review:
- Total projected annual remuneration
- Employees included in the SDL calculation
- Remuneration categories configured in payroll
- SARS registration details
- Applicable SETA information
- Monthly EMP201 declarations
- Payment dates
- Payroll reports and supporting records
A monthly review can identify discrepancies before they become larger problems during a reconciliation or audit.
Find out how we can assist with payroll processing and compliance.
Credit to South African Revenue Service for the information in this article.
