Where an employee is not required to work at least 22 hours a week, their employment will be classified as non-standard. This includes casual wages, commissions and stipends. In these instances, employees’ tax (PAYE) needs to be withheld at a flat rate of 25%.
Notwithstanding the above, PAYE must be calculated based on the normal tax tables, and not using 25%, if the employee:
has furnished their employer with a written declaration that they will not render services for another employer for the duration of their employment; or
is required to work at least five hours per day and earns less than R287 a day
Examples
Trainee/Intern does work for a month (i.e. more than 22 hours a week) - This will be standard employment and they should be taxed based on the normal tax tables. If their annualised earnings exceed the tax threshold for the tax year (R91,250 for 2023), PAYE will be deducted based on the normal tax tables, and not using 25%. If their annualised earnings are less than the tax threshold, no PAYE will need to be deducted.
A casual worker works for 4 hours a day, for a week - this will be non-standard employment and they should be taxed at 25%.
An individual that is not an employee receives a referral commission of R5,000 - 25% PAYE needs to be withheld. As they worked less than 22 hours, this will be classified as non-standard employment.
No PAYE was withheld
If no PAYE was withheld and it was subsequently identified that PAYE should have been withheld - either the 25% or based on the tax tables, you have the following options:
Recover the PAYE from the individual, or
Gross up the stipend to get to the same nett pay
Who is liable for the PAYE
The company is liable to determine if PAYE is payable. If tax was not withheld appropriately and SARS identifies this, they could charge penalties and the company could be held liable for the taxes.