Estimated reading time: 4 minutes
Key Takeaways |
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• Late PAYE payments carry a mandatory 10% penalty, even when the delay is short. |
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• A late EMP501 reconciliation costs 1% of your annual PAYE liability for every month it is outstanding, up to 10%. |
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• Modern payroll software reduces processing time and calculation errors, and keeps tax tables current. |
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• A simple formula lets you calculate the return using your own practice’s numbers. |
In January 2018, SARS imposed a penalty of R1 064 607.69 on an employer whose PAYE payment of more than R10.6 million was only released on 8 January, after the due date (Tax Court judgment). The penalty was eventually remitted, but only after the employer took the matter on appeal to the High Court (Cliffe Dekker Hofmeyr).
For law firms, conveyancers and estate agencies, payroll isn’t the core business, but it carries this kind of risk every month. By the end of this article, you’ll know:
- where manual or outdated payroll costs your practice
- what modern payroll software changes
- how to calculate the return using your own figures
Lexpro has built software for South African legal and property professionals for more than two decades, and Lexpro Payroll brings the same focus to salaries, statutory submissions and leave.
Where Payroll Costs Add Up for South African Practices
Time. Every month, someone captures hours and leave, checks calculations, issues payslips and prepares the EMP201. PAYE, UIF and SDL must be paid, and the EMP201 submitted, within seven days after the end of the month in which the amounts were withheld (SARS). The EMP501 reconciliation and IRP5 certificates add to the workload, and every new staff member increases it.
Errors. An incorrect monthly PAYE calculation can lead to both penalties and interest, and SARS attributes any shortfall picked up on the EMP501 to the last month of the reconciliation period (SARS). On top of that comes the time spent tracing and correcting mistakes, and the frustration of staff who are paid incorrectly.
Compliance. Under paragraph 6(1) of the Fourth Schedule to the Income Tax Act, SARS must impose a penalty of 10% on employees’ tax that is not paid on time (SAFLII). A late EMP501 attracts a penalty of 1% of the annual PAYE liability, rising by 1% each month it remains outstanding, to a maximum of 10% (SARS).
Visibility. Spreadsheets make it hard to see staff costs by month, department or fee earner, which weakens budgeting and planning.
What Modern Payroll Software Delivers
- Faster processing: Gross-to-net calculations, payslips, IRP5s and reconciliations are generated automatically, so a payroll run takes a fraction of the manual time.
- Fewer errors: Built-in validation checks flag problems before they reach employees or SARS, and centralised data keeps every report consistent.
- Current compliance: Tax tables and statutory thresholds update automatically, and audit trails make SARS queries easier to answer.
- Staff self-service: Employees view payslips, update personal details and request leave through a portal, and managers approve leave electronically.
How to Calculate the ROI of Payroll Software
Use this formula with your own practice’s figures over a 12-month period:
Annual ROI (%) = (Annual savings − Annual software cost) ÷ Annual software cost × 100
- Annual savings = Time saved + Error costs avoided + Compliance costs avoided
- Time saved = (hours per payroll run now − hours per run with software) × hourly staff cost × payroll runs per year
- Error costs avoided = payroll corrections per year × hours per correction × hourly staff cost
- Compliance costs avoided = SARS penalties and interest paid in the last 12 months + hours spent on SARS queries × hourly staff cost
- Annual software cost = monthly subscription × 12 + once-off setup or training costs
To see how quickly the software pays for itself: Months to break even = once-off costs ÷ monthly savings
Where to find your numbers:
- Hours per run: time your next payroll from first capture to final submission.
- Hourly staff cost: divide the monthly salary of the person running payroll by the hours they work each month.
- Penalties and interest: check your SARS statement of account on eFiling.
- Corrections: count reissued payslips and corrected EMP201s over the past year.
How Lexpro Payroll Fits Your Practice
Lexpro Payroll is cloud-based, so there are no servers to maintain and updates happen without IT involvement or downtime. It integrates with accounting software and time and attendance systems, which removes duplicate capturing. Reporting shows workforce costs and trends at a glance, and the platform scales from small practices to large firms without a system change.
Payroll Software FAQs
How soon will we see a return?
Time savings begin with the first payroll run. Use the break-even formula above to see when the savings cover your once-off costs.
Is cloud payroll cheaper than on-premises software?
Usually, yes. A subscription removes the large upfront outlay, updates are included, and costs grow in line with your headcount.
Will our staff need extensive training?
Payroll administrators need a short introduction, and the self-service portal is built for employees to use without training. A demonstration will show you the interface before you commit.
Build Your Payroll Business Case
Run the formula with your own figures, then compare the result with what a single late PAYE payment could cost your practice. If the numbers support the move, see how Lexpro Payroll handles your monthly run in a personalised demonstration.
Book a demo, email info@lexpro.co.za or call +27 12 345 4510.
