Going from working on the tools to running a team is one of the biggest transitions in a tradie's career, and it brings legal duties most sole traders have never dealt with. The moment you take on your first employee you become responsible for PAYE, UIF, the Skills Development Levy and COIDA, and you must register with SARS within 21 business days. Budget for the true cost of an employee, not just the gross wage, before you ever advertise a vacancy.
The shift
Most of your income used to come from your own hands. Now it comes from organising, pricing and supervising other people, and the skills are partly different. What changes:
- Your income ceiling rises, because you are no longer limited to what one pair of hands can produce.
- Your time moves from production to organisation, quality control and client management.
- Cash flow gets more complex: you are now paying wages and buying materials before the client pays you.
- Your legal exposure increases. As an employer you take on PAYE, UIF, COIDA and Employment Equity obligations.
Making the first hire: the legal steps
- Employment contract from day one. This is required. The Basic Conditions of Employment Act (BCEA) prescribes the minimum content. A CCMA-approved template is a sensible starting point, available through the CCMA at www.ccma.org.za.
- Register for PAYE and UIF with SARS within 21 business days of becoming an employer. PAYE is Pay-As-You-Earn employees tax; UIF is the Unemployment Insurance Fund. Register through SARS eFiling.
- Register for SDL (the Skills Development Levy). SDL is 1% of your total payroll and funds skills training. You are exempt if your total annual payroll is below R500,000, which keeps most small first-time employers out of it.
- Register with the Compensation Fund under COIDA (the Compensation for Occupational Injuries and Diseases Act) at cfonline.labour.gov.za. The annual COIDA levy is roughly 0.5% to 2% of wages, depending on your industry risk rating. Treat that as an estimate only. The construction tariff is gazetted and your exact rate depends on your risk rating, so do not bank on a fixed figure.
What an employee actually costs
Take a worker hired at R8,000 a month gross. The gross wage is only part of the cost. On top of it you carry:
- PAYE: often nil at this income level, because the 2026/27 tax threshold for someone under 65 is R99,000 a year, and R8,000 a month sits below that. PAYE only kicks in once an employee earns above the threshold.
- UIF: 1% from the employee and 1% from you as the employer. On R8,000 the employer portion is R80.
- SDL: 1% of payroll, so R80, but only if your total annual payroll puts you over the R500,000 exemption line.
- COIDA levy: an estimate of roughly 1% on these figures, around R80, with your real rate set by your risk rating.
So the true monthly cost of an R8,000 employee is somewhere above R8,000 once UIF, SDL where it applies, and the COIDA levy are added. Work out your own figure, with your accountant, before you advertise. The administrative burden of running PAYE is real, and getting it wrong has consequences.
Common mistakes
- Hiring before registering as an employer. PAYE and UIF registration with SARS is due within 21 business days.
- Budgeting only the gross wage. UIF, SDL where it applies, and the COIDA levy all sit on top.
- Treating the COIDA levy as a fixed number. It is a range, roughly 0.5% to 2% of wages, set by your risk rating.
- Starting an employee with no written contract. The BCEA requires one from day one.
- Running payroll by guesswork. Use a payroll service or your accountant; the rules are unforgiving.
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