Many employees look forward to their annual bonus, only to be met with disappointment when a large portion of the bonus is deducted for tax.
Sumeshan Nair, Executive Committee Member of the South African Payroll Association (SAPA), says that “employees can pay extra tax on a monthly basis towards the tax that would be deducted from their annual bonus so that no tax is deducted when a person receives their annual bonus.”
“An amount is included in an employee’s monthly tax calculation to compensate for the tax on the bonus when the annual bonus is paid. This way, the employee effectively pays their ‘bonus tax’ month on month to get a full bonus payout” said Nair.
Employees can request this option from employers
One of the main reasons for companies failing to offer this option to staff is because they are unsure of how it works or how the monthly tax deductions should be calculated therefore not offering it to their employees.