Is a 13th cheque compulsory in South Africa?

South Africa: It Is Not Compulsory For An Employer To Pay A 13th Cheque To Its Employees. As the year comes to an end, many employees will be expecting payment of a 13th cheque or Christmas bonus from their employer.

Is a 13th cheque a must?

There is no provision in the Basic Conditions of Employment Act which compels an employer to pay bonuses of any sort.

What is the difference between bonus and 13th cheque?

“A 13th cheque is a bonus that the employee can expect with certainty if this is part of his or her employment contract,” Porter said. “A bonus is a reward based on the employee's performance and the performance of the business.

Who gets 13th cheque?

The 13th cheque or Christmas bonus.

This bonus is normally classed as a gratuity - in other words, a payment of gratitude by the employer to the employee in recognition of a job well done, or if you like, going the extra mile.

How does a 13th cheque work in South Africa?

“A thirteenth cheque is essentially an additional monthly salary paid, or 8.33% of the employee's annual salary, that gets paid to the employee – normally in December or any other month depending on the employer's contract.

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Is payment of bonus mandatory?

Unlike incentive bonus, which is an ex gratia payment, Statutory bonus is a compulsory payment by law. Payment of statutory bonus under the Payment of Bonus Act is not a matter of choice of the employer but rather a matter of right of the employee.

Is a yearly bonus compulsory?

Firstly, it is necessary to understand that there is no statutory requirement in labour law to pay bonuses of any sort, and any such payments that are made are not regulated by labour legislation.

How much tax do I pay on my 13th cheque?

If you take your salary and times it by 13 (12 months and 1 bonus) it will bring you to R 189 291,44, this is your taxable income for the year, SARS will then calculate the tax due on the total amount, and your employer will then divide this amount by 13 and the month that you receive your bonus, your tax will be ...

Is Holiday bonus compulsory in South Africa?

Firstly, it is necessary to understand that there is no statutory requirement in labour law to pay bonuses of any sort, and any such payments that are made are not regulated by labour legislation.

How much do you get taxed on a bonus in South Africa?

R1 250 of the bonus (R260 000 – R258 750) would be taxed at 30% (R375 tax) and R18 750 (R20 000 – R1 250) would be taxed at the lower tax rate of 25% (R4 687.50). Total tax on the bonus would therefore be R5 062.50.

Who is eligible for 13th month pay?

According to the Department of Labor and Employment (DOLE) guidelines, all private-sector “rank-and-file” employees are eligible for the 13th month pay benefit as long as they've worked for at least one month during the calendar year.

What is the rule of bonus payment?

The Payment of Bonus Act, 1965 provides for a minimum bonus of 8.33 percent of wages. The salary limited fixed for eligibility purposes is Rs. 3,500 per month and the payment is subject to the stipulation that the bonus payable to employees drawing wages or salary not exceeded to Rs.

Does cost to company include 13th cheque?

13th cheque – make sure you understand that if you are offered a structured 13th cheque it does not increase you CTC. So instead of your salary being your annual CTC / 12 it is now your annual salary / 13.

Can company withhold your 13th month pay?

Can the employer withhold payment of the 13th month pay? No, the payment of 13th month pay is mandatory, specifically provided under Presidential Decree (P.D.) No.

What is the difference between 13th month pay and bonus?

The law and Supreme Court decisions are very clear. The 13th month pay is a legal obligation. A Christmas bonus is an act of generosity given by employers. A bonus is not an obligation but a voluntary gift.

Are Christmas bonuses mandatory?

Other facts to consider include the employee handbooks and job appointment letters. It is safe to assume that employers must pay Christmas bonuses if the contract of employment states it categorically that the employee will receive a bonus at Christmas since the contract bounds the parties.

What is a 14th cheque?

13th and 14th month pay is the payment of an additional month's salary, a form of compensation, in the financial year. It is a common employment standard around the globe, though how it works depends on the employment law of a country.

Is 13th cheque taxable in South Africa?

Usually, the amount is taxed when it is paid out. However, some companies allow employees to pay additional tax during “normal” months, and then the bonus / 13th cheque is seen to be “tax free”. In South Africa, the more you earn, the higher the rate of tax that you pay.

How can I avoid paying tax on my bonus?

What is a Structured 13th cheque?

“A 13th cheque is essentially an additional monthly salary paid, or 8.33% of the employee's annual salary that gets paid to the employee (normally in December, but it can be in any other month, depending on the employer's contract.)

Are companies paying bonuses in 2021?

However, as of 2021, that number is beginning to rise slowly, now at an 11% average. 76% of companies plan on awarding a bonus in 2021. While bonuses are generally tied to employee performance, companies expect to pay more of them this year due to the COVID-19 pandemic.

Which employee is not entitled to bonus?

An employee who has been dismissed from service for a) fraud; or b) riotous or violent behaviour while on the premises of the establishment; or c) theft, misappropriation or sabotage of any property of the establishment is not entitled, for bonus (Section 9).

How does bonus work in South Africa?

Contrary to popular belief, South African Labour Law makes no provision for paying bonus pay to an employee. Therefore, employees do not have a right in terms of our Labour Laws to a bonus payment.

How an employee becomes disqualified to receive bonus?

Disqualification From Bonus Under The Act

According to the sec 9 of the act an employee shall be disqualified from receiving bonus under the Payment of Bonus Act, 1965, if he is dismissed from service for: Fraud, or. Riotous or violent behavior while on the premises of the establishment, or.

What is the time limit for payment of bonus?

Time limit for Payment of Bonus (Section 19)

1. The bonus shall be paid within a period of 8 months from the close of accounting year. However, on application by the employer and on sufficient reasons, the Appropriate authority, by order may extend the said period of 8 months to a period not exceeding 2 years.