Skills Development Levy: Rates, Exemptions, Penalties, and Grants

The Skills Development Levy is a compulsory monthly payment equal to 1% of your total payroll, owed to the South African Revenue Service (SARS) by every employer whose annual remuneration bill exceeds R500,000.¹ SARS collects it and channels the money to Sector Education and Training Authorities (SETAs) and the National Skills Fund, which finance workplace training. A portion of what you pay can flow back to your business as grants if you engage with the system properly. The legal basis is the Skills Development Levies Act 9 of 1999.²

Who Has to Pay

Your liability turns on one figure: total remuneration paid to all employees over a twelve-month period. If that figure exceeds R500,000, you must register and pay.¹ The threshold was confirmed for 2026 and remains unchanged.³

Once you cross the threshold, register with the Commissioner for SARS. You can do this alongside PAYE and UIF registration using the EMP101e form.⁴ You’ll need your SARS reference numbers and the SETA classification code for your industry. A partially completed form doesn’t count as registered.

Liability continues as long as your payroll stays above R500,000. If it drops below, you’re exempt, but keep watching. Growth back above the line triggers the obligation again.

How Much You Owe

The levy is 1% of total remuneration paid in a given month. If your payroll for the month is R800,000, your SDL for that month is R8,000. Remuneration follows the definition in the Fourth Schedule to the Income Tax Act, so it covers wages, overtime, leave pay, bonuses, fees, commissions, lump sums, and taxable fringe benefits.⁵ 6

The SDL is the employer’s cost. Section 3(3) of the Act prohibits you from deducting it from an employee’s pay, withholding wages to cover it, or requiring the employee to contribute any portion of it.⁷ Budget for it as an operational overhead tied to headcount and wages.

Who Is Exempt

Section 4 of the Act lists the employers who don’t need to pay. The exemptions divide into payroll size and organisational status.

Employers whose total remuneration over any twelve-month period does not exceed R500,000.⁷
National and provincial public service employers.
National and provincial public entities exempt from income tax under section 10(1)(cA)(i) of the Income Tax Act.
Religious and charitable institutions that hold an income tax exemption under section 10(1)(cA)(i).
Public benefit organisations under section 10(1)(cN) of the Income Tax Act, if they solely carry on qualifying public benefit activities or provide funds to PBOs that do.⁶
Employers that carry on no trade and are exempt from income tax under section 10(1)(cA)(i).⁷

Verify your status with SARS rather than assuming. A religious institution that also runs a profitable commercial operation may not meet the criteria. Getting the classification wrong means accumulating unpaid levies plus penalties.

How and When to Pay

Each month you declare and pay the SDL on the EMP201 return, which also carries your PAYE and UIF figures. The return and the payment are due within seven days after the end of the month, so by the 7th of the following month. If the 7th lands on a weekend or public holiday, the deadline moves back to the last business day before it.⁸

Submissions run through SARS eFiling or the e@syFile Employer software.¹ Payment goes through electronic channels such as internet banking or a direct transfer through the filing software. Keep the digital receipt from every successful submission. It’s your proof of compliance if SARS queries a period later.

Reconcile your payroll system against the figures on the EMP201 before you file. Discrepancies between declared remuneration and actual payroll are one of the fastest triggers for a SARS query, and fixing them before submission is cheaper than fixing them afterwards.

Penalties for Late or Missed Payments

Section 12 of the Skills Development Levies Act imposes a mandatory 10% penalty on any levy amount that remains unpaid after the due date.⁷ SARS must impose the penalty. Interest also accrues on outstanding amounts at a prescribed rate linked to the Public Finance Management Act. As of the most recent adjustment in September 2025, that rate for overdue tax was 10.25%, and it changes when the Reserve Bank adjusts interest rates.

The costs stack up. An employer who ignores the SDL for several months faces the original levy amount, a 10% penalty on each late payment, and accumulating interest on the outstanding balance. Administrative non-compliance penalties for failing to submit the EMP201 on time may apply separately under the Tax Administration Act. Paying on time and filing on time is always the cheaper option, even if you have to estimate a figure and correct it later.

Getting Money Back Through Grants

The SDL is not a one-way payment. Of every rand collected, 80% is allocated to SETAs and 20% to the National Skills Fund.⁹ Within the SETA share, portions are ring-fenced for mandatory grants paid back to compliant employers, discretionary grants for specific training projects, and SETA administration.

Mandatory Grants

To claim a mandatory grant, you submit a Workplace Skills Plan (WSP) and an Annual Training Report (ATR) to your SETA by 30 April each year.¹⁰ The WSP sets out planned training for the coming year; the ATR reports on training completed in the previous year. Miss the 30 April deadline and the grant is forfeited for that cycle. No explanation recovers it.

Discretionary Grants

SETAs also allocate discretionary funding for training aligned with sector priorities, including learnerships, bursaries, skills programmes, and work-integrated learning. These are competitive and not guaranteed, and each SETA publishes its own funding windows and priority areas. Your track record on previously funded programmes, including completion rates and absorption of unemployed learners into jobs, affects how future applications are ranked.¹¹

Skills Development Facilitator

Every levy-paying employer should nominate a Skills Development Facilitator (SDF) to act as the link between the business and the SETA. The SDF helps develop and submit the WSP and ATR, advises on implementing the training plan, and passes SETA initiatives and grant opportunities back to the employer. The employer must give the SDF the resources and training to do the work, and hold them accountable. If your SDF misses a grant deadline, the SETA will not accept that as grounds for leniency.¹²

1
South African Revenue Service. Skills Development Levy
2
South African Government. Skills Development Levies Act 9 of 1999
3
South African Revenue Service. Budget 2026 Frequently Asked Questions
4
South African Revenue Service. EMP101e – Application for Registration
5
South African Revenue Service. Skills Development Levy
6
South African Revenue Service. Interpretation Note 10 – Skills Development Levy Exemption: Public Benefit Organisations
7
Department of Labour. Skills Development Levies Act, 1999
8
South African Revenue Service. Completing the Monthly Employer Declaration (EMP201)
9
Department of Labour. Basic Guide to Skills Development Levies
10
Mining Qualifications Authority. Reminder: 2026 WSP/ATR Submission
11
Wholesale and Retail SETA. 2026/27 Discretionary Grant Funding Windows
12
SASSETA. Skills Development Facilitators