EMP501 Reconciliation Essentials

The bi-annual EMP501 reconciliation is a critical SARS requirement for all employers. This process verifies that PAYE deductions and UIF contributions match what was submitted throughout the period. Missing the deadline can trigger audits and penalties.

What is EMP501?

The EMP501 is an employer reconciliation declaration that must be submitted twice a year to SARS. It reconciles:

• PAYE (Employees' Tax) deducted from employees
• UIF (Unemployment Insurance Fund) contributions
• SDL (Skills Development Levy)
• Any other liabilities declared on EMP201 returns

The reconciliation ensures that the amounts declared on monthly EMP201 returns match the actual amounts paid to employees as reflected on IRP5/IT3(a) certificates.

EMP501 Submission Deadlines

Employers must submit EMP501 reconciliations twice a year:

First Period (March to August)

• Reconciliation period: 1 March to 31 August
• Submission deadline: 31 October
• IRP5/IT3(a) certificates: Must be issued to employees by 31 October

Second Period (September to February)

• Reconciliation period: 1 September to 28/29 February
• Submission deadline: 31 May
• IRP5/IT3(a) certificates: Must be issued to employees by 31 May

The Reconciliation Process

Step 1: Prepare Employee Certificates

Before submitting the EMP501, you must:

• Generate IRP5 certificates for all employees
• Prepare IT3(a) certificates for any other income earners (directors' fees, etc.)
• Ensure all employee tax numbers are correct
• Verify that totals match your payroll records

Step 2: Submit via eFiling

The EMP501 must be submitted electronically through SARS eFiling:

• Log into your eFiling profile
• Navigate to Returns > Employer Reconciliation
• Upload your CSV file containing employee details
• Review and submit the declaration

Step 3: Address Discrepancies

SARS will compare your EMP501 submission with your monthly EMP201 returns. Common discrepancies include:

• Under-declared PAYE on monthly returns
• Over-declared amounts that were paid but not reconciled
• Missing or incorrect employee tax numbers
• Calculation errors in SDL or UIF

Common Mistakes to Avoid

• Late submission: Missing the deadline results in automatic penalties and can trigger an audit
• Incorrect employee tax numbers: Verify all numbers before submission
• Not reconciling monthly payments: Ensure all EMP201 returns for the period are accurate
• Forgetting to issue certificates: Employees must receive their IRP5/IT3(a) certificates
• Omitting temporary workers: All income earners must be included, even short-term employees

Penalties for Non-Compliance

Failure to submit the EMP501 or late submission can result in:

• Administrative penalties: Percentage-based penalty on PAYE liability
• Interest charges: On any underpaid amounts at the prescribed rate
• Employer compliance programs: SARS may place you in a compliance program requiring monthly verification
• Audits: Increased likelihood of a full PAYE audit
• Director liability: In serious cases, SARS can hold directors personally liable

Best Practices

• Maintain accurate monthly payroll records throughout the year
• Reconcile your payroll to EMP201 submissions monthly, not just bi-annually
• Start the EMP501 process at least two weeks before the deadline
• Keep detailed records of all PAYE calculations and payments
• Verify employee details regularly to avoid submission errors
• Use reliable payroll software that generates EMP501-ready files