When should an employer check whether a tax directive is needed before payment?

Review the payment before promising a net amount

Bring payroll and the tax adviser into the discussion while the payment is being planned. A settlement or termination package can contain several components with different tax treatment. Agreeing a take-home figure before checking those components can create a difficult gap between the promise and lawful withholding.

The SARS employer guide for the 2027 tax year explains that directives instruct employers or fund administrators how to deduct employees’ tax from relevant payments. The directive needs to fit the actual event and payment.

Record who will pay each component. Money paid by the employer and a benefit paid by a retirement fund can involve different applicants and forms, even when both arise because the same employee is leaving.

If legal or HR negotiations are continuing, identify which facts remain unsettled. Do not submit a final application using a provisional reason or amount without understanding the correction implications if the agreement changes.

Use the event to identify the review needed

This is a screening table. It does not mean that every item requires the same directive or that any payment labelled a lump sum automatically receives preferential treatment.

Separate the components of a termination package

Prepare a schedule identifying salary, leave, bonus, notice-related payments, gratuity and any other amount. Explain what each component compensates for and the document creating the entitlement. The tax label should follow the facts rather than the payroll code chosen for convenience.

The SARS IRP3(a) and IRP3(s) guide requires employers to analyse the nature of the payment and select the appropriate reason. An employee leaving employment does not make every amount in the final package a qualifying severance benefit.

For a fictional employee whose final package includes ordinary leave entitlement and an additional termination amount, retain separate calculations and establish the treatment of each. Do not combine them merely because they will be paid on the same date.

Where the distinction is uncertain, obtain a review before making declarations. Keep the legal agreement and payroll schedule aligned, with any differences explained. A document called a “settlement” may still require analysis of several underlying elements.

Confirm who must apply and which form applies

The SARS directive overview distinguishes employer, fund-administrator and insurer responsibilities. Use the form and channel applicable to the payer and payment, rather than asking the employee to obtain any available directive.

For employer IRP3(a) and IRP3(s) applications, the completion guide identifies the employer’s role. An employee’s personal document or an old directive issued for another payment should not be treated as authority for the current transaction.

Confirm the representative or service provider’s mandate and access. The person capturing the request needs accurate information from HR, payroll and the employee where relevant. Allocate responsibility for resolving identity mismatches and answering SARS queries.

Use current forms and guidance. SARS enhanced its directive system in April 2026, so an old procedure sheet may describe screens or routes that have changed. The current eFiling guide provides the operational reference.

Check the facts that determine the instruction

Verify the employee’s identifying details and income tax reference against reliable records. Check the employer’s PAYE details, the gross amount, relevant accrual date, tax period and reason. An error in one field can affect the result or prevent processing.

The date money will leave the bank is not necessarily the date on which the legal entitlement accrued. Give the adviser the contract, event and decision dates needed to assess the correct position. Do not choose a date simply because it produces a preferred result.

Provide the remuneration information required for the particular application. Keep the basis of the calculation and ensure amounts are neither omitted nor counted twice. Where the required information is uncertain, resolve it before submitting a declaration.

Retain evidence of employee or member elections where they affect the payment. An informal conversation should not replace a required instruction or consent. Check that the final application reflects the actual election and the payer’s records.

Distinguish an estimate from the issued directive

A calculator or simulation can help explain a possible outcome during planning. It is not the issued instruction for the payment. Clearly label estimates and their assumptions when discussing a proposed net amount with the employee.

Keep the final SARS directive with its reference and period. Read the instruction and compare it with the application and payment schedule before payroll applies it. The employer guide states that employers must follow the directive and its applicable period.

If the directive appears wrong, investigate the underlying information and use the proper correction process. Do not change the tax figure manually because the employee expected a different result. The directive-error guide explains that review.

Where the payment changes after a directive is issued, stop and establish what the change means for the application. An old instruction should not be stretched to cover a materially different event.

Use a payment-release checklist

1. Confirm the actual payer and payment event.
2. Separate the package into supported components.
3. Determine whether a directive is required and select the current form.
4. Verify identity, reference, date, reason and calculation details.
5. Submit through the authorised process and retain the outcome.
6. Compare the issued directive with the intended payment.
7. Apply the instruction and record the withholding correctly.
8. Retain the evidence for reporting and reconciliation.

Assign a reviewer who can see the agreement, application and payroll result together. A payroll operator may correctly enter the numbers supplied while still lacking the context to spot an incorrect termination reason.

Record any issue that prevents release and the person responsible for resolving it. Avoid communicating a guaranteed release date while an essential directive or correction remains outstanding.

Escalate a payment already made without the required review

If money has already been paid and the directive position is unclear, preserve the original payroll, bank and agreement records. Tell the adviser exactly what happened and when. Do not replace the original payment description or change dates to make it appear that the process was completed earlier.

Identify any tax withheld, amount paid to SARS and certificate already issued. The response may involve the directive process, payroll corrections and related reporting, depending on the facts. Establish the proper sequence before making a second payment or refunding tax to the employee.

Explain the issue through the employer’s authorised communication process and keep the correction record. A later application does not erase the need to account accurately for the original transaction. Use the review to identify why the payment bypassed the control and assign responsibility for future unusual payments.

Keep the directive connected to later reporting

The directive does not replace the employer’s reporting and reconciliation duties. Keep the gross payment, tax withheld, payment evidence and certificate information consistent. The SARS employment-tax validation guidance includes checks between certificate information and directive records.

Explain to the employee which documents will be supplied and who handles a query. Do not promise that the directive eliminates every later assessment or return obligation. Its purpose is the relevant withholding instruction.

For tax-directive application support, provide the proposed payment breakdown, event documents, employee details and any existing directive. Early review makes the application more coherent and helps payroll apply the correct instruction when the payment is ready.