Guide to the skills development levy (SDL)
Understanding how the SDL employer contribution works is key to staying compliant and unlocking valuable opportunities to grow and upskill your team.
Managing your business payroll involves staying on top of all the taxes and contributions that impact your employees’ salary bill, and one of these is the skills development levy (SDL).
But what is SDL contribution, who needs to pay it, and why does it matter?
Whether you manage payroll or want a clearer understanding of your responsibilities, this guide explains everything you need to know about SDL:
- how it works,
- who’s required to pay it,
- and why it plays such a vital role in developing your workforce’s skills.
Here’s what we’ll cover:
What is the skills development levy (SDL)?
The skills development levy is a compulsory tax that South African businesses must pay to help support training and development of the workforce.
It’s set out in the Skills Development Levies Act of 1999 and managed by the South African Revenue Service (SARS).
In simple terms, the levy makes sure your company contributes to upskilling your employees and strengthening the country’s broader talent pool.
A business uses the collected funds to support training programmes and initiatives that boost employment opportunities, address skills shortages, and build a more competitive workforce.
For employers, it’s a chance to invest in your team, improve staff retention, and support long-term business growth.
Who must pay the SDL contribution?
Most employers are required to pay the skills development levy.
If your business is:
- Registered with SARS for Pay-As-You-Earn (PAYE), and
- has an annual payroll exceeding R500,000,
then you are legally required to pay SDL.
This rule applies to a wide range of employers, including companies, close corporations, non-profits, and certain public entities.
If your total employee remuneration crosses the R500,000 threshold in a year, SDL contributions become part of your statutory obligations.
How much is the SDL contribution?
You calculate the skills development levy as 1% of your total employee remuneration bill.
But what exactly counts as “remuneration”?
According to SARS, it includes:
- Salaries and wages
- Bonuses
- Commissions
- Leave pay
- Overtime payments
- Fringe benefits (such as the use of a company car or a housing allowance)
If you’re using payroll software, these components are usually captured automatically in the SDL calculation.
However, it’s still important to understand what’s included to ensure your SDL employer contribution is accurate and fully compliant with SARS requirements.
Importance of SDL for employers
The skills development levy is an opportunity to invest in your business and your people.
Here’s why it matters:
1. Upskilling your workforce
A portion of your SDL contribution is allocated to Sector Education and Training Authorities (SETAs), which fund accredited training programmes tailored to specific industries.
This gives you access to targeted skills development aligned with your business needs, helping you build a stronger, more capable team.
2. Claiming back through grants
If you submit a Workplace Skills Plan (WSP) and an Annual Training Report (ATR), your business may be eligible to claim back a portion of your SDL through mandatory and discretionary grants.
This means you can recover some of what you contribute, especially if you’re committed to continuous employee development.
3. Boosting productivity and competitiveness
A more skilled workforce leads to better performance, stronger innovation, and a clear competitive edge.
When used strategically, the SDL becomes a valuable lever for improving business outcomes.
How to calculate SDL
Calculating your skills development levy is a straightforward process that involves just three steps:
Step-by-step:
- Add up the total remuneration paid to all employees for the month.
- Multiply that total by 1% (or 0.01).
- The result is your SDL contribution for that period.
For example, imagine your business paid R300,000 in total salaries, bonuses, and commissions in June.
R300,000 × 0.01 = R3,000
You would need to pay R3,000 in SDL for that month.
If you’re using payroll software, this calculation is typically automated.
Still, it’s useful to understand the logic behind it to make sure everything remains accurate and compliant.
When to pay the SDL
As part of your monthly payroll duties, the SDL must be paid alongside statutory contributions like PAYE and UIF.
Here’s what you need to do:
- Submit your SDL using the EMP201 form via the SARS eFiling system.
- Payment is due by the 7th of every month, following the month in which salaries were paid.
- If the 7th falls on a weekend or public holiday, make sure to pay on the last working day before that date.
For example, if you’re processing salaries for June, your SDL payment and EMP201 submission must be completed by July 7.
Setting a monthly reminder or automating this process through payroll software can help your HR team stay on track and avoid penalties.
Exemptions from paying SDL
Not every employer is required to pay the skills development levy.
There are specific cases where your business may be exempt.
You are exempt if:
- Your annual payroll is R500,000 or less.
- You’re a public service employer (such as national or provincial government department).
- You’re involved in qualifying public benefit activities, such as certain educational, welfare, or health services.
- You’ve been granted a ministerial exemption.
How to claim an exemption:
If you qualify for exemption, you’ll need to:
- Register with SARS, and
- Indicate your exemption reason either via eFiling or at a SARS branch.
Once the exemption is confirmed, your EMP201 declaration will show your SDL liability as zero.
How to process SDL in payroll systems
Managing SDL manually can be time-consuming and prone to errors, especially as your business grows.
That’s where integrated payroll and HR software makes the difference.
With automated payroll tools, your HR team can:
- Automatically calculate SDL each pay period.
- Generate and submit EMP201 declarations directly through the platform.
- Link employee records and remuneration data to ensure full compliance.
- Access reports to help prepare WSPs and ATRs.
By automating these tasks, your payroll team can avoid manual errors and ensure your SDL contributions are always accurate, compliant, and submitted on time.
Final thoughts on SDL
The skills development levy is a powerful driver of growth and transformation.
For South African businesses, it’s an opportunity to invest in your workforce, support industry-wide skills development, and strengthen operational efficiency.
Looking to streamline your SDL processes?
Discover how our payroll software can help you stay compliant, save time, and focus on developing your employees.
FAQs about skills development levy
1. Can employers claim back any of the SDL they pay?
Yes. If your business submits a WSP and an ATR to your relevant Sector Education and Training Authority (SETA), you may qualify for mandatory and discretionary grants.
These allow you to recover a portion of your SDL contributions by demonstrating investment in employee training and development.
2. Who qualifies to pay SDL?
Any employer in South Africa with an annual payroll exceeding R500,000 and who is registered for Pay-As-You-Earn (PAYE) with SARS is required to pay SDL.
