A liability is an obligation to pay money to someone else. In payroll, running the pay cycle creates liabilities: the PAYE and UIF withheld from employees, the employer's own UIF and SDL, and amounts due to retirement and medical funds.
What it means
A liability exists from the moment payroll is calculated, before any money moves. The employer holds the withheld and accrued amounts on behalf of SARS and the funds until they are paid over. Declaring the liability and settling it are two distinct steps.
Where it fits in
The PAYE, UIF and SDL liabilities are declared monthly on the EMP201 and cleared by the matching payment. In the accounting records these sit in liability accounts until paid, which is why the books carry a payroll liability or statutory control account between the pay run and the payment date.
Key rules
- Arises when payroll is calculated, not when payment is made.
- The employer holds withheld tax and contributions in trust until paid over.
- PAYE, UIF and SDL liabilities are declared on the EMP201 and settled by the linked payment.
- Unpaid liabilities accrue penalties and interest and remain the employer's responsibility.
