SDL: The Payroll Levy Employers Pay (and Employees Don't)

If you run payroll, or you've ever looked closely at the employer's side of employment costs, you'll have come across SDL — the Skills Development Levy. Employees often spot it and worry it's another deduction from their pay. It isn't: SDL is paid by the employer, not the employee, and it never comes off your salary. But it's a real cost of employing people, so it matters to anyone running a business or comparing the true cost of a hire.

SDL is a levy of 1% of an employer's total payroll, paid monthly to SARS. Its purpose is to fund skills development and training across the economy — the money flows to the Sector Education and Training Authorities (SETAs) and the National Skills Fund. Employers who invest in registered training can claim a portion of it back as grants, which is why larger companies often have someone whose job partly involves recovering SDL through training programmes.

There's an important exemption for small businesses. If your total annual payroll is below R500 000, you're exempt from SDL entirely and don't need to register for it. This keeps the levy off the backs of the smallest employers, where the administrative burden would outweigh the benefit. Once your payroll crosses that threshold, registration and the 1% levy kick in.

For an employee, the practical relevance of SDL is mostly in understanding your true cost to company. When an employer budgets for a role, they're paying your gross salary, plus their 1% UIF share, plus 1% SDL, plus any benefits. The cost-to-company figure is always higher than your gross salary, and SDL is one of the small pieces that explains the gap. If you're negotiating or comparing offers on a cost-to-company basis, it's useful to know what's inside that number.

This is general information, not tax advice. To see the full employer cost of a salary including SDL, use the calculator and switch on the employer cost view.