Employee Tax – Labour Broker

Reference to the Act              

Labour broker and employee definition in Paragraph 1 of the 4th schedule Paragraph 2(5) of the 4th Schedule.


The provision or procurement of workers as opposed to the provision of service is of importance. Typically, a labour broker arrangement will involve three parties, namely the client, the labour broker and the worker(s).


The person who specifies the workers required. A written or oral service contract would arise between the client and the labour broker where the service conditions of the workers may or may not be stipulated. Payments for the workers’ services are made to the labour broker.

Labour broker                          

The labour broker is a natural person who, for reward, provides and remunerates

workers for a client and is either in or not in possession of an exemption certificate (IRP30). The labour broker either makes available his/her own employees to perform work for a client or procures workers for a client. The labour broker pays the workers.


These workers can be any person, including —

  • Members and/or employees of a close corporation
  • Directors and/or employees of a company
  • Trustees and/or employees of a trading trust
  • Proprietors and/or employees of a business
  • Partners and/or employees of a partnership.


Exemption certificate (IRP 30)

The 4th Schedule makes provision for an exemption certificate to be issued by SARS to a labour broker, which will absolve employers from having to deduct Employees’ Tax from any payments made to such labour brokers.

SARS shall not issue an exemption certificate if —

  • more than 80% of the gross income of the labour broker during the tax year consists of amounts received from any one client, unless the labour broker employs three or more full-time employees throughout the tax year —
    • who are on a full-time basis engaged in the business of that labour broker of providing persons to or procuring persons for clients of that labour broker
    • who are not connected persons in relation to that labour broker or
  • the labour broker provides to any of its clients the services of any other labour broker or
  • the labour broker is contractually obliged to provide a specified employee of the labour broker to render any service to such client.

An exemption certificate is only valid from the date of issue until the end of the tax year.

The labour broker must apply annually on an IRP30(a) form for a new exemption certificate at a SARS branch at least two months before the expiring of his/her current exemption certificate. If the issue of an exemption certificate is delayed for longer than a calendar month, the date of validity will be altered from the date of issue to the date the application was received. In such cases any Employees’ Tax deducted is refundable by the relevant employer.

  • An exemption certificate will only be valid if —
    • it is not outdated
    • it bears a labour broker reference number beginning with a 7
    • it has been computer printed
    • the labour broker is in possession of the original and
    • it has not been altered in any way.

If a labour broker is in possession of a valid exemption certificate and undergoes a change of name, the original certificate must be returned to the relevant SARS branch together with an application for a new certificate, which indicates the changed particulars.

If an exemption certificate has been lost or misplaced, application for a replacement certificate must be made to SARS Head Office and the replacement certificate will only be issued during the period of validity of the original certificate.

Employees’ Tax                       

If a labour broker is not in possession of a valid exemption certificate (IRP30), all payments made to the labour broker will be subject to Employees’ Tax.

An employer who does not deduct Employees’ Tax from a payment to a labour broker must be in possession of a certified copy of an exemption certificate

(IRP30) that must be retained for inspection purposes.

?      The deduction is classified in the following categories —

?   Labour broker with exemption certificate — no Employees’ Tax must

be deducted

?    Labour broker without an exemption certificate – Employees’ Tax
must be deducted according to the applicable deduction tables

?    Labour broker with a tax directive – Employees’ Tax must be
deducted according to the instructions on the tax directive.

IRP5/IT3(a) details                     

The Employees’ Tax deducted for a labour broker whether calculated according

to the deduction tables or a tax directive must be reflected as PAYE.

The remuneration must be reflected under code 3617 on the IRP5/IT3(a).

The reason code for non-deduction of Employees’ Tax (where applicable) must be reflected as 07 on the IRP5/IT3(a).