Licenses & Registrations: Skills Development Levy (SDL)

February 05, 2026•3 min read

This is article #9 of 10 in the Licenses & Registrations Series.

Introduction

The Skills Development Levy (SDL) is a mandatory tax designed to encourage learning and skills development in the South African workforce. While many small business owners see it as just another compliance task, SDL plays an important role in improving employee skills and strengthening the economy.

This article explains what SDL is, who must register, and how it affects different business structures.

What Is the Skills Development Levy?

The Skills Development Levy is a tax paid by employers to fund education and training initiatives. The money collected supports Sector Education and Training Authorities (SETAs), which help develop skills across various industries.

SDL is calculated as a percentage of employee payroll.

Who Must Register for SDL?

Any business that:

Is registered for PAYE, and
Pays employees a total annual payroll above the threshold set by SARS,

must register and pay SDL.

Most employers who meet these requirements are automatically registered for SDL when they register for PAYE.

Who Is Exempt from SDL?

Some employers do not need to pay SDL, including:

Businesses with an annual payroll below the threshold
Certain non-profit organizations
Public service employers

Even if exempt, businesses may still need to register for PAYE.

How SDL Is Calculated

SDL is calculated at:

1% of total monthly employee remuneration.

It is paid monthly along with PAYE and UIF to SARS.

How to Register for SDL

Registration is done through SARS, usually at the same time as PAYE registration. Employers must:

Submit employer registration details
Declare employee remuneration
File monthly EMP201 returns

Paying and Submitting SDL

Employers must:

Pay SDL monthly
Submit EMP201 returns
Reconcile annually using EMP501

Late payments or incorrect submissions may result in penalties and interest.

Business Structure Differences: What Applies

Sole Proprietorship

Sole proprietors must pay SDL if they employ staff and exceed the payroll threshold.

Partnership

Partnerships must pay SDL if they employ staff and meet the payroll requirement.

Private Company (Pty) Ltd

Private companies must register and pay SDL when payroll exceeds the threshold.

Public Company (Ltd)

Public companies are required to pay SDL and comply with strict reporting standards.

Franchise

Each franchise owner is responsible for SDL for their own employees.

Start-Up

Start-ups must register for SDL once they meet PAYE and payroll requirements.

Non-Profit Company (NPC)

Some NPCs are exempt, but exemption must be confirmed with SARS.

Co-Operative

Co-operatives must pay SDL if they employ staff and meet payroll requirements.

State-Owned Company

State-owned companies follow government SDL compliance rules.

Why SDL Matters for Your Business

SDL helps:

Improve employee skills
Support industry-specific training
Strengthen long-term workforce development
Businesses may also benefit from training grants through their SETA.

What Happens If You Don’t Pay SDL?

Failure to comply may result in:

Penalties and interest
SARS enforcement action
Non-compliance status

Closing: Investing in Skills Is Investing in Growth

While SDL is a legal requirement, it also supports the growth of skilled employees and sustainable businesses. Understanding SDL helps you stay compliant while taking advantage of training opportunities available to your industry.