The Employment Tax Incentive (ETI) is a tax incentive aimed at encouraging employers to hire young work seekers, the aim of which is two-fold. Firstly, it is a means of cost-sharing between Employers and Government to help motivate employers to employ young people in their work places. South Africa has a particularly high rate of youth unemployment due to the large gap in skills between what the learners are taught in schools and tertiary education arenas and the actual needs required to work effectively within the workplace. As a result employers are hesitant to employ a young person with little or no actual work experience which in term means that young people are not gaining the skills or experience needed to drive the economy forward. This lack of skills can have long-term adverse effects on the economy.
And secondly it makes the option of hiring a young, less experienced individual more attractive to a prospective employer which then allows the employee access to positions which may previously have not been attainable thereby giving them the much-needed work place learning which will enable to them to be more attractive to prospective employers in the future.
The Employment Tax Incentive was implemented with effect from 1 January 2014 and was means to only last until the end of 2017. The Employment Tax Incentive has since been extended until February 2019. Thousands of new jobs have been created as a result of the implementation ETI with the department of trade and industry confirming that they have approved over R20 billion in monthly cash benefit to those who qualify, during 2016 / 2017.
Employers may have heard about the Employment Tax Incentive and may be wondering if they will qualify for a reduction in the amount due to be paid to SARS.
According to SARS, an employee qualifies the employer for ETI depending on the below:
- Has a valid South African ID, Asylum Seeker permit or an ID issued in terms of the Refugee Act
- Is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services mainly inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance)
- Is not a domestic worker
- Is not a “connected person” to the employer (related to the employer)
- Was employed by the employer or an associated person to the employer on or after 1 October 2013 and
- Is paid the minimum wage applicable to that employer or if a minimum wage doesn’t apply, is paid a wage of at least R2 000 (where the qualifying employee was employed for 160 hours in a month) and not more than
R6 000 remuneration.
Employers who want to check to see if they qualify can use this Employment Tax Incentive calculator on the SARS website. Click here
If your new employee meets the aforementioned criteria, then you qualify for an employment tax incentive (ETI). Consequently, the net-effect is that your PAYE tax will qualify for a reduction in the amount due to be paid to SARS.