EMPLOYMENT TAX INCENTIVE (ETI)

Youth unemployment is an ongoing problem in South Africa. Did you know that the youth unemployment rate in 2017 was 67.4%? This is the figure provided by Stats SA for young people between the ages of 15 and 24 and includes the number of young people who have given up looking for work. As a result, many young South Africans are not gaining the skills or experience needed to drive the economy.

In an attempt to change this situation, the South African government provides an incentive to employers appointing young and less experienced work seekers. This incentive, called the Employment Tax Incentive or ETI, came into effect on 01 January 2014.

So, what are the benefits of this incentive to the employer? Employers will pay less PAYE to SARS when appointing young workers while these workers still receive the same wage.

If you are an employer in the private sector, registered for PAYE with SARS and tax compliant, you will be able to claim ETI for all qualifying employees on your payroll.

But how do you know whether your employee qualifies? If you can answer YES to all four questions below, your employee does qualify for ETI:

• ·     Is the employee in the age group of 18 to 29 years old?
• ·     Does the employee have a South African ID, asylum seeker permit or an ID issued in terms of the Refugees Act?
• ·     Are you paying the qualifying employee the minimum sector wage applicable to your industry or, where your industry is not regulated by a sectorial determination, the minimum wage of R2000 per month
• ·     Was this employee appointed on or after 1 October 2013?

Take note that this incentive is not applicable to domestic workers or any employees connected to the employer. In note 67 of the SARS Interpretation, it defines people that are connected to the employer.

For more details, practical examples, manual calculations, and system demos watch our ETI video!