WHY IS THERE AN ETI?
Millions of young South Africans are excluded from participating in economic activity, and as a result suffer disproportionately from unemployment, discouragement and economic marginalisation. High youth unemployment means 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.
In South Africa, the current lack of skills and experience, as well as perceptions regarding the restrictiveness of labour regulations, make some prospective employers reluctant to hire the youth.
As a South African employer, you now have a great opportunity to boost the employment of young job seekers.
The aim of the ETI is to facilitate the increased employment of young job seekers.
WHAT IS EMPLOYMENT TAX INCENTIVE (ETI)
The ETI is an incentive aimed at encouraging employers to hire young job seekers. It was implemented with effect from 1 January 2014.
WHAT ARE THE BENEFITS OF ETI
WHO ARE THE EMPLOYERS THAT QUALIFY?
Is registered for Employees’ Tax (PAYE), or is eligible to register for PAYE (i.e. the employer cannot register just to claim ETI, other registration requirements must be met)
Is not in the national, provincial or local sphere of government
Is not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance by Notice in the Gazette)
Is not a municipal entity
Is not disqualified by the Minister of Finance due to the displacement of an employee or by not meeting the conditions as may be prescribed by the Minister by regulation.
To work out if you are a qualifying employer:
HOW DO I DETERMINE WHO IS A QUALIFYING EMPLOYEE?
An individual is a qualifying employee if he or she:
Has a valid South African ID, Asylum Seeker permit or an ID issued in terms of the Refugee Act
Was employed by the employer or an associated person to the employer on or after 1 October 2013 and
Is not a domestic worker
Is not a “connected person” to the employer
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
Is paid the minimum wage applicable to that employer or if a minimum wage doesn't apply, is paid the amount contemplated in the Minimum Wage Act and not more than R6 000 remuneration. If there is no prescribed wage regulating measure or not subject to or exempt from the requirements of the National Minimum Wage Act, a wage of at least R2 000 (where the qualifying employee was employed for 160 hours in a month) must be paid.
There is no limit to the number of qualifying employees that an employer can hire.
We hope you found this information useful. If you have any questions on how the Employment Tax Incentive (ETI) relates to payroll and the PaySpace system, please feel free to get in touch with our support team.