South Africa has a wealth of young talent waiting to be unleashed! Millions of young people are eager to contribute their skills and energy to the economy. By investing in their potential, we can create a brighter future for everyone. Did you know there is a youth employment tax incentive for businesses, better known as the Employment Tax Incentive (ETI)?
Why is there a youth employment tax incentive?
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.
As a South African employer, you now have a great opportunity to boost the employment of young job seekers. The youth employment tax incentive can help offset the costs of hiring young or inexperienced employees.
What is the youth employment tax incentive?
The youth employment tax incentive (ETI) was introduced to generate employment opportunities for the youth of South Africa and job seekers with minimal work experience.
The incentive reduces the cost of hiring young people to employers through a cost-sharing mechanism with the government, while leaving the wage the employee receives unaffected. The ETI was implemented with effect from 1 January 2014 and will end on 28 February 2029.
What are the benefits for employers?
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It will reduce the employer's cost of hiring young people through a cost-sharing mechanism with the government by allowing you to reduce the amount of Pay As You Earn (PAYE) you pay while leaving the wage received by the employee unaffected.
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For example, employers who are registered for PAYE and who employ a person for the full month of February and earn R2000 will get R1 000 off their monthly PAYE liability (provided that the employee is a qualifying employee based on all the other remaining requirements). For more information on how the ETI works, click here.
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Employers will be able to claim the incentive for a twenty-four-month period for all employees who qualify.
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The youth employment tax incentive amount differs based on the salary paid to each qualifying employee and whether the qualifying employee was employed after the inception of the ETI programme on 1 October 2013. ETI may only be claimed for a total of twenty-four qualifying months.
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This incentive will complement existing government programmes with similar objectives, e.g. learnership agreements.
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The youth employment tax incentive aims to facilitate the increased employment of young job seekers.
Who qualifies for the youth employment tax incentive?
The employer is eligible to claim the ETI incentive if the employer–
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Is registered for Employees’ Tax (PAYE), or must be eligible to register for PAYE (e.g. the employer can't register just to claim ETI, other registration requirements must be met)
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Is not in the national, provincial or local sphere of government
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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)
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Is not a municipal entity
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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.
An individual is a qualifying employee if he or she–
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Has a valid South African ID, Asylum Seeker permit or an ID issued in terms of the Refugee Act
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Is 18 to 29 years old
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Is not a domestic worker
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Is not a “connected person” to the employer
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Was employed by the employer or an associated person to the employer on or after 1 October 2013 and
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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 500 gross remuneration.
Important: The value of the youth employment tax incentive the employer may claim depends on the value of the monthly remuneration paid to the qualifying employee. If the employee has worked less than 160 hours in the month, the remuneration amount must be ‘grossed up’ to 160 hours per month to calculate the value of the ETI. The amount can then be calculated and be ‘grossed down’ in the same ratio.