The Employment Tax Incentive (ETI) in South Africa is a government program that aims to encourage employers to hire and retain young workers. The incentive is intended to reduce the cost of hiring and retaining young employees by providing a reduction in the amount of Pay-As-You-Earn (PAYE) tax that an employer is required to pay.
To be eligible for the ETI, the employer needs to be compliant with SARS in terms of no outstanding amounts owing to SARS. This could be in terms of VAT, UIF, SDL, PAYE or any other non- compliance with SARS relating to the employer’s PAYE reference number.
The employee eligibility can be seen below:
- An employee must be between the ages of 18 and 29 years old
- The employee must also earn R6,500 or less per month in terms of their gross remuneration figure
- The employee should have been employed on or after 1 October 2013
- Employers can claim the ETI for a maximum of 24 qualifying months for each qualifying employee
If the employer is not subject to wage regulating measures the employee’s wage should be at least R2000.00 per month if they are exempt from the national minimum wage. If the employer is subject to the wage regulating measures, then the employee’s wage should not be less than the prescribed minimum wage for the employer’s industry.
The incentive works by reducing the amount of PAYE tax that an employer is required to pay on behalf of a qualifying employee. It is important to note that the ETI is only available to employers registered for PAYE with the South African Revenue Service (SARS), and that the incentive is claimed on a monthly basis by the employer when submitting their monthly Emp201 declaration to SARS.
The calculation for ETI has a year 1 and year 2 calculation and has been displayed below for ease of reference:
| Monthly Remuneration | Formula
First 12 Months |
Formula
Second 12 Months |
| R0 to R1 999,99 | 75% of Monthly Remuneration | 37,5% of Monthly Remuneration |
| R2 000 to R4 499,99 | R1 500,00 | R750 |
| R4 500 to R6 499,99 | R1 500 – (75% x (monthly remuneration – R4500)) | R750 – (37.5% x (monthly remuneration – R4 500)) |
Overall, the Employment Tax Incentive in South Africa is a valuable tool for employers looking to hire and retain young workers, as it can help to reduce the cost of doing so. Employers who are eligible for the incentive should make sure to take advantage of it to support the employment of young people in South Africa. This program is a great way for employers to give back to the community and contribute to the reduction of youth unemployment and economic growth in South Africa.
