Skills Development On A Budget

As you prepare your 2023 Annual Training Report (ATR) and Workplace Skills Plan (WSP) submissions to your relevant Sector Education and Training Authority (SETA), this time also serves as the perfect opportunity to kick-off your planning for the skills development element of the Broad-Based Black Economic Empowerment (B-BBEE) scorecard in order to maximise your scores, while at the same time, minimise your spend. LabourNet is a proponent of skill development for business growth In South Africa.

Unlike all the “spend-based” elements of B-BBEE, skills development is the only element where the actual outflow of cash is unavoidable. Fortunately for the proactive, there are existing relief measures designed for the purpose of assisting with one’s training budget in the form of various grants and tax rebates. If you’re uncertain, you can enlist our B-BBEE consulting services in South Africa.

Mandatory and discretionary grants:

While most businesses are aware of their annual reporting requirements with the SETAs, a vast majority are only aware of the “mandatory grants” available to them.

To simplify, a “mandatory grant” is paid annually to organisations for reporting on their completed training (under the Annual Training Report) and their planned training (under the Workplace Skills Plan). This grant equates to 20% of the Skills Development Levies or SDL which is a monthly 1% levy paid to SARS based on the total salaries and wage bill by organisations with a payroll equal to or more than R500 000 per annum.

“Discretionary grants” are simpler to understand as these grants are awarded to an organisation at the discretion of the SETA. So called “discretionary grant windows” open sporadically throughout the year, with specific requirements communicated to all interested organisations. These requirements can be for a specific training programme, a specific field of study or job title, or could simply be available for training programmes that align to the SETA’s Sector Skills Plan (SSP) which is a formal document, published annually, indicating the scare and/or critical skills as well as the hard-to-fill vacancies identified within the industry of the specific SETA. The value of a “discretionary grant” can be up to 49.5% of an organisation’s annual paid Skills Development Levies.

The Employment Tax Incentive (ETI):

The Employment Tax Incentive (ETI) is an incentive introduced by SARS in 2014 to encourage organisations to hire young and less experienced job seekers. This incentive is applied for monthly when submitting the organisation’s SARS EMP201 employer declaration form to SARS, and the process itself is managed by the payroll and/or finance departments. There is no limitation on the number of employees that may be claimed, and this incentive is also effective till 2029.

For an organisation to be eligible, they must:

· Be registered for Employee Tax (PAYE), or must be eligible to register for PAYE,

· Not be operating in the national, provincial, or local spheres of government,

· Not be a public entity listed in the Public Finance Management Act,

· Not be a municipal entity, and

· Not be disqualified by the Minister of Finance due to the displacement of an employee or by not meeting the conditions that may be prescribed by the Minister via a regulation.

For an employee to qualify, he or she must:

· Have a valid South African ID, Asylum Seeker permit or an ID issued in terms of the Refugee Act,

· Be between the age of 18 to 29 years old,

· Not be a domestic worker,

· Not be a “connected person” to the employer,

· Be employed by the employer or an associated person to the employer on or after 1 October 2013, and

· Be paid the minimum wage applicable to that employer, or if a minimum wage does not apply, is paid the amount contemplated in the Minimum Wage Act and not more than R6 499.99 remuneration per month. If there is no prescribed wage regulating measure, or, if not subject to, or exempt from, the requirements of the National Minimum Wage Act, a wage of at least R2 000.00 (where the qualifying employee was employed for 160 hours in a month) must be paid.

Due to a high rate of abuse of the ETI, government made certain amendments in respect of this allowance in 2021. The amendments have clarified that to apply for and receive this incentive the organisation must:

· Enter into a contract of employment with the learner(s) and therefore place the learner(s) on the organisation’s payroll,

· Ensure the learner(s) are adequately managed as an employee would be managed, and

· Ensure the learner(s) receive legitimate and valuable workplace experience.

The government has also implemented an amendment that came into effect on the 1st of March 2022 regarding the actual value claimed under ETI. Please take note of the below tables indicating the previous and current formulas to be applied.

If you feel overwhelmed by the information, get in touch with our B-BBEE consulting services in South Africa.

The 12H Learnership Allowance:

The 12H Learnership Allowance was introduced to motivate employers to develop their employees and unemployed persons seeking to study and is made available in two parts i.e., an Annual Allowance and a Completion Allowance. This allowance is seen as a tax credit and is deducted annually at the end of the tax assessment period.

An employer will only qualify for the Annual Allowance if:

· During any year of SARS tax assessment, the learner is a party to a registered learnership agreement with the employer,

· The learner holds an NQF-level qualification ranging from NQF Level 1 to 10,

· The agreement was entered into pursuant to a trade carried on by that employer, and

· The employer has derived “income”, as defined, from that trade.

An employer will qualify for the Completion Allowance if they meet the criteria for the Annual Allowance above, and if the learner(s) have successfully completed the learnership programme during the year of SARS tax assessment.

An employer will not qualify for any part of this allowance, during any assessment period, in which there is no registered learnership agreement and if the claimed learner is not employed.

Both allowances can be broken down as per the below table, with a pro-rata amount applicable should the programme not run for the full 12-months of the tax assessment year and based on the 28% company tax rate:

For proper compliance with the Skills Development Act and to ensure your organisation meets the set B-BBEE targets and/or applicable requirements, it is critical for organisations to have a good working relationship with their preferred training providers.

LabourNet is a registered training provider with a network of other providers available to provide the right training at the right price and in the right place. In addition to promoting skill development for business growth In South Africa, we offer B-BBEE consulting services in South Africa.

For more information, please refer to our National Learning Schedule on our website. Alternatively, please contact us and we will gladly assist with your training needs as well as your Skills Development and B-BBEE Compliance needs. For more information regarding Tax Incentives and other benefits be on the lookout for upcoming short articles on our social media pages and contact us to register for a free webinar on the 6th of April 2023 covering the above topics.