What is Employer Tax Incentive?

 What is the Employment Tax Incentive (ETI)? It is an incentive aimed at encouraging employers to hire young and less experienced work seekers. It reduces an employers cost of hiring young people through a cost sharing mechanism with government, while leaving the wage the employee receives unaffected. The employer can claim the ETI and reduce the amount of Pay As You Earn (PAYE) tax payable by the amount of the total ETI calculated in respect of all qualifying employees. This incentive came into effect on 1 January 2014.

Why the Employment Tax Incentive? Many young South Africans are excluded from 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 and experience can easily become an impediment to employment, thereby having long term adverse effects on the individual and the economy. In response to the high youth unemployment rate, government has implemented an incentive aimed at encouraging employers to hire young and less experienced work seekers, as stated in the National Development Plan.

Who qualifies for the ETI? Employers who are registered for Employees Tax (PAYE) with SARS. Only employers who are tax compliant will be able to claim the ETI. However the amount will be available, subject to limitations, once noncompliant employers become compliant.

Who doesnt qualify for ETI? National, provincial and local spheres of government. Public entities listed in Schedule 2 or 3 of the Public Finance Management Act Parastatals, government entities or municipal entities, unless the Minister of Finance designates them by regulation Employers who have been disqualified by the Minister of Finance due to displacement of employees or by not meeting conditions as may be prescribed by the Minister by regulation