EMPLOYMENT TAX INCENTIVE (ETI)
An incentive aimed at encouraging employers to hire young and less experienced work seekers.
Employment Tax Incentive (ETI), what is it?
It is an incentive aimed at encouraging employers to hire young and less experienced work seekers. It reduces an employer’s cost of hiring young people through a cost-sharing mechanism with government, while leaving the wage the employee receives unaffected.
This incentive came into effect on 1 January 2014.
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 doesn’t qualify for ETI?
National, provincial and local spheres of government
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
When can the incentive be claimed?
Employers are able to claim the incentive when they have employees who:
- Have a valid South African ID
- Are from 18 to 29 years old
- Are not domestic workers
- Are not related or “connected” to the employer
- Earn at least a minimum wage in terms of wage regulating measures. If no measure exists, then the employee must earn R2 000 per month in wages
- Earn less than R6 000 per month in total remuneration (basic salary plus all other benefits)
- Were newly employed on or after 1 October 2013
Note: It can be claimed for a maximum of 24 monthly periods per qualifying employee.
How is the ETI claimed?
An employer can claim the incentive by decreasing the amount of PAYE that is payable to the SARS for every qualifying employee that is hired by the employer.
This is done by completing the Employment Tax Incentive (ETI) field on the employer’s monthly EMP201 submission to SARS.
Note: No refunds are currently permitted, and employers should be able to produce IDs for the employees that the incentive is claimed for, if required to.
How does it work?
In determining the value of the incentive for a particular month, an employer must follow 5 steps:
- Identify all qualifying employees for that month
- Determine the applicable employment period for each qualifying employee (1st 12 months or 2nd 12 months)
- Determine each employee’s “monthly remuneration”
- Calculate the amount of the incentive per qualifying employee
- Aggregate the result
|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))|
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