Employment Tax Incentive
What is ETI?
The ETI is an incentive aimed at encouraging employers to hire young work seekers.
- 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.
- For example, employers who are registered for PAYE, and who employ a person for the full month of February 2014 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).
- Employers will be able to claim the incentive for a 24-qualifying month period for all employees who qualify.
- The 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 24 qualifying months.
- This incentive will complement existing government programmes with similar objectives e.g. learnership agreements.
- The aim of the ETI is to facilitate the increased employment of young work seekers.
- The employer is eligible to claim the ETI if the employer–
- 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)
- Is not in the national, provincial or local sphere of government
- 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)
- Is not a municipal entity
- 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.
- Has a valid South African ID, Asylum Seeker permit or an ID issued in terms of the Refugee Act
- Is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services mainly inside a special economic zone (SEZ) to an employer that is operating inside the SEZ.
- Is not a domestic worker
- Is not a “connected person” to the employer
- Was employed by the employer or an associated person to the employer on or after 1 October 2013 and
- Is paid the minimum wage applicable to that employer or if a minimum wage doesn’t apply, is paid the amount contemplated in the Minimum Wage Act and not more than R6 000 remuneration. If there is no prescribed wage regulating measure or not subject to or exempt from the requirements of the National Minimum Wage Act, a wage of at least R2 000 (where the qualifying employee was employed for 160 hours in a month) must be paid.
Important: The value of the ETI 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. See more information here.
The ETI came into effect on 1 January 2014 and it will end on 28 February 2029.
How is the ETI claimed?
An employer can claim the incentive by decreasing the amount of PAYE that is payable to SARS for every qualifying employee hired by the employer. This is done by completing the ETI field on the employer’s monthly EMP201 return to be submitted to SARS.
The monthly ETI that may be claimed per qualifying employee is as follows:
First 12 months
Second 12 months
R 0 - R2000
50% of Monthly Remuneration
25% of Monthly Remuneration
R 2001 – R 4500
R 1000 per employee
R 500 per employee
R 4501 – R 6500
R 1 000 – (0.5 x (Monthly Remuneration – R4 000))
R 500 – (0.25 x (Monthly Remuneration – R 4 000))