Who would not like to pay less taxes, reduce their labour costs and encourage job creation?
Who would not, I hear you say!
SARS is offering exactly that opportunity to every employer, as Yolandi Esterhuizen from Sage VIP, explained at a recent workshop organised by i-Fundi.
But hurry, this offer is only valid until 2016.
To encourage job creation, SARS is willing to pay part of the salary, of every young person, that you employ for the first two years. Important: The person hired, needs to be between 18 and 29 years old.
How do you get this incentive?
It’s really easy.
You do NOT:
- need to make any application
- need to wait for a refund
The benefit is instant and so does not strain your cash flow.
All you need to DO:
- tell SARS on your usual EMP 201 form, how much you claim for each young person hired and deduct that from your total PAYE amount that you were supposed to have paid.
How much can you claim?
That depends on how much you pay the person. The table below shows you how much you can save. The value of the incentive will decrease by half during the second year. An employer may only claim the incentive for the first two years that each young person has been hired.
| Salary |
1st year claim per youth |
2nd year claim per youth |
| Up to R2000 |
50% of salary |
25% of salary |
| R 2001- 4000 |
R 1000 |
R 500 |
| R 4001- 6000 |
from R1000 to zero on a sliding scale |
From R 500 to zero on a sliding scale |
During the first year, the value of the incentive will be 50% of the monthly wage up to a monthly wage of R2,000.
For wages between R2,000 and R4,000, the value of the incentive will be R1,000.
For wages between R4,000 and R6,000, the incentive value will decrease linearly from R1,000 to zero.
EXAMPLE: an employer who hires a young person with a monthly salary of R3,500 may decrease the amount of PAYE it needs to pay SARS by R1,000, while for a youth who earns R5,000 the employer may decrease the amount of PAYE it needs to pay to SARS by R500.
How will SARS know that you are deducting the right amount?
SARS assumes that you comply with all the requirements until it finds out otherwise during a tax audit. The penalities for making a mistake are not high, you simply pay back the amount for which you do not qualify.
Some other terms and conditions apply:
- The person must be employed by you, it does not matter whether the person is on contract, a part time or full time employee.
- You are not allowed to replace an older employee with a younger one just to claim the incentive.
- The person should have been hired by you on or after the 1st October 2013
- Is in the possession of a SA ID or in possession of an asylum seeker permit
- Must not earn less than the minimum wage as stipulated by the bargaining council in your industry
- Your company taxes need to be up to date, or you must have made the necessary arrangements with SARS to get there.
- If your total PAYE tax bill is less than the incentive claimed, you can carry that credit forward.
- Government organisations do not qualify for the incentive.
The terms and conditions listed here is not complete but it gives you a good sense of what you need to do to claim the incentive. In essence, SARS made every effort to keep things simple.
Nevertheless, as a company has youth joining on different dates and at various salary rates, it makes sense to automate the calculation of the incentive. “That is why Sage VIP has been updated to make the administration of the Employment Tax Incentive effortless”, as Yolandi Esterhuizen from Sage VIP, explained.
According to Stefan Lauber, from i-Fundi, the introduction of the Employment Tax Incentive is a major step forward. “Companies have now a whole host of incentives to bring new people on board”. Amongst them are:
- The Employment Tax Incentive. Companies can easily save per recruit R 12 000 in terms of salaries.
- They can save for every person on a learnership R16 800 in annual taxes.
- They can also receive further learnership grants for the learners’ salary and training.
- They can get a refund of up to 50% of their skills levies paid.
- Plus they can earn valuable BBBEE points, which increases a company’s competitiveness.
“That can easily add up to more than R50 000 per learner, which can give an employer free labour for up to a year.” Given the fact that anyone with more than 6 months work experience has an 80% chance to find employment, all of these initiatives can make a major contribution to the creation of jobs.
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