With effect from 1 January 2014 employers can take advantage of the Employment Tax Incentive (often referred to as the “ Youth Wage Subsidy ”). It appears to be a very simple process, essentially administered by SARS.
Who does it apply to?
The scheme is available to employers who employ South Africans citizens and asylum seekers with valid permits aged between 18 and 29. There are however a few exclusions which include:
- Government departments;
- Public entities; and
- Employers not registered for PAYE.
Employers can also not claim in respect of the following employees:
- Employees employed before 1 October 2013;
- Domestic workers;
- Connected persons (employees related to the employer);
- If the employee is paid less than the minimum wage applicable to the employer i.e. a collective agreement or Sectoral Determination; and
- If the employee displaces an existing employee.
What can employers claim?
Employers may claim 50% of an employee’s remuneration if the employee earns less than R 2000 (if the remuneration is not subject to any minimum wage provisions). In respect of employees earning between R 2 001 and R 4 000 an amount of R 1 000 can be claimed. For employees earning between R 4 001 and R 6000 a sliding formula applies – by way of an example, an employer would be able to claim R 500 in respect of an employee earning R 5 000.
Employers can claim the incentive in respect of qualifying employees for a period of 2 years. The value of the incentive however halves in an employee’s second year of employment. The incentive falls away on the commencement of the employee’s 3rd year of employment.
How to take advantage of the scheme
As with any incentive scheme, accurate documentation needs to be in place and this will include:
- Obtaining copies of the employee’s ID book/card or valid asylum seeker’s permit (we suggest that you obtain certified copies before the employee commences employment);
- Ensuring that a signed employment contract is in place;
- Keeping an accurate record of employees’ ages.
The employer should calculate the incentive amount due in respect of all qualifying employees and the total can be deducted from the employer’s monthly PAYE liability. SARS is in the process of updating their EMP 201, EMP 501 and IRP5 documents to incorporate this incentive scheme.
The incentive offers employers an opportunity to assist in addressing the problem of youth unemployment, while simultaneously receiving a financial benefit in the process. Employers who need to appoint new staff are encouraged to make use of this opportunity.
AUTHOR: Neil Raymer