Tax incentive for hiring young and less experienced citizens

• Jurisdiction: South Africa
• Author: Michael Rudnicki
• DOI: 10.10520/EJC173386
• Published date: 01 June 2014
• Date: 01 June 2014
• Pages: 1-7
• Published By: Siber Ink

1

© Siber ink

Tax Incentive for Hiring

Young and Less Experienced

Citizens

MICHAEL RUDNICKI

AbstrAct

Yet another piece of legislative change, this time in the form of an incentive:

an employment tax incentive, promulgated by the Employment Tax Incentive

Act 26 of 2013, which provides cash incentives to employers who employ

young and low-earning South African citizens.

The ETI programme is effective 1 January 2014, and is applicable for two

twelve-month cycles within a period commencing on 1 January 2014 and

ending on 31 December 2016.

The ETI credits a ‘qualified employer’ with cash amounts depending on

the level of monthly remuneration with a cap of R6 000. The minimum

monthly wage required to tax advantage of the incentive is R2000 or a wage

approved in terms of a ‘wage regulating measure’.

Qualifying employees must be aged between 18 and 29, subject to certain

exclusions, such as domestic workers.

Introduction

Government’s desire to reduce unemployment and thereby stimulate

employment within young age groups has been boosted by the introduc-

tion of the Employment Tax Incentive Act 26 of 2013 (‘the ETI Act’). The

incentives contained in the ETI Act extend some of the employment-related

incentives vis à vis deductions for employers, in relation to learnership

contracts,1 bursaries for employees,2 and related deductibility provisions

for employers.3 Not only does the ETI Act provide benefits to employers

in respect of low-earning, young employees, but also, by notice in the

Gazette, in respect of employees in Special Economic Zones and specifically

designated industries. The perceived benefits for employers under the ETI

Act, which has an end date of 31 December 2016, include enhanced cash

flow for employers and the potential to increase employment and related

salaries due to cash-flow savings. There are no direct monetary benefits for

employees other than the potential for enhanced wages and longer work

experience.

1

Section 12H of the Income Tax Act 58 of 1962.7

2

Section 10(1)(q) of the IT Act.

3

Section 11(a) of the IT Act, namely the general deduction formula.