Employment Tax Incentive – Don’t let your company miss out on the benefits
The growing number of unemployed young people, particularly those without tertiary training or education, is of great concern. According to the Quarterly Labour Force Survey (QLFS), the official unemployment rate was 33,9% in the second quarter of 2022.
In 2014 National Treasury introduced a new incentive to encourage the employment of young people through the introduction of the Employment Tax Incentive Act (ETIA).
The Employment Tax Incentive (ETI) scheme is the most powerful small and mid-sized enterprises (SME) tax benefits scheme. Eight years into the incentive, and with it scheduled to be around until 28 February 2029, it is an opportune time to remind employers of the benefits.
The Employment Incentive Tax allows employers to reduce the amount of PAYE (pay as you earn) the employer pays while leaving the employee’s wage unaffected. However, it has many technical specifications and requirements, which will significantly impact on companies’ payroll systems and processes.
Although not the lengthiest piece of legislation, the Act is packed with requirements, provisos, exclusions and links to other sets of legislation. Largescale implementation inevitably requires specialist skills, which many SMEs may not be able to afford, especially if the specific SME potentially only employs a handful of qualifying employees.
Employees can qualify for ETI for 24 months from employment with the employer. These do not have to be consecutive months and only qualifying months are counted towards the 24 months. The incentive falls away after the 24 qualifying months and cannot be switched on retroactively, so it is imperative to apply the ETI as soon as an eligible worker is employed.
Most SMEs miss out on the ETI benefits, either because of a lack of awareness, fear of claiming ETI incorrectly, or concerns surrounding the increased admin.
It is important to have an updated and well-advised payroll system as SARS also pays close attention to ETI submissions.
CRS Technologies makes an effort to ensure our payroll and human resource systems are up to date with all the requirements to enable employers to maximise their Employment Tax Incentive benefits, and can assist employers to maximise the value of the incentive.