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Tax incentives for employing youth in your business

“I have a young business that is developing well. But I need to appoint more staff. I’ve heard that there are tax incentives for employing youth. How do these work?”

A useful tax incentive for employing youth is ETI or Employee Tax Incentive. ETI allows you to benefit up to R12,000 per year for every qualifying youth you employ. ETI was introduced to help make it more affordable for businesses to appoint new staff and assist young job seekers to find employment. 

Through ETI, SARS subsidizes the appointment of youth by allowing a business to decrease their Pay-As-You-Earn (PAYE) for every qualifying youth that is hired. Businesses can decrease PAYE for up to 24 months from date of appointment. There is also no restriction on the amount of employees that you claim ETI for.

Employees who qualify for ETI must meet the following requirements:

• Possess a South African ID
• Be between 18 – 29 years of age
• May not be domestic workers
• May not be related or connected to the employer
• Must earn at least a minimum wage
• May not earn more than R6000 per month.
• Must be a new appointment with the employer.

The incentive is calculated as follows:

 

Department of National Treasury & SARS

 

From this table it can be seen, that a business can claim up to R12,000 for the first year for every new qualifying youth that is appointed. 

Additionally, it can also be mentioned that SARS affords employers who invest in the training and development of their employees with additional tax incentives. Section 12(h) of the Income Tax Act provides for a deduction of R80,000 net profit after tax for a learner without a disability.

So, if you were to appoint a qualifying youth and immediately invest in that youth by placing him/her on a learnership you could receive a tax incentive of R92,000 for the first year of employment. You would simultaneously provide the youth with much needed access to the job market, training and workplace experience and invest in your own business by growing a young and skilled worker to add value to your business.

SARS affords multiple incentives for businesses that wish to invest in their human capital through the appointment of youth and their development through training initiatives. 

It would however be wise to consult with skills specialists to assist you to structure your employment and training initiatives correctly in order to take maximum advantage of the incentives available for businesses.

May 13, 2019
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