Category: General | Employment Tax Incentive PAYE Tax Obligations ETI
WHAT IS THE EMPLOYMENT TAX INCENTIVE (ETI)?
The Employment Tax Incentive (ETI) is a South African government initiative designed to reduce unemployment by encouraging businesses to hire young and less experienced job seekers. By offering tax incentives, the ETI lowers employment costs, making it easier for businesses to expand their workforce.
WHO QUALIFIES FOR THE ETI?
Employers can claim the ETI if they:
- Are registered for PAYE with SARS.
- Comply with all tax obligations.
- Employ workers earning less than R6,500 per month.
- Hire employees aged 18 to 29 (or any age if working within a designated Special Economic Zone).
HOW DOES THE ETI BENEFIT EMPLOYERS?
Employers who meet the criteria receive a monthly tax incentive per qualifying employee for the first 24 months of their employment. This reduces PAYE liability, creating cash flow relief while boosting youth employment.
BREAKDOWN OF THE MONTHLY ETI BENEFIT:
| Monthly Wage | First 12 Months | Second 12 Months |
|---|---|---|
| R0 — R2 499.99 | 60% of monthly remuneration | 30% of monthly remuneration |
| R2 500 — R5 499.99 | R1 500 | R750 |
| R5 500 — R7 499.99 | R1 500 – (75% x (monthly remuneration – R5 500)) | R750 – (37,5% x (monthly remuneration – R5 500)) |
HOW TO CLAIM THE ETI
Employers must calculate their ETI claim monthly and report it in their EMP201 payroll submission to SARS. The incentive is deducted from PAYE liabilities.
COMMON MISTAKES WHEN CLAIMING ETI
Avoid these errors to prevent penalties and ensure compliance:
- Claiming for non-qualifying employees.
- Incorrectly calculating ETI amounts.
- Failing to adjust claims after the 12-month threshold.
- Not maintaining proper payroll records.
RECENT UPDATES & COMPLIANCE MEASURES
SARS has intensified compliance checks, increasing audits to ensure correct ETI claims. Employers must keep detailed payroll records and be prepared for SARS reviews.
FINAL THOUGHTS
The ETI is a valuable tool for businesses looking to reduce tax liability while playing an active role in addressing youth unemployment. If you’re an employer, consider the financial benefits while ensuring compliance.
DISCLAIMER
Nothing in this article should be construed as tax advice. An expert should be consulted based on specific facts and circumstances. Tax A Sured (Pty) Ltd does not accept responsibility for decisions taken based on this article. Consult primary resources before making any decisions.
