With effect from 1 January 2014, employers can take advantage of the Employment Tax Incentive, often referred to as the “youth wage subsidy”.
According to Neil Raymer, Human Resources director at Labourwise, it appears to be a very simple process, essentially administered by the South African Revenue Service (Sars).
“The scheme is available to employers who employ South Africans citizens and asylum-seekers with valid permits between 18 and 29 years old,” says Raymer.
However, he says, there are a few exclusions, including government departments, municipalities, public entities, and employers not registered for Pay-As-You-Earn (PAYE).
Employers also cannot claim in respect of the following employees:
- Staff employed before 1 October 2013
- Domestic workers
- Staff related to the employer
- Staff paid less than the minimum wage based on a collective agreement or sectoral determination
- Displacing an existing employee.
Employers may claim 50% of an employee’s remuneration if the employee earns less than R2 000, if the remuneration is not subject to any minimum wage provisions.
Raymer says in respect of employees earning between R2001 and R4 000, an amount of R1 000 can be claimed.
For employees earning between R4 001 and R6 000, a sliding formula applies.
“For instance, an employer would be able to claim R500 in respect of an employee earning R5 000,” says Raymer.
As with any incentive scheme, accurate documentation needs to be in place, including copies of the employee’s ID book or card or valid asylum-seeker’s permit, a signed employment contract, and accurate records of employee 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 busy updating its EMP201, EMP501 and IRP5 documents to incorporate this incentive scheme.
The incentive offers employers an opportunity to help address the problem of unemployment of young people, while simultaneously receiving a financial benefit in the process.
Raymer says employers who need to appoint new staff are encouraged to make use of this opportunity.
But he cautions employers against using the scheme as the sole criterion when employing staff, because the law prohibits discrimination on age, gender or race.
According to Neren Rau, chief executive officer of the South African Chamber of Commerce and Industry (Sacci), the youth wage subsidy has not been well publicised.
However, he says this is a huge opportunity for small business owners to access skills that they might not have ordinarily been able to afford. Rau further says that he hoped that the new incentive scheme would not result in older employees losing their jobs as this would be counter-productive since the scheme was a short-term initiative.