Budget Friendly Staff (ETI tax incentives)
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What is the ETI?
The Employment Tax Incentive (“ETI”) was introduced with the objective of generating employment opportunities for young and less experienced work seekers
The incentive reduces the cost of hiring young people to employers through a cost-sharing mechanism with the government, while leaving the wage the employee receives unaffected. The ETI was implemented with effect from 1 January 2014 and will end on 28 February 2029.
What are the benefits for employers?
The cost to the employer of hiring young people is reduced, as the employer is allowed to reduce the amount of employees’ tax (PAYE) that it is required to pay to the South African Revenue Service (“SARS”) in respect of a qualifying employee’s remuneration.
If an eligible employer hires a qualifying employee, the employer can deduct the ETI from the total amount of employees’ tax payable to SARS.
Which employers may claim the ETI?
If the employer is registered with SARS for purposes of paying monthly employees’ tax to SARS, the employer will be eligible to claim the ETI.
Which employees qualify for the ETI?
An individual is a qualifying employee if he or she:
- has a valid South African identity document, is an asylum seeker or refugee (with an asylum seeker permit or identity document, issued in terms of section 30 of the Refugees Act, 1998);
- is not a connected person in relation to the employer. (Connected person or relative: A connected person or relative means your spouse or anybody related to you or your spouse by blood in the third degree (e.g. great great grandfather etc.),
- is a permanent or part time employee;
- is between 18 and 29 years of age – the age restriction is applicable to individuals not employed by an employer located in a Special Economic Zone (“SEZ”);
Special Economic Zones:
- COEGA SEZ (Eastern Cape)
- RICHARDS BAY SEZ (KZN)
- EAST LONDON SEZ (Eastern Cape)
- SALDANHA BAY (Western Cape)
- DUBE TRADEPORT (KZN)
- MALUTI-A-PHOFUNG (Free state)
- OR TAMBO (Gauteng)
- MUSINA/MAKHADO (Limpopo)
- ATLANTIS (Western Cape)
- NKOMAZI (Mpumalanga)
- is employed by an employer located in a SEZ – in these circumstances there is no age restriction;
- is not a domestic worker;
- earns not less than the prescribed wage (R25,42/hour) OR where minimum wage is not applicable. This is where we discuss the remuneration with the employee and they are aware of what they are getting paid and have a choice to accept it or not.
- earns remuneration of less than R6 500 per month (remuneration includes the employee’s salary plus the value of all fringe benefits)
- was employed on or after 1 October 2013.
How is the ETI claimed?
An employer can claim the incentive by decreasing the amount of PAYE that is payable to SARS for every qualifying employee hired by the employer. This is done by completing the ETI field on the employer’s monthly EMP201 return to be submitted to SARS.
The ETI Calculation Formulae that are Effective from 1 March 2022:
| Monthly Remuneration | Formula
First 12 Months |
Formula
Second 12 Months |
| R0 to R1 999,99 | 75% of Monthly Remuneration | 37,5% of Monthly Remuneration |
| R2 000 to R4 499,99 | R1 500,00 | R750 |
| R4 500 to R6 499,99 | R1 500 – (75% x (monthly remuneration – R4500)) | R750 – (37.5% x (monthly remuneration – R4 500)) |
FAQs:
Will the Employment Tax Incentive (ETI) also be applicable to seasonal employees (i.e. 6 or 8 months) and/or fixed term contract employees?
The Act does not exclude them as long as they meet the requirements as an employee who qualifies, i.e.
- Has a valid South African ID
- Is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance)
- Is not a domestic worker
- Is not a “connected person” to the employer
- Was employed by the employer or an associated person to the employer on or after 1 October 2013 and
- Is paid the minimum wage applicable to that employer or paid a wage not below R2 000 per month if a minimum wage is not applicable.
Top Tip: There is no limit to the number of qualifying employees that an employer can hire.
How long will the ETI be available?
The ETI came into effect on 1 January 2014 and it will end on 28 February 2029.
For more information, have a look at the meeting we had on 7 November 2023, where we discussed this with some of the pastors. Here is the notes shared in the meeting.
As we gain more resources and details, we will upload them to our resource folder here. For more information, please contact Wianco.Blom@shofaronline.org.
