The Employment Tax Incentive (ETI) has been approved by the South African Parliament. The purpose of incentive is to alter the high levels of youth unemployment by reducing the cost to employers of hiring employees between the ages of 18 and 29. The ETI is to remain in force until 31 December 2016.
The ETI is a cost-sharing mechanism with the Government within the pay-as-you-earn system. Furthermore, it will decrease the amount of tax that is owed by an employer through the pay-as-you-earn system. The amount of tax that is owed by an employee will still be recorded as being paid (there will be no shortfall on assessment), while the employer may retain the cash value of the incentive.
For eligible, the employees whose age between18 and 29, possess a South African ID and must receive a salary that is between the minimum wage for that specific sector and ZAR6, 000 per month. The incentive will be available for the first two years of employment, and its value is prescribed by a formula, which has three components for different wage levels.
The incentive will be applicable until December 31, 2016 commencing from January 1, 2014. The ETI will apply to all eligible employees who were hired after October 1, 2013 in order to avoid the possibility of employers holding off hiring decisions until January 1, 2014.
