Skip to main content

Employment Tax Incentive Bill (ETI) - Q & A (1)

The new Employment Tax Incentive Bill has raised a lot of questions.   While I put out an overview a few weeks ago, there are some queries that keep coming up.   Over the next week, this blog will cover some of them.

Large numbers of unemployed are a problem for any country, but when young people leave the education system with a very poor chance of getting a job, their motivation to achieve is impacted from day one.

Statistics indicate that 50% of 15 to 25s are unemployed, and 29% of 25 to 34 year olds.   The ETI Bill aims at the 18 to 29 year olds who are believed to be around 30% of the total unemployed which is sitting at approximately 25%.

The concept of introducing a subsidy for employers who take on young people is not a new one, but there has been significant resistance.   The draft bill was released in September, and the formal bill was published on November 4th, 2013.  

When is it happening?

Treasury has set a “go live” date of 1st January, 2014.  
The bill has a so called “sunset” clause, i.e. it is in effect for three years only – January 1st, 2014 to 31st December, 2016. 

What are the objections and opportunities for abuse? 

There is a concern that companies will terminate existing employees in order to hire people who are eligible for the incentive
The bill is seen by the opposition to be a “watered down” version of the Wage bill proposed in 2010
It is also seen as unfair that people who are already employed will be excluded, leading to the fear that people will be dismissed and rehired to render them eligible

 

Response to the objections 

Employee’s being displaced are a cause for the employer to be disqualified from receiving the tax benefit
Treasury has commented that there is general protection from abuse built into the bill

 

Which Employers Qualify? 

Employers who are registered to withhold and pay employees tax (Para 15 of the Fourth Schedule of the Income Tax Act)

Which Employers are Disqualified? 

Local, provincial or national government
Municipal entities
Public entities (Public Finance Act of 1999), although the Minister of Finance may designate exceptions
Employers who are found to have displaced employees in order to benefit from the incentive
Employers who do not comply with the training conditions (as yet unspecified)
Employers who do not meet the conditions based on the classification of trade (SIC)
Employers who are not in good standing with SARS on the last day of the month

Are there penalties for non compliance? 

Yes
For non-compliance in terms of wage regulating measures, the claimed sums must be remitted to SARS as a penalty
Displacement includes a R30 000 penalty per displaced employee and possible disqualification from further tax incentives

Which Employees qualify? 

Employment date is October 1st, 2013 or later
Employee is between 18 and 29 years old on the first day of the month and not yet 30 on the last day of the month
Has a South African Identification Card (Act No 68 of 1997)
Has a formal Asylum Seeker document  (Act No 130 of 1998)
Should a company have an office in a Special Economic Zone (SEZ), and the employee (of any age) renders the majority of his/her services in that zone
Special industries, to be designated by the Minister of Finance in consultation with the  Ministers of Labour and  Trade and Industry

Which Employees do not qualify?


Domestic workers are specifically excluded
The employee may not be connected to the employer (Section 1 of the Income Tax Act)

If there is no minimum wage in place, an employee earning less than R2 000 is excluded


This is the first section of a three part article.


Comments

Popular posts from this blog

Which Wolf are you Feeding?

Which Wolf are you Feeding?
An old Cherokee is teaching his grandson about life: (Sources – See below) A fight is going on inside me, he said to the boy.   It is a terrible fight and it is between two wolves.   One is evil – he is anger, envy, sorrow, regret, greed, arrogance, self-pity, guilt, resentment, inferiority, lies, false pride, superiority and ego. The other is good – he is joy, peace, love, hope, serenity, humility, kindness, benevolence, empathy, generosity, truth, compassion and faith. This same fight is going on inside you – and every other person, too. The grandson thought about it for a minute and then asked his grandfather “Which wolf will win?” The old man replied simply “ The one you feed”. When I came across this story in a thriller by Michael Robotham, my reaction was immediate.  This is a great hook for creating positive thinking and, importantly to our business, a new way to approach an age old concern. Feeding the good wolf - focusing on the right stuff!  The message …

Thinking of leaving - should you discuss it with your manager?

The exit interview is not the time to tell your manager that you would have stayed if.....   When you are serious about your career, and really enjoy your job, except for one key component, take the time to talk before you resign.

While sometimes the grass is greener, more often than not you just inherit new issues at a new company.

It is a difficult labour market in South Africa right now, there is a skills shortage, and yet there are millions of people without jobs.   Working for a stable company, with people you like, and a job you enjoy is important, and yet there are often those frustrations that give you itchy feet.

In your current position, your manager might really want to keep you, and be very interested in finding out what would make you a happier, more productive, employee.   It is also sometimes much easier to have that conversation with somebody you already know, than have it in your first weeks in a new position.

When you know you have choices, as well as know that you …

Feeding the Right Wolf

Feeding the Right Wolf This Cherokee story resonated with me (see below). Like many business people, I get caught up in managing details, instead of focusing on strategy and growth.Measuring myself against the Good Wolf concept has become a way of thinking for me. Feeding the good wolf - focusing on the right stuff! In a previous article on this topic, I commented that the message is simple, the wolf you feed is the one that grows. The good wolf attributes in a business are where we ideally should spend our time, that good old 80 – 20 rule focusing on our engaged employees, improving client experience and quality of product, to name a few. Creating a Good Wolf Environment While we have many different tools – appraisals, customer and employee surveys – to try and understand the temperature and levels of entropy in our businesses – the truth is that it is really difficult to explain to people that they are not seen as feeding the good wolf.Often the people who offer the most negative input s…