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.


Popular posts from this blog

Agile workers & workspaces - a new way of working..

Being an agile worker is still a work in progress…
Is flexibility now a reality in the workplace?And is it really working? We keep renaming it – remote, activity based and agile work being some of the current terms. The assumption of control over one’s own time and deliverables does look like a great way to work and live, and it seems to be is a high priority for those entering the business world. There is also the development of the agile work space, where people come to the office each day, but don’t have a fixed work area.We used to call it hot desking back in the day and it met with mixed success.Today, office designers have started to create work spaces which are intended to encourage innovative thought, cross departmental collaboration and improved productivity. My research indicates that the mix of engaged and disengaged employees in an open plan workspace does not always have the desired effect of the positive workers influencing the culture.In fact, a case study of a senior execut…

The Gig Economy - HR and other issues

The Gig Economy has emerged as a topic of discussion and I understand that Intuit has posited that 40% of US workers will be independent contractors by 2020.  That is 3 years away! What is a gig employee?  Uber, Lyft, and Airbnb all utilize gig employees as the delivery mechanism for their apps.   While they are all clear that they are just an App and don’t employ the gig employees, governments and employer bodies are analyzing the risks and reports are indicating that they are significant. As a contract worker, which is how Uber defines their drivers, there is not an employer/employee contract in place.    While Uber, and other similar companies, create the mechanism for people to deliver a service, they consider themselves brokers, for want of a better word, and not employers. The UK is looking into the situation and considering legal structures .  The concerns are particularly when people have a single source of income, although they are not formally employed.  This leaves them in a …

Setting Budgets and Targets

Does too much of a stretch impact motivation?    Over many years of setting (and trying to achieve) targets and budgets, getting the balance right between stretch and motivation remains a challenge.

I love Jim Collins and Jerry Porras and their BHAGs in their great book, Built to Last, but if the goals are seen as unachievable too early in the business year, what then?

Is there a way for businesses to achieve success without budgets and targets in place?

Two old favourites " You can only manage what you can measure" and "People do what managers measure" suggest that they can't.  I am sure there must be successful businesses with different methodologies, but most of us need to work towards something.

With that in mind, I think there needs to be stretch, and there needs to be a sense of achievability.

Why would you race against Usain Bolt unless you think you could win?

The same goes for budgets and targets, people need to believe they are possible.

So how do you…