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

3 things to do BEFORE you resign

or sign a new contract…
1.Confirm your notice period ·A lot of companies allow 30 days from date of resignation, but many ask for a calendar month
2.Check your restraints ·If you are joining a competitor ·If you are joining a client
3.Find out when your last payment will be transferred ·Companies have been burned by paying over on the 25th, and people not returning, so they may delay payment transfer until the last official working day, or even the first day of the following month.  You may need to make special arrangements regarding debit orders ….
Both your current company and your new one deserve to be fairly treated.   Knowledge of the policies makes this possible.
Even if the policies don’t make sense to you, you agreed to them when you signed your contract.
HR managers will tell you how many great working relationships are damaged because people don’t follow policy when resigning. It’s worth taking the time for many good reasons.  Building a solid career can depend just as much on how you …

Favourite Words

Shambolic – it simply sounds better to me than chaotic.. Do lots of people have favourite words or just a few of us nerds? As everybody is starting to think holidays (or maybe you prefer to vacation), it seemed a good time for a different type of blog. Have you noticed how many words with pleasant associations sound more attractive than those that describe the negative. Watching a TV quiz show the other night made me wonder. The contestant hated bulbous and gusset! There have always been some words that appeal to me, triskaidekaphobia being one. I now know that I had the meaning wrong! I thought it meant fear of Friday the 13th, but it is simply a fear of the number 13, so how does paraskevidekatriaphobia grab you? That is the real word for fear of Friday the 13th. Love it! Now I prefer rural to bucolic, but Robert Beard (see below) selected the latter as one of his favourites. Effervescent is a gorgeous word, so descriptive and onomatopoeic while ethereal makes me think of gossamer and fairie…

Resignation - keep building relationships

Resignation – avoid burning those bridges It has been a great pleasure working with a colleague like you. Now, you are off to your next big challenge! Good luck and farewell!
Isn’t that what we all want to hear when we leave?  We were appreciated and we will be missed.
The need for all parties to maintain professional conduct in the event of resignation is critical, particularly now when we are working within an unsettled socio-economic climate. Employees should avoid damaging relationships, and employers need to adopt a neutral approach and ensure that there are policies and processes that enable the separation to be objectively handled.  For example: ·A formal resignation letter is required·A formal acceptance of resignation is issued confirming any special conditions·An exit interview takes place·Handovers are planned and executed
Our HR team advise those who resign their position to adhere to a few golden rules. Failure to do so could harm whatever bonds have been formed at the workpla…