Three important things every employer needs to know about the Employment Tax Incentive (ETI)
43984, 13 Oct. 2014
Tags: eti, employment tax incentive
On 1 January this year, the Employment Tax Incentive (ETI) became effective for all payroll periods. The ETI has been put in place to encourage you, as an employer, to hire young job seekers. This is one way government is dealing with the high unemployment rate in the country.
According to the World Economic Forum (WEF) Global Risk 2014 report, South Africa has the third highest unemployment rate in the world for people between the ages of 15 to 24.
Since the ETI came into effect, there’s been a lot of confusion. Many employers don’t know how they stand to benefit, whether or not they qualify and what rules they must follow to protect their businesses from being disqualified from claiming the ETI.
If you’re not clear on some of the aspects regarding the ETI, keep reading as we tell you three important things you need to know so you can reduce your monthly PAYE payment to SARS if you qualify.
Here are three points you need to know about the ETI
1. Your business will qualify for ETI if you’re registered for PAYE with SARS as an employer and have a PAYE number.
You’ll only benefit from the ETI if you have positions you can fill with individuals who meet the criteria set out in the Employment Tax Incentive Act (ETI Act.)
If you and your employees meet the criteria, you can reduce your monthly PAYE payment to SARS. And that’s where the benefit of this incentive lies. You’ll be able to claim the incentive for a 24 month period for every employee who qualifies.
We recommend you familiarise yourself with the ETI Act to find out which employees meet the criteria or check out SARS’ website.
2. The incentive is scheduled to end on 31 December 2016. Government will review its effectiveness then to determine whether to continue with it or not.
3. If you qualify for the ETI, you must follow certain rules. If you don’t, SARS will disqualify your business from making claims.
The most important rule is, you mustn’t unfairly fire or retrench existing staff and replace them with staff who would qualify for the ETI.
If you need to fire or retrench any staff and you plan to replace them with individuals who qualify for the ETI, do it in line with labour laws (i.e. follow the correct dismissal or retrenchment procedure). This is the only way to protect your company from disqualification.
Now that you know about these three important points, take advantage of the ETI and use it to reduce your monthly PAYE payment to SARS if you qualify.
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