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In Private by Neil Raymer5 Comments

With effect from 1 January 2014 employers can take advantage of the Employment Tax Incentive (ETI), often referred to as the “youth wage subsidy”. It appears to be a very simple process, essentially administered by SARS.

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  1. I am a farmer and have engaged a number of unemployed youths to do fencing maintenance. I tick all the blocks for ETI (contract, pay min agric wage,etc) except that I am not registered for PAYE as none of my employees earn above the taxable income threshold.
    It seems crazy that in rural areas where unemployment amongst the youth is particularly high and where they can acquire skills I am unable to make use of the youth subsidy. I have a limited budget for fencing maintenance but with the subsidy could employ them for twice as long and they would leave skilled enough to start their own contractor fencing business.

  2. Question: I understood that these incentives are only applicable to employers operating in special economic zones or in an industry designated by the Minister in the Gazette.

  3. The way I understand this incentive is that in effect existing employees who pay paye are subsidising this scheme, because employees paying tax will not have their liability reduced, but the employer will get a cash flow benefit from the incentive.

    1. Reply to J Marais: It is true that existing employees will not receive a reduction in tax rates, however the intention of the scheme is to incentivise employers to create employment. If an employer hired four qualifying employees at R 4000.00 he/she could employ a fifth at no additional cost or it can be used to invest in the business which in turn could lead to further employment creation. We need to take the problem of youth unemployment seriously and this incentive certainly is a step in the right direction.

      1. Reply to Peet: The incentive is applicable to all employers. The age limit of 18 to 29 years is not applicable if the employee renders services inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance. However, the Special Economic Zones (SEZ) Bill is currently before parliament and no industries have yet been specifically designated. For now the age limit would apply in such areas.

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