The Employment Tax Incentive Act commenced on 1 January 2014. The aim is to encourage job creation.
All employers who are registered for PAYE will be eligible to reduce their PAYE that is payable, for each month that an employer employs a qualifying employee.
Do you qualify for ETI credits in your practice?
- The employee must be aged 18-29.
- The employee cannot be an independent contractor.
- The employee must have a valid SA ID, an asylum seeker permit or a refugee ID.
- The employee cannot be a domestic worker.
- The employee cannot be connected to you. This means that they cannot be a relative.
- The employee was employed on or after 1 October 2013.
- The minimum wage paid to the employee must be R2000 and not exceed R6000 per month.
- All returns to SARS must be up to date and no money being owed to SARS.
If the above criteria are met, you will qualify for the incentive. This incentive is available for the first two years of employment.
An employer has six months to claim the ETI they are entitled to, if it is not claimed it will be forfeited.
SARS will refund the employer the amount of the incentive that was not used to reduce the PAYE amount payable at the end of each six month reconciliation period.
Let’s look at a practical example:
Employee is twenty-five years old. He works 176 hours a month and his salary is R4000. For the first 12 months of employment the employer will receive a monthly deduction on PAYE of R1000.
For the second 12 months of employment the employer will receive a monthly deduction on PAYE of R500.
From the above you can see that there is an incentive to employ younger staff and give them the opportunity to gain work experience.