While there is no certainty regarding the proposed five-year extension on the Employment Tax Incentive (ETI) programme (as directed by the 2018 Draft Taxation Laws Amendment Bill), companies will benefit financially from implementing ETI.
CRS Technologies offers the following guidelines:
ETI took effect from 1 January 2014 and was introduced as an incentive to encourage employers to hire young work seekers between the ages of 18 and 29.
It was set to expire on 31 December 2016. The Taxation Laws Amendment Act, 2016, extended the deadline for ETI to 28 February 2019.
HR and HCM services and solutions specialist CRS Technologies reminds employers that they can claim back on ETI depending on the value of the monthly remuneration.
The employer can claim the ETI and reduce the amount of Pay-As-You-Earn (PAYE) tax payable by the amount of the total ETI calculated in respect of all qualifying employees.
Other benefits include:
* It will reduce the employers cost of hiring young people through a cost-sharing mechanism with government, by allowing you to reduce the amount of Pay-As-You-Earn (PAYE) you pay while leaving the wage received by the employee unaffected. For example, employers who are registered for PAYE, and who employ a person for the full month of July 2018 and earns R2000, will get R1 000 off their monthly PAYE liability (provided that the employee is a qualifying employee based on all the other remaining requirements).
* The incentive amount differs based on the salary paid to each qualifying employee and whether the qualifying employee was employed after the inception of the ETI programme on 1 October 2013. So there is certain return on investment (ROI) for qualifying employees, but one of the reasons for business apprehension regarding the programme is because of the level of complexity in calculating cost and ROI regarding ETI.
There are also specific criteria covering qualification for employers and employees alike to the programme.
In order to qualify, the relevant employer must be registered for Employees’ Tax (PAYE), or must be eligible to register for PAYE. The employer can’t register just to claim ETI, other registration requirements must be met.
Certain employers are specifically excluded from the benefits of the ETI, even if they are registered employers for employees’ tax purposes. These employers are:
* The government of the Republic in the national, provincial or local sphere.
* A public entity that is listed in Schedule 2 or 3 of the Public Finance Management Act 1 of 1999, other than those public entities that the Minister may designate by notice in the Government Gazette on such conditions as the Minister may prescribe by regulation.
* A municipal entity.
Qualifying employers can also be disqualified by the Minister of Finance due to the displacement of an employee or by not meeting the conditions as may be prescribed by the Minister by regulation.
“CRS is one of the very few payrolls that can calculate this correctly and has the resources and expertise to fulfil all requirements for employers within its payroll system,” says Sandra Maritz, legislation business consultant at CRS Technologies.