Employment Tax Incentive Act


The Employment Tax Incentive Act is effective from 1st  January 2014- 31st December 2016 and is a very nice piece of legislation for employers who employ younger employees in the lower income brackets.

The principles of the Bill are as follows:

Employers obtain a direct tax rebate via a reduction on their monthly PAYE when hiring employees who:

         Fall between the ages of 18-29

         Are either new employees or have renewed their fixed term contracts since 1 October 2013.

         Have a SA ID or an Asylum Seeker permit

         Have a gross monthly salary that falls between R2,000 (or the industry’s Collective Agreement minimum wage if applicable) and R6,000.

In addition:

         This incentive doesn't apply to domestic workers and workers connected to or related to the employer.

         There is a penalty of R30,000 per displaced employee, plus disqualification from the ETI benefit, should it be found that the employee was displaced in order for the employer to benefit from the ETI.

The rebate structure is as follows:

For the 1st to the 12th qualifying months:

Salary bracket

ETI rebate

R0-R2,000 (collective agreements)

50% of monthly salary




R1,000- (0.5 x (monthly salary-R4,000)


For the 13th to the 24th qualifying months:

Salary bracket

ETI rebate

R0-R2,000 (collective agreements)

25% of monthly salary




R5,000- (0.25 x (monthly salary-R4,000)


As such the maximum rebate for the first 12 months is R1,000 and for the next 12 months is R500.

In terms of how is practically works, the VIP’s Payroll system will calculate the total ETI rebate amount. Alternatively the Payroll department needs to calculate the ETI rebate based on employees who qualify for the ETI.

This figure needs to be captured under the new EMP201 under Employment Incentive Tax (ETI) under the Payment section. The form automatically takes this amount off the PAYE due and calculates a new Net Total Due for PAYE.

Companies are allowed to roll-over amounts under various condition, so if you missed taking advantage of the ETI in January 2014, you can claim January and February’s ETI on your February 2014 EMP201.

Benefits of the ETI:

         To the Employer: PAYE is reduced, therefore cost of employment is lowered

         2. To the Employee: Has a job

         3. To the Country: Youth employment rate increases, improves social stability  

If you have comments or questions, please contact us at Peoplewise.