Employment Tax Incentive – South Africa

Once again the draft Employment Tax Incentive Bill has been tabled. The bill proposes tax relief to the employee. This is expected to pass on to the employer by reducing the effective cost to company, thus enabling companies to employ staff at a lower cost.

The growing trend in South Africa is of school and university leavers not been able to find jobs in the work place. The lack of skills is often a concern to many business owners. One might question the reality of the skills shortage with the amount of education and additional courses these individuals attend, but the perception is there.

Once again the draft Employment Tax Incentive Bill has been tabled. The bill proposes tax relief to the employee. This is expected to pass on to the employer by reducing the effective cost to company, thus enabling companies to employ staff at a lower cost.

The incentive is applicable to all new employees under the age of 25 and employed after the 31 October 2013. The expected date of promulgation is the 1st January 2014 but is likely to be effective 1st March 2014.

The incentive will run until 1st of January 2017.

Government is hoping this incentive will improve the unemployment gap of youth. This is possibly a move to appease the masses of dissatisfied youth in South Africa. There are concerns that the incentive will not work, due to the lack of demand in the local economy. Is there enough growth in the private sector to allow for the expansion of jobs at the school leaving rate? Where the incentive could help, is by reducing the minimum wage as a cost to company, but then these employees are already below the PAYE threshhold and so the inventive will not help the masses in lower income brackets.

Private sector business will welcome the incentive to try and save on employee costs. Let us be hopeful that the Employment Tax Incentive will create a positive economic stimulus. One that allows the private sector to see scope to expand their employment base and to improve profitability.

Make use of this time to assess business budgets. Work out whether this incentive will give your business the scope to employ new young staff. Factor in the cost of skills development that will be needed. Will it give you the ability to expand business and increase your customer base?