Youth Day on 16 June is a great time to consider the advantages of employing young people in your business – and to find out how SARS’ Employment Tax Incentive (ETI) can assist your company to do this at a reduced cost.

Key to unlocking the benefits of this tax incentive – and of having young employees – is the professional assistance we bring to ensure ongoing compliance with the numerous and ever-changing rules and administrative issues that come with this incentive. 

“Trust the young people; trust this generation's innovation. They're making things, changing innovation every day.” (Jack Ma, Co-Founder Alibaba Group)

South African businesses are always looking for ways to foster growth and innovation while still reducing costs.  

One way to achieve both is to employ young people. Young workers bring unique advantages that can transform your organisation. What’s more, the government subsidises part of the employment costs for qualifying young employees through SARS’ Employment Tax Incentive or ETI.

What young employees can bring to your business

• Tech savvy: More comfortable with new technologies, young employees can accelerate digital adoption in your business.
• Fresh perspectives: Young employees often introduce innovative approaches and creative solutions.
• Adaptability: Young people tend to be more flexible and better equipped to respond to sudden changes and unexpected circumstances.
• Fast learning: Fresh out of formal education, young people often learn more readily and are eager to apply their skills.
• Energy and enthusiasm: The energy and optimism of younger workers can positively impact team dynamics and workplace morale.
• Future-proofing: Young employees help businesses keep up to date with technological developments, emerging trends and the millennial and Gen Z markets.

How the ETI benefits local companies

• The ETI makes it more cost-effective for companies to employ young people and to harness all the benefits mentioned above.
• Essentially, this incentive subsidises part of your employment costs for qualifying young employees for two years. There is no limit to the number of qualifying employees that an employer can hire.
• The young employees’ wages are paid by the employer in full, and the ETI is claimed by reducing the employer’s monthly Pay-As-You-Earn (PAYE) liability by the calculated ETI amount. This creates immediate positive effects on your cash flow.
• It goes without saying that hiring more employees at a lower cost – and the boost of youthful energy they bring – will positively impact productivity and innovation in any company. Many South African businesses use the ETI to create a competitive advantage, build a talent pipeline for the future, and enhance their Corporate Social Responsibility credentials.

How the ETI works

Qualifying criteria
Employers	Employees
Meet the qualifying conditions as prescribed by regulation	A valid South African ID, Asylum Seeker permit, or Refugee ID
Registered for PAYE	Between 18 and 29 years old (age limit doesn't apply in Special Economic Zones)
Must not have displaced employees to claim the ETI	Not a domestic worker or “connected person” to the employer
Not in the national, provincial, or local sphere of government and not a municipal entity	Employed on or after October 1, 2013
Not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (with some exceptions)	Earn at least the minimum wage (or R2,500 where no minimum wage applies) but not more than R7,500 per month

 

Calculation of ETI from 1 April 2025
Monthly remuneration	Formula: First 12 months	Formula: Second 12 months
R0 — R2,499.99	60% of monthly remuneration	30% of monthly remuneration
R2,500 — R5,499.99	R1,500	R750
R5,500 — R7,499.99	R1,500 — (75% x (monthly remuneration — R5,500))	R750 — (37,5% x (monthly remuneration — R5,500))
*Employers can claim the ETI for a maximum of 24 months per qualifying employee. *Example: employing a qualifying employee at R2,500 for the full month could reduce the company’s monthly PAYE liability by R1,500 per month in the first year, and R750 per month in the second year, if all other requirements are met.

Adapted from SARS         

Common ETI pitfalls

Claiming for non-qualifying employees

Incorrectly calculating ETI amounts

Failing to adjust claims after the 12-month threshold

Not maintaining proper payroll records

Overlooking the ‘monthly remuneration’ definition and required adjustments

Penalties for non-compliance
R30,000 penalty	For each employee displaced to employ ETI-qualifying employees
100% penalty	For claiming ETI for employees earning less than the minimum wage or incorrectly calculating remuneration
Understatement penalties	Under the Tax Administration Act, potentially ranging from 10% to 200% of the shortfall
Late payment penalties	10% penalty on underpaid PAYE plus interest at the prescribed rate

Adapted from SARS

How professional assistance makes a difference

• The ETI offers significant benefits, but it also comes with considerable compliance requirements and potential penalties for incorrect implementation.
• Our team of experienced accountants and tax professionals stays up to date with the ever-changing regulations, uses professional systems to identify qualifying employees, accurately calculate claims, and keep proper records, and is ready to assist if any issues, compliance checks or audits arise.
• In this way, we ensure your business can maximise the ETI benefits – and the benefits of having young employees - while minimising compliance risks.

Speak to us if you need help taking advantage of the ETI.

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