|Sage VIP Payroll Press Release|
How to align your payroll with the Employment Tax Incentive Bill
|Issued by: Watt Communications:|
[Johannesburg, 5 December 2013]
South Africa is well known for its high unemployment rates, especially among the youth. In an attempt to reduce this, government has proposed the implementation of the Employment Tax Incentive (ETI) scheme to encourage businesses to employ young people. The Bill was adopted and the proposed implementation date is set as from 1 January 2014. In practical terms, it means the employer will receive an incentive for employing youths, subject to certain conditions, which will be in the form of a reduced PAYE monthly liability.
"The incentive will have financial benefits as it will contribute to an improved cash flow, especially for smaller businesses and entrepreneurs. Companies will be in a better financial position to employ more people and will have more money available for training programmes," says Ina du Plessis, Director of Research and Development at Sage VIP.
However, it has many technical specifications and requirements, which will significantly impact on companies' payroll systems and processes. Du Plessis encourages all HR and payroll administrators to ensure they are aware of and understand the detail of the incentive. They should also ensure that their software provider makes provision for the administration of ETI within their payroll and HR software.
According to Du Plessis, Sage VIP has, since the Bill was published, made a concerted effort to ensure their payroll and HR systems are up to date with all the requirements. She gives customers the assurance that they have nothing to be concerned about and that Sage VIP will be ETI compliant when it becomes effective.Yolandi Esterhuizen, Legislation Manager at Sage VIP, continues by highlighting some of the basic principles to understand the concept of ETI.
1. Determine if you are eligible for the incentive as an employer
An eligible employer is a private-sector employer registered for PAYE.
2. Determine which of your employees will allow you to qualify for an incentive (also referred to as qualifying employees).
The following are some basic steps to follow:
3. Determine the incentive amount
The incentive will be available for a maximum 24-month period per qualifying employee, broken up into a ‘first 12 months' period and a ‘next 12 months' period'.
The incentive must be determined every month by identifying who the qualifying employees are and by doing the above calculation.
Mr A (qualifying employee) is employed in April 2014. His monthly remuneration is R1 500. Mr A was employed after 1 October 2013 and April is his first month of employment at this employer.
Because Mr A earns below R2 000 a month during the first 12-month period, the incentive amount available to the eligible employer is 50% of R1 500 = R750 for the month of April. This amount will then be deducted from the total PAYE liability of the employer.
For more information, please visit www.treasury.gov.za.