employment tax incentive (ETI) 

What's New?

  • 08 December 2017 - Updated e@syFile™ Employer version 6.8.2 
    e@syFile™ Employer software has been updated from version 6.8.1 to version 6.8.2, you can refer to the release notes for more details on the changes made to the software.

  • 01 December 2017 - Confirmation of PAYE banking details
    Employers are urged to check their PAYE banking details on the eFiling RAV01 form. This will ensure that the banking details are correct in cases where an ETI refund is expected. If the details are incorrect employers will need to visit a SARS branch to update it.

  • 1 November 2017 - Employer Interim Reconciliation
    CLOSED NOW. Employers who have not submitted their annual declarations are urged to do so urgently.

  • 07 September 2017 - August 2017 Employer Interim Reconciliation submissions open 15 September 2017
    The Employer Interim Reconciliation submission period will open on 15 September and run to 31 October 2017.
    During the Interim Reconciliation submission period, employers are required to submit an Employer Reconciliation Declaration (EMP501) and Employee Income Tax Certificates [IRP5/IT3 (a) s] for the six month period 1 March to 31 August 2017. The interim IRP5/IT3(a)s for the six month period 1 March to 31 August 2017 must not be issued to an employee unless it is a final certificate (where the employee has left the service of the employer or the employer ceased to be an employer on or before 31 August 2017).
Changes which have been introduced:
  • New Income Source Codes 3719/3769, 3720/3770 and/or 3721/3771
    • Certain dividends in respect of restricted equity instruments are considered to be remuneration from which employees’ tax is deductible. When the above-mentioned codes are imported into or captured on e@syFile™ Employer or eFiling, a directive number will be required. You should enter fifteen zeros (0 x 15) as the directive number on the IRP5/IT3(a)s with these income source codes.
  • Updated version of e@syFile™ Employer
    • The updated version of e@syFile™ Employer should be used when filing your interim reconciliation and is available for download on www.sarsefiling.co.za. It is very important that you back up the current information on your computer prior to installing a new version as the installation may delete your current information.
    • You can submit your Employer Reconciliation Declaration (EMP501) and Employees Income Tax Certificates [IRP5/IT3(a)s] online via e@syFile™ Employer, or if you have less than 50 employees, via eFiling.
  • Payroll Tax (PAYE, SDL and UIF) compliance
    • To avoid penalties being levied make sure that you submit your declaration by no later than 31 October 2017.
Please note:  You need to submit your Monthly Employer Declarations (EMP201) and payments to SARS by the 7th of each month. In instances where the 7th falls on a public holiday, Saturday or Sunday, the due date becomes the last business day prior to the 7th. When making payment, make sure to use the correct Payment Reference Number (PRN) so that your payments are correctly allocated.

Why is there an ETI?

Millions of young South Africans are excluded from participating in economic activity, and as a result suffer disproportionately from unemployment, discouragement and economic marginalisation. High youth unemployment means young people are not gaining the skills or experience needed to drive the economy forward. This lack of skills can have long-term adverse effects on the economy.

In South Africa the current lack of skills and experience as well as perceptions regarding the restrictiveness of labour regulations make some prospective employers reluctant to hire the youth.
As a South African employer, you now have a great opportunity to boost the employment of young work seekers.

What is it?

The ETI is an incentive aimed at encouraging employers to hire young work seekers. It was implemented with effect from 1 January 2014. 

What are the benefits for employers?

The benefits of the ETI are:
  • 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 February 2014 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). For more information on how the ETI works, click here.
  • Employers will be able to claim the incentive for a 24 month period for all employees who qualify. Click here for more information.
  • 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. ETI may only be claimed for a total of 24 qualifying months. Click here for more information.
  • This incentive will complement existing government programmes with similar objectives e.g. learnership agreements.
  • The aim of the ETI is to facilitate the increased employment of young work seekers.

Who qualifies?

  • The employer is eligible to claim the ETI if the employer–
    • Is registered for Employees’ Tax (PAYE), or must be eligible to register for PAYE (e.g. the employer can't register just to claim ETI, other registration requirements must be met)
    • Is not in the national, provincial or local sphere of government
    • Is not a public entity listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance by Notice in the Gazette)
    • Is not a municipal entity
    • Is not 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.
Top Tip: To work out if you are a qualifying employer click here.

How do I determine who is a qualifying employee?

Top Tip: There is no limit to the number of qualifying employees that an employer can hire.
An individual is a qualifying employee if he or she–
  • Has a valid South African ID, Asylum Seeker permit or an ID issued in terms of the Refugee Act
  • Is 18 to 29 years old (please note that the age limit is not applicable if the employee renders services mainly inside a special economic zone (SEZ) to an employer that is operating inside the SEZ, or if the employee is employed by an employer that operates in an industry designated by the Minister of Finance)
  • Is not a domestic worker
  • Is not a “connected person” to the employer
  • Was employed by the employer or an associated person to the employer on or after 1 October 2013 and
  • Is paid the minimum wage applicable to that employer or if a minimum wage doesn't apply, is paid a wage of at least R2 000 (where the qualifying employee was employed for 160 hours in a month) and not more than
    R6 000 renumeration.
Important: The value of the ETI the employer may claim depends on the value of the monthly remuneration paid to the qualifying employee. If the employee has worked less than 160 hours in the month, the remuneration amount must be ‘grossed up’ to 160 hours per month to calculate the value of the ETI. The amount can then be calculated and be ‘grossed down’ in the same ratio. See more information here.

Will penalties apply?

Yes, penalties will apply when:
  • An employer claims the ETI for an employee who qualifies and earns less than the minimum wage (or less than R2 000 where a minimum wage is not applicable). A penalty equal to 100% of the ETI claimed for that employee will be imposed. This will lead to an under-payment of employee’s tax and possible interest and penalties in terms of the Tax Administration Act.
  • An employer is believed to have displaced an employee in order to employ an employee who qualifies. A penalty of R30 000 will be levied, for each employee displaced. 

How long will it be available?

The initial end date of 31 December 2016 was extended to 28 February 2019.  
An employer is able to claim the incentive for a 24 month period for all employees who qualify.

Need help?

Call the SARS Contact Centre on 0800 00 SARS (7277), or visit your nearest SARS branch.
Top Tip: Formulas are sometimes difficult to understand so we have step-by-step examples for ETI, click here.
To access this page in different languages click on the links below:
Last Updated: 14/12/2017 3:30 PM     print this page
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 Top FAQs

What do I do if an employee doesn't qualify each month?
In determining the first or the second 12 month period, only the months in which the employee qualifies are taken into account.

Can the Monthly Employer Declaration (EMP201) have a negative amount?
The Pay-As-You-Earn (PAYE) on the EMP201 may not result in a negative amount. Where the calculated Employment Tax Incentive (ETI) is more than the PAYE liability,

What are the consequences if I select Yes under the Employment Tax Incentive (ETI) section on the Monthly Employer Declaration (EMP201), and I do have outstanding returns and/or debt?
If an employer continues to claim the ETI even though it is not available to them in term of section 8 of the ETI Act, the employer would have a short fall on the payment of PAYE resulting in interest and penalty for late payment in that month.

If an employee's monthly remuneration places the employee in the R2001 - R4000 range for ETI. If that same employee works overtime and as a result earns more than R4000. How will the ETI be calculated?
The calculation of ETI is determined per qualifying employee at the end of each month. This means that the incentive amount may not remain fixed per qualifying employee where the employee earns additional payments, such as overtime.

Do I need to tick the Employment Tax Incentive (ETI) field when completing a certificate on e@syFile™ Employer?
The ETI field is only mandatory when you have claimed ETI for the specific employee. A pop-up message will be shown, when manually capturing the certificate details for an employee who doesn't qualify for the ETI.