“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
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.
We offer a wide range of specialist services, including tax consulting and tax compliance. Should you need our advice or assistance, contact your contact Partner at MGI Bass Gordon. Send an email to info@bassgordon.co.za or call us on 021 405 8500.
Additional reading:
You can help clients to ascertain whether they are a ‘qualifying employer’ using SARS’ interactive tool. Also, visit the Employment Tax Incentive (ETI) webpage for more information and resources.
The article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.
