Extension Of The Expanded Employment Tax Incentive Age Eligibility Criteria And Amount Claimable

Written on 09/07/2021
MJ Minter Inc

Despite the recent relaxation of the national lockdown, various businesses and employees are still negatively impacted by the COVID-19 pandemic. These negative impacts are further exacerbated by the impacts of the recent unrest in the country that destroyed businesses and infrastructure. The Government, therefore, wishes to provide additional assistance to those who continue to be adversely affected by COVID-19, as well as assisting in the process of reconstructing businesses. Moreover, this support measure is aimed at supporting employment in the most vulnerable sections of the labour market.

As a result, it is proposed that the expansion of the ETI be reinstated for another limited four-month period, following the design implemented in 2020: 

  • A R750 increase to the maximum monthly amount of ETI allowable. Therefore, the maximum allowable values will be increased in the following manner: 
    • Employees are eligible under the current ETI Act from R1 000 to R1 750 in the first qualifying twelve months and from R500 to R1 250 in the second twelve qualifying months. 
    • Allowing a monthly ETI claim in the amount of R750 during these four months for employees from the ages of 18 to 29 who are no longer eligible for the ETI as the employer has claimed ETI in respect of those employees for twenty four months, or they were in the employer’s employ before 1 October 2013. 
    • Allowing a monthly ETI claim in the amount of R750 during these four months for employees from the ages 30 to 65 who are not eligible for the ETI due to their age. 
  • Formulae will apply to calculate the value of the incentive relative to remuneration received, to introduce the incentive at a positive rate for wages between R0 and R2 000 per month, at a constant value for wages between R2 000 and R4 500 per month, and a declining rate for wages between R4 500 and R6 500. 
  • Since the requirement for social distancing may result in employees working significantly reduced hours, coupled with the businesses that are being reconstructed being unable to trade as normal at the moment, both of which would impact the monthly remuneration actually paid, the proposal allows for the calculation of the ETI claim based on actual remuneration paid in that month where the employee worked less than 160 hours a month (the remuneration paid to the employee would not need to be grossed-up).
  • As the contractual agreement entered into at the beginning of the employees employment with the employer will not be altered, the extent of the ETI claimable in instances where the employee was employed for less than 160 hours a month would still be impacted by the hours employed and paid for in that month (the incentive claimable will bear the same ratio that the number of hours the employee was remunerated bears to 160 hours – the incentive would need to be grossed-down). 
  • The inclusion of an anti-avoidance measure aimed at limiting potential abuse where an employer claims the incentive despite having significantly reduced the employee’s wages. This anti-avoidance measure will apply to wages below R2 000. 
  • Accelerating the ETI reimbursements from twice a year to monthly as a means of getting cash into the hands of tax compliant employers as soon as possible. 
  • To qualify for this relief, the employer must be tax compliant and registered with the South African Revenue Service (SARS) as an employer by 25 June 2021. 

Effective date 
The proposed measures will apply for four months and will come into operation on 1 August 2021 and end on 30 November 2021