About ETI

ETI is a tax incentive by government aimed at encouraging businesses to employ youth.

It reduces your PAYE for employees between the ages of 18 and 29, who earn less than R6000 per month. What this means is that you can actually get some money back from the SARS for employing youth. If your ETI claim is greater than your monthly PAYE, you will get the excess back in cash, tax free.

ETI – Financial benefits for the employer:

The maximum ETI benefit that can be claimed per month per employee is R1 000. That may not sound like much but when you have 100 qualifying employees that is R100 000 per month.

ETI in a nutshell:

  • The purpose of ETI is to increase the employment of young people
  • It is a cost sharing arrangement between government and the private sector
  • It is for the benefit of the employer and results in a reduction in PAYE payable each month to SARS or a physical cash re-imbursement to the company
  • The actual ETI credit values calculated are not reflected on payslips or tax certificates
  • ETI was introduced 1 January 2014 and will end in February 2019 (The end date was 31 December 2016 until the law was amended and signed into power in January 2017)

Qualification criteria:

The employer must be ETI tax compliant, this means no tax returns or outstanding monies in the month the ETI is claimed.

The employer must have qualifying employees, these are employees

  • who were employed on or after 1 October 2013
  • have a green ID Book or work asylum seeker work permit
  • are between 18 and 29 years old, calculated in the month the ETI is claimed (No age restriction applicable to special economic zones)
  • earn less than R6 000 in any month
  • earn the minimum wage or at least R2000 per month

How ETI is calculated:

  • ETI is calculated per employee per month using a SARS formula
  • The total ETI value is submitted on monthly/annual PAYE returns
  • You receive the benefit at the end of each month
  • ETI can be claimed for a maximum of 24 months for any one employee. It is calculated based on the number of qualifying employees you have in your employ in any given month.

ETI Benefit Mechanisms:

Credit offset

This occurs where ETI benefit does NOT exceed PAYE. (Most common) – The ETI credit amount is deducted from that months PAYE liability and you pay less across to SARS. SARS treats that notional credit as an amount actually paid.

ETI Reimbursement

These occur with ETI historical claims are submitted as the ETI has never been claimed before. In certain industries the ETI credit is always more than the SARS PAYE liability. In both instances it means that you will be getting physical cash back, Tax Free.

Put simply you can claim back more than the PAYE you have paid. This results in a cash refund every six months.

ETI Misconceptions:

  • There are BBBEE requirements for ETI – This is incorrect, ETI can be claimed irrespective of the race, gender of your employees and has NO BBBEE requirements of any kind
  • There is a limit to how much ETI you can claim - There is no limit or cap on the value of the ETI claim as it is calculated based on the No. of qualifying employees and their salaries.
  • You have to pay tax on these benefits - ETI benefits are tax neutral i.e. no tax payable on amounts received or offset
  • If you claim ETI, you cannot claim other allowances - ETI does not affect any other incentives you may already be claiming, including learnerships allowances, this is specifically included
  • If you have not combined the benefit of the learnerships allowances with the ETI incentive then you are losing a lot of money

 

Find out how much you are underclaiming

 

Making a difference

The reason we help companies claim ETI is because we want to create opportunities for youth to find employment. If we can employ the youth, over 40% of whom are unemployed, we will make a significant difference in improving their lives and the state of the economy. Read more about ETI

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