“Agriculture has particular labour challenges because staffing requirements can change sharply during planting, harvesting, and other seasonal periods. The ETI is one existing measure that may reduce part of the employment cost where workers and employers meet the statutory requirements,” explains Dix.
Introduced in 2014, the ETI is intended to encourage employers to hire younger, less experienced workers, and it is currently scheduled to come to an end on 28 February 2029.
The benefit does not reduce an employee’s wage or Pay As You Earn (PAYE) record. Instead, a qualifying employer calculates the incentive and reduces the PAYE it pays to the South African Revenue Service (SARS), while the employee’s tax is still recorded as paid in full. The employer retains the cash value of the incentive.
The incentive can apply to permanent, part-time, and seasonal employees, but it is not a subsidy for every new worker and does not legalise undocumented employment. Its value depends on identifying eligible workers and processing each monthly claim correctly.
Who may claim?
The employer must be registered with SARS for employees’ tax, or PAYE. Dix says that while ordinary private-sector farming businesses and other employers in the agricultural value chain may qualify, they must meet the requirements of the Employment Tax Incentive Act (No. 26 of 2013).
Tax compliance is essential. If an employer has an outstanding tax return or tax debt at the end of the month, the ETI cannot be used to reduce PAYE for that month. Limited exceptions apply to certain formal debt arrangements, disputed debt, and total tax debt of less than R100. Unresolved non-compliance can result in the employer losing the benefit or having a refund delayed.
“Labour compliance is equally important. The ETI cannot compensate for paying below the applicable wage. The employee must receive at least the higher amount required by a collective agreement, bargaining council agreement, or minimum-wage legislation,” says Dix.
Where no wage-regulating measure applies, or the employer is outside the scope of, or exempt from, the National Minimum Wage Act (No. 9 of 2018), the statutory ETI wage floor is currently R2 500 for 160 ordinary hours, adjusted proportionally for employees who work fewer ordinary hours.
Which employees qualify?
For most agricultural employers, an employee must meet the following requirements during the relevant month:
- Be aged 18 to 29 at month-end;
- Have been employed by the employer or an associated person on or after 1 October 2013;
- Earn monthly remuneration of less than R7 500;
- Hold one of the identity documents recognised for the ETI; and
- Not be a domestic worker or a connected person in relation to the employer, such as certain relatives or persons with a specified ownership relationship.
The identity requirement deserves special attention.
“An undocumented person cannot qualify and may not lawfully be employed. A foreign passport or ordinary work visa alone does not satisfy the ETI identity test.
“SARS recognises a valid South African identity card, asylum-seeker permit, or refugee identity document,” explains Dix, adding that payroll staff should verify the document and its validity before claiming.
The aim is therefore not to replace undocumented labour with ‘cheap’ labour, but to recruit eligible workers through lawful employment. Where a farm needs to hire additional employees after reducing its workforce, the ETI may reduce the net cost of hiring qualifying young people. It must never be used to displace an existing employee.
Farmers using seasonal staff supplied by a registered temporary employment service or labour broker should establish who pays the remuneration and accounts for PAYE. According to SARS’s legal guide, the ETI is claimed by the employer paying the remuneration, which is usually the labour broker, rather than automatically by the farm where the work is performed.
The benefit
For employers who meet these requirements, the ETI can provide substantial payroll relief. Table 1 summarises the current ETI bands. For example, a qualifying employee earning R4 500 per month could generate an ETI of R1 500 per month during the first 12 qualifying months and R750 per month during the next 12, assuming all eligibility requirements continue to be met. That equates to R27 000 over the 24-month qualifying period.
The calculation is employee-specific, however, and actual PAYE relief depends on the employer’s circumstances and whether it complies with its tax obligations.
For claims from 1 April 2025, the maximum monthly ETI is R1 500 during the first 12 qualifying months and R750 per month during the next 12. These are qualifying months, not necessarily consecutive calendar months. A month in which an employee does not meet the eligibility requirements does not count towards the 24 qualifying months.
The incentive is claimed monthly on EMP201 and must be reconciled with the EMP501 and employee tax certificate information. It may not be deducted from an employee’s pay. The ETI is exempt from normal income tax.
Table 1: Current ETI bands (from 1 April 2025)
| Monthly remuneration | First 12 qualifying months | Next 12 qualifying months |
| R0–R2 499 | 60% of monthly remuneration | 30% of monthly remuneration |
| R2 500–R5 499 | R1 500 | R750 |
| R5 500–R7 499 | R1 500 − [0,75 × (remuneration − R5 500)] | R750 − [0,375 × (remuneration − R5 500)] |
| R7 500 or more | R0 | R0 |
The table shows the ETI payable for a full month of 160 ordinary hours. If an employee works fewer hours, the amount is reduced proportionally. The employee must also meet all the eligibility requirements, including those relating to age, remuneration, and identity.
Seasonal work: hours are critical
“The 160-hour rule is particularly important in agriculture. For fewer than 160 hours for which the employee was employed and paid, remuneration is grossed up to a 160-hour equivalent, and the resulting ETI is grossed down,” explains Dix.
For this calculation, the hours are not limited to ordinary hours and may include overtime. By contrast, the wage-compliance check is based only on ordinary hours. Payroll must keep these two calculations separate.
Table 2 illustrates how the calculation works for employees working fewer than 160 hours. For example, a seasonal employee works 80 hours and is paid R2 750. Adjusted to a 160-hour equivalent, this becomes R5 500. The ETI at that remuneration level is R1 500, but because the employee worked only half the standard hours, the monthly claim is reduced to R750. Simply calculating the ETI using the actual remuneration of R2 750, without first adjusting it to a 160-hour equivalent, would result in an incorrect claim.
Table 2: ETI calculations for employees working fewer than 160 hours
| Hours worked; remuneration | 160-hour equivalent remuneration | Qualifying period (months) | ETI/month before apportionment | ETI/month after apportionment | Employment period; total ETI |
| 80 hours; R2 750 | R5 500 | 1–12 | R1 500 | R750 | 4 months: R3 000 |
| 120 hours; R4 500 | R6 000 | 1–12 | R1 125 | R843,75 | 6 months: R5 062,50 |
| 60 hours; R2 250 | R6 000 | 13–24 | R562,50 | R210,94 | 3 months: R632,82 |
Table 3: ETI calculations for employees working 160 hours or more
| Monthly remuneration | Qualifying period (months) | ETI/month | Employment length (months) | Total benefit |
| R3 000 | 1–12 | R1 500 | 3 | R4 500 |
| R4 500 | 1–12 | R1 500 | 12 | R18 000 |
| R4 500 | 13–24 | R750 | 12 | R9 000 |
| R6 500 | 1–12 | R750 | 6 | R4 500 |
| R6 500 | 13–24 | R375 | 6 | R2 250 |
Note that calculations assume that every eligibility and minimum wage requirement is met every month. Totals are illustrative: usable PAYE relief depends on the employer’s PAYE liability, rollover balance, reconciliation, and tax compliance.
Administration is important
Any excess ETI may roll over when it exceeds gross PAYE and may be refunded after the August or February reconciliation, subject to compliance and verification. An omitted claim must be made by the final month of that reconciliation period, or it is forfeited.
SARS may request an ETI file, and records must be retained for five years.
A sound payroll file should include the employee’s contract, a copy of their identity or asylum-seeker permit, start date, remuneration, applicable wage rate, paid hours split between ordinary time and overtime, ETI month count, calculations, timesheets, and proof of payment. EMP201 figures should reconcile to payroll, EMP501 and IRP5/IT3(a) data.
Care must also be taken with monthly remuneration. Since March 2022, it is limited to cash paid to the employee, after adding back lawful deductions such as PAYE, Unemployment Insurance Fund, garnishee orders, and union fees. Non-cash payments and salary sacrifices are disregarded.
Variable remuneration, including overtime, bonuses, commission, leave pay, and night-shift or standby allowances, is included when actually paid. These items can push a worker across an ETI band or the R7 500 ceiling.
The downside of careless claiming is substantial. A 100% penalty may apply to ETI claimed for an employee who is paid below the required wage, in addition to recovery of the claim. A separate 100% penalty, effective from 1 March 2025, targets ETI received on remuneration that should have been disregarded under the cash-remuneration rule.
Incorrect claims can also create a 10% late-payment penalty, interest, and understatement penalties. Displacing an employee to obtain ETI attracts R30 000 per displaced employee and disqualification.
Dix says the practical lesson is that ETI should be treated as a payroll compliance calculation rather than an automatic subsidy.
“Eligibility can change from month to month. Employers need to check age, remuneration, hours, identity document validity, and the qualifying-month count, and make sure the EMP201 ultimately reconciles with the payroll and EMP501 information,” he concludes.
