The employment incentive subsidy

Determining employee eligibility and calculating the requisite amount

The employment incentive subsidy
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A farmer or businessman registered with SARS for the payment of withholding tax and Pay As You Earn (PAYE) may qualify for the employment incentive subsidy provided in terms of the Employment Subsidy Act 26 of 2013.

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Who qualifies?
The subsidy is available to employees between 18 and 29, but the age limitation does not apply if the employer is in a special economic zone and operates from a fixed place of business. To qualify, an employee must possess a valid SA identity document and cannot be related to the employer. Domestic workers and employees earning less than the minimum wage do not qualify.

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There is no limit to the number of qualifying employees hired, but an employer will be subject to harsh penalties should he dismiss staff who do not qualify, in order to hire eligible employees. The incentive is available for an employee for a 24-month period and is only applicable to employees hired after 1 October 2013. It is currently available until 1 January 2017, but could be extended if successful.

Doing the sums
The 24-month incentive period is divided into two halves. To calculate the benefit he receives during the first 12 months, the employer must use the following formula:

If the employee receives R2 000 or less, the benefit is an amount equal to 50% of the remuneration per month.
If the employee receives between R2 000 and
R4 000, the benefit is R1 000 per month.
If the employee receives between R4 000 and R6 000, the formula is:

x = a − (b − 4 000)
2
where x is the incentive, a is R1 500 and b is the monthly remuneration.
Thus the incentive for a driver earning R5 000 per month would be:

1 500 – (5 000 – 4 000)
2
Answer: R1 000

In the second 12-month term of employment of a qualifying employee, the formula changes:
For remuneration of
R2 000 or less, the benefit is an amount equal to 25% of the remuneration per month.
For remuneration of R2 000 to R4 000, it is R500 per month.
For remuneration of R4 000 to R6 000, the formula is:

x = a – (b − 4 000)
4
where x is the incentive,
a is R500 and b is the monthly remuneration. Thus, the incentive for a driver earning R5 000 per month would be:

500 – (5 000 – 4 000)
4
Answer: R250

The total incentive for all employees as a sum is then available to the employer, who will deduct this amount from his total PAYE liability when he files his EMP201 declaration.

Outstanding tax liabilties
If the employers has tax liabilities outstanding, he will not be eligible for the benefit. However, the excess is rolled over until such time as the returns are up to date and the liabilities are cleared.