Professional December 2016/January 2017

PAYROLL INSIGHT

Tackling youth unemployment and skills shortages in South Africa

Sharon Tayfield, chief operations officer at Praxima Holdings (Pty) Ltd, explains what is being done

S outh Africa has been operating a skills development levy (SDL) since April 2000 and a youth wage subsidy or employment tax incentive (ETI) since January 2014. Former presidents of South Africa, Nelson Mandela and Thabo Mbeki, placed enormous emphasis on education as the solution to the problems in South Africa. Currently more than twenty per cent of taxes raised is allocated to education. SDL is a levy imposed on employers to promote learning and development and is driven by the employer’s salary bill. Currently it’s imposed at a rate of one per cent of the total amounts paid to employees, including lump sums. The SDL is paid and declared on the monthly employer tax declaration form (EMP201) at the same time as the monthly pay as you earn (PAYE) declaration is made. New employers entering South Africa are obliged to register for SDL (along with PAYE and unemployment insurance fund (UIF)). This must be done within 21 days

after becoming an employer. Where an employer’s total salary bill subject to SDL over a twelve-month period will not exceed R500,000 the employer will be exempt from paying SDL levies. The employer, however, has a responsibility to register with the South African Revenue Authority (SARS) as soon as they become liable for SDL. The levies raised from SDL are distributed via the sector education and training authority (SETA) system. There are some 21 industry-specific SETAs to ensure that every industry and occupation is covered. They are concerned with learnerships, internships, unit-based skills programmes and apprenticeships. Towards the end of 2011, the SETAs introduced ‘pivotal’ grants which are for professional, vocational, technical and academic learning programmes that result in a qualification or part qualification on the national qualifications framework. There are also mandatory grants available to the employer. In order to

access the grants, employers submit a workplace skills plan to the SETA with which they are registered and then follow up with an annual training report detailing the training actually done. There are other requirements beyond the scope of this article, making the process of getting back the SDL time- consuming. ETI was introduced by the South African National Treasury as a means of reducing unemployment, alleviating skills shortages and creating new jobs. The draft Taxation Laws Amendment Bill of 2016 has proposed an extension for ETI until 28 February 2019, which is good news for many employers as there are a number of businesses operating in South Africa that have failed to claim the ETI credits and make full use of the funding available to them. ‘Tax compliant’ employers can claim a deduction on the amount of PAYE they pay over to the SARS based on certain criteria and provided certain conditions are met. As ETI is claimed at the same time as the PAYE monthly declaration is made, there is no special application process which employers need to undertake to gain access to the benefits.

...at a rate of one per cent of the total amounts paid to employees, including lump sums

| Professional in Payroll, Pensions and Reward | December 2016/January 2017 | Issue 26 24

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