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The Employment Tax Incentive (ETI) initiative, devised by the Minister of Finance as part of the Wage Subsidy proposed in 2010, is being promulgated and will become effective from 1 January 2014.

Developed with the objective of increasing employment for young people aged 18 to 29 years, the legislation will allow employers to claim a rebate on their PAYE liability provided their PAYE accounts with SARS are up to date.

Philip Meyer, technology director of payroll and HR software specialist Sage Pastel Payroll & HR, says the ETI claim will be based on the remuneration of employees aged between 18 and 29 who were appointed on 1 October 2013 or later and have a legitimate SA ID number or asylum seekers permit.

The calculation of the ETI claim may only be applied to a monthly salary or wage that is in line with the specific industry’s prescribed minimum wage rates.

“If the industry has no formal set minimum wage, then the qualifying employee needs to earn a minimum of R2 000 a month to be considered for the rebate calculation.

“The incentive is calculated at a higher rate for the first 12 months after an employee qualifies. The maximum amount companies may claim per employee is R1 000 for each of the first 12 months,” says Meyer.

During the second 12-month period, the maximum claim is halved to R500 per month.

“However, an ETI claim based on remuneration exceeding R6 000 a month will have a zero incentive value.”

The first phase of the Employment Tax Incentive initiative will require employers to submit their first claims with their January PAYE return which is due on 7 February 2014.

To simplify the requirements and calculate an accurate claim, employers should approach the legislation as a four-step process:

* The first step is to determine whether the employer is eligible to claim the incentive for the current month.

* Secondly, determine which employees qualify to be included in the claim.

* Step three is to calculate the amount to be claimed against PAYE for the month.

* The final step is to submit the ETI claim as part of the monthly PAYE return.

The amount of administration that is required for substantiating an ETI claim will place an additional burden on payroll administrators as SARS will require more detailed information if they decide to query your calculations prior to allowing your claim. It therefore makes sense to make use of automated solutions to apply the correct calculations and generate the required reports in the format SARS prescribes.

Employers must make use of the opportunity to benefit from the Employment Tax Incentive as the legislation is set to expire on 31 December 2016.”