The Employment Tax Incentive (ETI) is one of the more generous — and most under-claimed — programmes available to South African employers. If you employ young, lower-earning workers, it lets you reduce the PAYE you pay over to SARS each month. In effect, government shares part of the cost of employing them. Here's how it works and how to make sure you're claiming everything you're entitled to.
What the ETI is for
The incentive was introduced to encourage employers to hire young and inexperienced workers, reducing youth unemployment by lowering the cost of taking someone on. Crucially, it doesn't affect the employee's wage — they're paid exactly as normal. It's the employer's PAYE liability to SARS that's reduced, so the benefit flows to the business doing the hiring.
Which employees qualify
The core qualifying conditions for an employee are, in general:
- They are between 18 and 29 years old (some exceptions apply, such as employees in special economic zones).
- They hold a valid South African ID, asylum seeker permit or refugee permit.
- They earn below the monthly remuneration threshold set by SARS.
- They were employed on or after 1 October 2013.
- They are not a domestic worker, and not connected to the employer (for example, a relative or the owner).
The employer also needs to be registered for PAYE and tax compliant to claim.
How much you can claim, and for how long
The value is calculated on a sliding scale based on the employee's monthly remuneration, with the maximum incentive going to the lowest earners and tapering to zero at the upper threshold. It's paid at a higher rate for the first 12 qualifying months of employment and a reduced rate for the next 12 — a maximum of 24 months per qualifying employee. SARS updates the exact amounts and thresholds from time to time, so it's important to apply the current values.
How you actually claim it
You don't submit a separate ETI application. Instead, you calculate the total qualifying incentive for the month and reduce the PAYE you declare and pay on your EMP201 by that amount. Where your available ETI is more than the PAYE due in a given month, the excess isn't lost — it's carried and reconciled at your twice-yearly EMP501 reconciliation.
Why so much ETI goes unclaimed
The rules are fiddly: you have to check each employee's age, remuneration and start date every month, apply the right first-year or second-year rate on a sliding scale, and stop at 24 months. Done by hand across a growing team, it's easy to miss employees who qualify or to claim the wrong amount. That's exactly the kind of monthly calculation payroll software should handle for you — checking eligibility automatically, applying the current SARS values, tracking the months used, and flowing the reduction through to your EMP201.
This guide is general information to help you get oriented — it isn't formal tax or legal advice. Thresholds, rates and deadlines change, so confirm the current figures on the SARS website or with your accountant before you act.