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The employee tax incentive came into effect in SA on January 1 2014 and offers employers an incentive to employ young workers. Picture: SUPPLIED/ETIMAX
The employee tax incentive came into effect in SA on January 1 2014 and offers employers an incentive to employ young workers. Picture: SUPPLIED/ETIMAX

ETI, the employee tax incentive, was introduced to boost employment among young South Africans. It’s a generous incentive, but many employers are missing out on improved cash flows the incentive offers.

“Many employers are underclaiming their employee tax incentive (ETI) benefit for the under-29s they employ,” says Reshmi Maharaj, Etimax marketing and sales director, SA’s ETI recovery and tax specialists. She says there is a 99% probability employers’ ETI claims are inaccurate, and 95% are not receiving the benefits they are due under the legislation.  

ETI came into effect in SA on January 1 2014 and offers employers an incentive to employ young workers. Employers claim a deduction from PAYE for qualifying employees, often translating into more cash flows into the business. 

The incentive applies to employees under the age of 29 who earn less than R6,500 a month. 

Though a simple idea — employ young people and reduce your tax bill, the ETI Act and SA Revenue Service (Sars) requirements have made claiming ETI a complex matter. ETI claims can differ month to month and employee to employee, and the amount businesses can claim is worked out according to different criteria and formulas. 

“ETI is new to the country and there aren’t a lot of specialists in the field,” says Maharaj. “Because the requirements and formulas used to calculate it can become complex, payroll systems are not set up to accurately calculate ETI.” 

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Complex ETI claims simplified

“We recognised the need for ETI specialists when the incentive was introduced. Our team of master tax practitioners, analysts and software engineers developed the skills and software to help businesses calculate and claim the ETI benefit they are due,” she says.

The difference a correct ETI calculation and claim makes can be huge. Maharaj says one of its clients was underclaiming by over R6.5m. “That’s the kind of cash flow that makes a really big difference to the day-to-day operations of a business.”

Etimax reviews current and past ETI calculations and claims

“We can track ETI at employee level dating back to 2014 to identify and rectify incorrect calculations and ensure accuracy going forward. In our experience, clients are usually claiming less than the maximum benefit due to them.

Etimax is the only company in SA that focuses on maximising ETI claims, using our ETI specialist skills and sophisticated software, as well as our knowledge of Sars processes and requirements,” says Maharaj. 

The company’s sophisticated software was also developed with Sars in mind, which means for midyear and year-end EMP501 reconciliations, Etimax can correct ETI validations errors from the payroll and rewrite the accurate ETI values per employee to ensure accurate claims in the current tax year.

Get your ETI refund

Maharaj says calculating and claiming ETI correctly is only the first step of the process: the second and sometimes most important step is getting the excess ETI refunded. Any ETI not used against PAYE during a tax year should be refunded to the taxpayer, according to the legislation. However, in practice, this is not always the case as employers are either unaware of their right to this refund or they do not follow the correct procedures to get these funds paid out.

“The nature of our business and experience with this incentive has allowed us to develop a streamlined and succinct method to ensure all our clients receive any excess ETI amounts due to them as fast as possible,” For example, Etimax recently assisted a client that battled for years to get a refund from 2016 paid out.

ETI runs to 2029

Maharaj says there are several myths and misconceptions when it comes to ETI — for example, that it ended in 2019. “ETI was extended to the end of February 2029, so employers can still benefit from the incentive while employing SA’s youth and building skills in the economy.”

Another myth is that there are broad-based black economic empowerment criteria. This is not true. “Any employer can claim if they meet the criteria set out in the act.”

However, she says you do need to be tax compliant to claim ETI, and an employee can only qualify for 24 periods. 

Understanding the legislation and making sure claims are accurate is a job for the specialists. Maharaj says prospective clients can request a review by Etimax analysts, at zero risk or obligation. The company structures its fees based on success, which it has a 98% track record of achieving.

“Our business is to make ETI easy for employers to claim and receive the benefit they are due.”

Etimax is a member of SA Institute of Tax professionals and the SA Payroll Association. For more information call +27 (0) 11-234-2263 or e-mail reshmi@etimax.co.za

This article was paid for by Etimax.

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