According to the International Labour Organisation, in 2010, youth unemployment in South Africa stood at 50.53%. In 2020, this figure has risen to 55.75%. Some studies estimate the jobless rate of youth between the ages of 15 and 24 at 74%. In the first quarter of 2020, South Africa consisted of 20.4 million young people between the ages of 15 and 34 years, who account for 63,3 % of the total number of unemployed persons.

Various events are staged annually to celebrate the youth, yet a significant number of these youth have little to celebrate and would also like to have the pride of being able to earn a living and not to rely on the social grant system. Many young people complete their tertiary studies without the chance of finding employment.

In an effort to address South Africa’s high youth unemployment levels, government has introduced the Employment Tax Incentive (ETI) scheme. Its objective is to reduce the cost of hiring young people and in so doing incentivising employers to employ more young people.

Benefits for the employer

This cost saving mechanism in collaboration with government reduces the pay-as-you-earn (PAYE) owed to SARS, leaving the salary received by the employee unaffected.

This partial subsidisation allows the employer to reduce the cost of employment for a period of two years per employee with no limit to the number of youth who may be employed under the scheme.

The employer must be a private company registered with SARS.  It is easily administered, making it accessible to small businesses operating on limited budgets. Businesses can therefore secure the requisite manpower at an incentivised cost. The employer simply decreases the PAYE amount payable by completing the ETI field on their monthly EMP 201 submission to SARS.

Young people benefit because they are able to gain access to work and earning opportunities.

To qualify, the employee must be South African, have an asylum seeker permit, or hold an ID issued in terms of the Refugee Act. The employee must be between the ages of 18 and 29 years old and may not have any connection to the employer. The employee must have been employed after 1 October 2013 and may not be a domestic worker.

In this time when businesses, having been impacted by the onslaught of COVID-19 are seeking to re-establish their financial sustainability, this is a notable opportunity. In so doing, employers will also be contributing to the reduction of disillusioned young people in South Africa. It is envisaged that the scheme will continue until 28 February 2029.

Victor Smith | Training Manager
Lindokuhle Majola | Administrative Assistant