Facts about the Employment Equity Act

May 11, 2017

In terms of the Employment Equity Act, annual reports must be submitted by all employers who employ 50 or more employees, or employers with fewer than 50 employees who are designated in terms of the turnover threshold. If you employ fewer than 50 employees and your annual turnover is below the threshold of R15-million, you do not have to register and report (see Table 1).

 
Turnover thresholds
Sector or sub-sectors in accordance with the Standard Industrial  Classification           

Total annual turnover

 

Agriculture R6-million
Mining and quarrying R22,5-million
Manufacturing R30-million
Electricity, gas and water R30-million
Construction R15-million
Retail and motor trade and repair services R45-million
Wholesale trade, commercial agents and allied services R75-million
Catering, accommodation and other trade R15-million
Transport, storage and communications R30-million
Finance and business services R30-million
Community, special and personal services R15-million

Employment Tax Incentive

Members are reminded that the tax incentive aims to stimulate the employment of young people between the ages of 18 and 29 years. It is paid to employers in the form of a claim against tax payable. Employers qualify for a monthly incentive, depending on the salary paid, for two years. Companies that pay young employees between R2000 and R4000 per month will be eligible for a R1000 tax incentive per employee. The incentive has been extended until 28 February 2019 due to the positive impact that the scheme has had on employment growth since January 2014.

The tax incentive amount can be deducted from the total PAYE amount in respect of each qualifying employee employed. The incentive does not affect the employee in any way but the payment is reduced from the total PAYE due by the qualifying company (see Table 2).

 

Monthly remuneration Year 1: Theoretical Tax Incentive per month for the first 12 months of employment Year 2: Theoretical Tax Incentive per month during the next 12 months of employment
R0 – R2000 50% of monthly remuneration 25% of monthly remuneration
R2001 – R4000 R1000 R500
R4001 – R6000 R1000 – (0,5 x monthly remuneration – R4000) R500 – (0,25 x monthly remuneration – R4000)

 

Who will qualify?

Employers who are registered to withhold and pay employees’ tax (paragraph 15 of the Fourth Schedule of the Income Tax Act).

Non-eligible employees are listed here:

The government of the republic in the national, provincial or local spheres.

– Public entities listed in Schedule 2 or 3 of the Public Finance Management Act (other than those public entities designated by the Minister of Finance by notice in the Government Gazette).

– Municipal entities defined in Section 1 of the Municipal System Act.

– Employers who do not meet the conditions based on the classification of trade.

– Employers who are not in good standing with SARS on the last day of the month.

Eligible employees include:

– Those employed on 1 October 2013 or later.

– Employees between 18 and 29 years old on the first day of the month and not yet 30 on the last day of the month.

– Employees with South African identity documents.

– Employees with formal asylum seeker documents.

– Where the company has an office in a Special Economic Zone (SEZ), and the employee (of any age) renders the majority of their services in that zone.

– Employees in special industries designated by the minister of finance in consultation with the ministers of labour and trade & industry.

Non-eligible employees include:

– Domestic workers.

– Employees earning less than R 2000 where there is no minimum wage in place.

– Employees ETI-audited by SARS.

Employers must be able to prove their calculation of ETI in terms of each employee.

Lucas Bowles, ECA regional director, East/South Cape