The State President announced in the State of the Nation Address on 11 February 2022 that the requirements of the Employment Tax Incentive Act will be reviewed. This announcement will directly impact payroll suppliers.

In recent years, various projects have been initiated to address the high levels of unemployment in the country. These include the Presidential Employment Stimulus programs, the Social Employment Fund, and the YES Initiative. However, the Employment Tax Incentive, which focuses on young people aged 18 to 29, has been the most successful.

Based on feedback from employers, it is believed that the take-up of the Employment Tax Incentive would have been even better if the requirements were simpler and the risk of non-compliance was lower. The Payroll Authors Group of South Africa (PAGSA) has made several submissions to National Treasury since 2015, requesting a re-think of the troublesome aspects of the Act. In recent years, the PAGSA has proposed changes that would significantly simplify the requirements.

The 2022 State of the Nation Address mentioned that the value and criteria for participation in the Employment Tax Incentive will be increased to encourage hiring by smaller businesses. The changes to the incentive will make it easier for small businesses, in particular, to hire young people. It is hoped that these steps to simplify the requirements will apply to all employers, not just smaller businesses.

More details about the proposed changes will be provided in the Budget proposals on 23 February 2022. However, policy makers tend to keep their cards close to their chests and provide minimal information in the budget.

Once the changes are implemented, payroll systems and Employment Tax Incentive administration processes will likely need to be adjusted. This announcement is good news for payroll suppliers and employers participating in the Employment Tax Incentive project.

Please note that all information provided by the PAGSA is subject to their DISCLAIMER.