South Africa is grappling with serious challenges related to youth unemployment, with many young individuals classified as NEET – Not in Employment, Education, or Training. To address this pressing issue, the government has rolled out various incentives designed to motivate businesses to hire NEET youth and provide them with essential skills for long-term sustainable employment. These incentives are part of a larger national initiative aimed at enhancing skills development, decreasing unemployment, and improving the country’s economic outlook.
This article highlights the significant legislative and financial incentives offered to South African businesses that employ NEET youth. These include the Employment Tax Incentive (ETI), the Youth Employment Service (YES) initiative, learnership programs, and additional opportunities.
- Employment Tax Incentive (ETI)
The Employment Tax Incentive (ETI), launched in 2014, stands as a key initiative by the government aimed at addressing youth unemployment. This program lowers the expense of hiring young, less-experienced individuals by offering tax relief to employers, facilitating the employment of NEET youth aged 18 to 29.
How the ETI Works:
- Employee Eligibility: NEET youth must be between 18 and 29 years old, earn between the minimum wage and R6,500 per month, and have a valid South African ID.
- Employer Eligibility: Any private sector business registered for PAYE can benefit from the ETI. Public sector employers are excluded.
- Incentive Value: Employers can claim up to R1,000 per month per employee for the first 12 months and R500 per month for the next 12 months. This reduces the PAYE tax owed by the company.
- Youth Employment Service (YES) Initiative
The YES initiative, which was launched in 2018, serves as a vital resource to combat youth unemployment. Its primary goal is to generate job opportunities for young individuals, emphasizing the importance of their first formal work experience. This initiative is designed for businesses looking to invest in the future workforce while simultaneously enjoying attractive incentives.
How the YES Initiative Works:
- Job Creation: Companies commit to creating employment opportunities for NEET youth for at least 12 months, providing them with a chance to gain experience in a structured work environment.
- B-BBEE Boost: One of the most attractive incentives for employers is the opportunity to improve their B-BBEE scorecard by up to two levels by participating in YES. This can increase competitiveness, especially in sectors where government contracts or B-BBEE compliance are important.
- Corporate Image: Companies that join the YES initiative are seen as key contributors to reducing youth unemployment, enhancing their reputation in the market.
- Learnerships and Apprenticeships
Learnerships and apprenticeships combine theoretical education with practical workplace experience. The South African government encourages business participation in these initiatives by providing tax incentives and additional benefits, making them a fantastic opportunity for NEET youth keen on acquiring vital job skills. Companies that engage in accredited training can recuperate a portion of their SDL contributions, creating a financial incentive for skill development.
Incentives for Employers:
- Learnership Tax Allowance: Under Section 12H of the Income Tax Act, businesses can claim a tax deduction of R80,000 per year for each learner enrolled in a registered learnership. For learners with disabilities, this can increase to R160,000. This substantial tax break makes it more cost-effective for businesses to take on and train NEET youth.
- Skills Development Levy (SDL) Refunds: Companies that pay the Skills Development Levy (SDL) can claim grants back by offering training through SETA-accredited learnerships or apprenticeships. This creates a financial win-win for employers who invest in skills development.
- Employers who pay the Skills Development Levy (SDL) can indeed reclaim grants, but specific requirements and processes must be followed.
- Eligibility: Employers with an annual payroll exceeding R500,000 are required to pay an SDL of 1% of their total salary expenses to the South African Revenue Service (SARS). This levy funds education and training initiatives.
- Grant Claims: Companies can reclaim grants by providing training through accredited programs like learnerships or apprenticeships, provided they comply with relevant regulations. To qualify for these grants, employers must submit a Workplace Skills Plan (WSP) and an Annual Training Report (ATR) to their respective Sector Education and Training Authority (SETA). The grants can be substantial; for instance, companies can recover up to 20% of their SDL contributions as mandatory grants, with additional discretionary grants available based on the SETA’s guidelines.
- Internships and Work-Integrated Learning Programs
Internships and work-integrated learning (WIL) programs offer NEET youth valuable hands-on experience in the workplace, while also supplying businesses with extra manpower. These initiatives typically focus on young individuals who possess theoretical knowledge but require practical experience to finalize their qualifications or to successfully enter the job market.
Incentives for Employers:
- SETA Grants: Sector Education and Training Authorities (SETAs) provide discretionary grants to employers who offer internships or WIL placements to NEET youth. These grants cover the costs of stipends, training resources, and mentorship for interns.
- SDL Grants: Employers can claim a portion of their Skills Development Levy back through participation in accredited training programs, which encourages structured workplace learning.
- B-BBEE Skills Development Incentives
Skills development plays a vital role in the B-BBEE (Broad-Based Black Economic Empowerment) scorecard. Companies that prioritize training and development for NEET youth can gain significant points, improving their B-BBEE compliance and increasing their competitiveness for government contracts and private sector opportunities.
Key Requirements:
- Spending on Skills Development: Companies must spend at least 6% of their total payroll on skills development activities, particularly targeting previously disadvantaged individuals, to earn points under the B-BBEE Skills Development pillar.
- Focus on NEET Youth: Investing in training and employing NEET youth, particularly black youth, allows businesses to accumulate points on their B-BBEE scorecard. This includes providing bursaries, internships, learnerships, or mentorship programs.
- Special Economic Zones (SEZs) Employment Incentives
Special Economic Zones (SEZs) are specific areas designed to enhance industrial growth and attract investment. Employers within SEZs receive extra incentives for hiring young workers, including those who are NEET (Not in Education, Employment, or Training).
SEZ Incentives for Employers:
- ETI Expansion: The Employment Tax Incentive (ETI) is extended in SEZs, allowing employers to claim the incentive for workers of all ages (not limited to those under 30) if they meet the wage thresholds.
- Corporate Tax Benefits: Companies in SEZs can enjoy reduced corporate tax rates and other incentives, making it easier for them to hire and train NEET youth while boosting their bottom line.
- Support for Small and Medium Enterprises (SMEs)
Small and Medium Enterprises (SMEs) are essential for generating employment and fostering skills development among NEET youth. The South African government has implemented various targeted initiatives to support SMEs that hire young individuals.
Key Programs:
- National Youth Development Agency (NYDA): The NYDA provides grants, funding, and business development services to youth-owned enterprises and SMEs that employ NEET youth. This helps small businesses grow while supporting youth employment.
- Youth Micro Enterprises Relief Fund (YMERF): This fund helps youth-owned micro-enterprises that may have been negatively impacted by economic conditions, offering financial relief and encouraging them to employ more NEET youth.
- Public Employment Programs
Alongside employer-driven incentives, the South African government operates public employment initiatives like the Expanded Public Works Programme (EPWP) and the Community Works Programme (CWP). Although these programs mainly focus on short-term job opportunities, they also offer essential work experience and foundational skills training for NEET youth.
Employer Involvement:
- Collaboration with Public Programs: Businesses can engage with these programs by offering mentorship, temporary placements, or training opportunities, allowing them to contribute to skills development while accessing additional labour.
The South African government has launched a comprehensive suite of incentives aimed at encouraging businesses to hire NEET youth and provide them with necessary skills training and practical experience. With options such as the Employment Tax Incentive (ETI), the YES initiative, learnership tax allowances, SETA grants, and B-BBEE benefits, companies have a variety of incentives to participate in programs that help tackle youth unemployment.
By implementing these incentives, businesses can significantly contribute to addressing the pressing socio-economic challenges in the country, all while gaining financial advantages and improving their competitive edge. These initiatives create a win-win situation for both South Africa’s workforce and its economic progress.
