Firms to recoup half of youth spend

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YouthRed Sapa

Businesses will get back up to half of what they spend on salaries of young employees with the new employment tax incentive.

But the benefits of the incentive, which came into effect on Wednesday, will only be measurable in a year’s time, says the Cape Chamber of Commerce.

Michael Bagraim, head of the chamber’s human resources committee, said it would only be possible to see how many businesses took up the incentives when their taxes were reconciled in March 2015.

“It is not a magic wand but will make a difference to address youth unemployment. It will be easier for business to take on young people for their first job,” he said.

Trade federation Cosatu is, however, not so optimistic.

Tony Ehrenreich, Cosatu provincial secretary, said the incentive, also called the youth wage subsidy, would displace older workers, while the government would subsidise businesses to employ young people in positions they already had.

“It would not create new positions,” he said.

Last month Cosatu said it would support a court application that challenged Finance Minister Pravin Gordhan on the implementation of the tax incentive because he did not consult them at Nedlac, the government, labour and business negotiating chamber

President Jacob Zuma signed the act into law last month after he promised in 2010 to implement a youth subsidy. The delay was due to opposition from unions.

The government has set aside R500 million for the incentive during the current financial year. The incentive will work through the PAYE tax system. The incentive is to encourage private companies to employ workers aged between 18 and 29.

Statistics SA found during the latest labour force survey that 3.3 million of the 10.4 million youth aged 15 to 24 were not in employment, education or training.

The National Treasury hopes the tax incentive will help address youth unemployment as the private sector, outside of agriculture, employs 70 percent of those in formal employment.

All businesses are eligible if they are registered to pay tax on behalf of their employees.

There is no limit to how many employees a business could hire, but qualifying workers must be South African.

To be eligible, the employee should not have been employed by the employer or associated institution before October 1, 2013 and must earn less than R6 000 a month.

The value of the tax incentive is up to R1 000 per employee who earns up to R4 000 a month.

The incentive’s value decreases from R1 000 to zero for employees who earn between R4 000 and R6 000 a month.

The incentive will be valid for 12 months, after which it will revert to half of its original value for another year.

The incentive will run until 2017.

The Western Cape government is considering dropping its youth wage subsidy next year and rallying businesses to use the national incentive.

The province implemented its youth wage subsidy in 2009 and has since paid the stipends of 5 000 interns. - The Cape Times

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