Johannesburg - The controversial subsidy for youth employment has come a step closer after the cabinet approved publication of the draft Employment Tax Incentive Bill last week.
The bill was “aimed at encouraging employers to give young people their first job experience, as well as boost employment by firms operating in the special economic zones (SEZs)”, the Treasury said on Friday.
The tax incentive contained in the draft, released for public comment, will cut the cost to employers of hiring young people while leaving the wage the employee receives unaffected, according to the Treasury.
The incentive is expected to be implemented from the beginning of next year and employers will be able to claim for employment that starts from next month. Written comments must be submitted to the National Treasury by close of business on October 11.
The employment incentive was first announced by President Jacob Zuma in the 2010 State of the Nation address and mentioned in the 2010 Budget.
The concept of supporting youth employment is opposed by trade unions, whose members fear it will create a two-tier labour market to the detriment of existing workers. It is supported by business and economists, who see it as a way to reduce unemployment of over 25 percent and a much higher level of youth unemployment.
The Treasury statement explained: “Employers who are registered for tax will be eligible to decrease their PAYE [pay as you earn] employees’ tax that is payable for hiring a qualifying individual.”
To qualify employees must be between the ages of 19 and 29, possess a South African ID and receive a salary that is between the minimum wage for that specific sector and R6 000 a month. A minimum of R2 000 will apply when there is no sectoral determination.
The Treasury said that the age restriction would not apply to “the SEZs”.
Domestic workers will not be eligible for the incentive.
The Treasury warned that the new employee could not be related or connected to the employer in any way.
DA finance spokesman Tim Harris said yesterday that his party welcomed the bill.
He said the DA would work in the standing committee on finance in Parliament to make sure a real, strong youth wage subsidy was introduced as soon as possible to help young unemployed people.
Cosatu spokesman Patrick Craven was not available for comment. However, he was quoted by the Sunday Times as saying the labour federation had been taken by surprise and had yet to analyse the bill.
“We knew that Treasury was looking at something like this, but we did not have the details. We did not know about the timing,” he reportedly said. - Business Report