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Employment incentive scheme bears fruit

"Numerous international studies show that school leavers who don't find jobs within a couple of years become virtually unemployable and contribute to social instability," says Rob cooper, director of legislation updates and proposed legislation at Sage VIP Payroll and HR. "This reality has prompted government to put a youth subsidy in place to alleviate the problem - after years of debate and fierce opposition from trade unions."

It seems that the employment tax incentive has achieved results beyond what was originally imagined...

According to the Business Report, at least 209 000 youth have been absorbed into the labour market this year under the government's youth employment tax incentive scheme. This is a significant increase from the 56 000 young people announced by then finance minister Pravin Gordhan in his Budget speech in February.

The first month of the scheme saw 56 000 young people employed by different companies in SA.

But in the medium-term budget policy statement tabled by Gordhan's successor, Nhlanhla Nene, in Parliament yesterday the latter revealed a massive expansion of the programme, reports Business Report.

The employment tax incentive encourages employers to hire young people by reducing the PAYE that they must pay SARS. This reduction is based on the number of young people employed and reduces your cost of employment while leaving the employee's earnings unaffected.

Originally, the labour movement was against the scheme because it believed companies would use the scheme to replace older workers with the youth.

But, according to the Business Report, this was denied by the government and during public hearings in Parliament last year it was agreed that companies who were found doing this would be penalised heavily.

In the statement yesterday the scheme received support from the business sector and labour market.

In the medium-term budget policy statement tabled by Nene yesterday, it was stated that:

"The employment tax incentive, which provides firms with incentives to hire young workers, is already supporting at least 209 000 young workers in about 23 500 firms."

For more on the employment tax incentive, have a look at the Tax section on HR Pulse.

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