What is the Employment Tax Incentive?
The Employment Tax Incentive (ETI) is a South African incentive that encourages employers to hire young, lower-paid workers. Under the Employment Tax Incentive Act 26 of 2013, an eligible employer reduces the PAYE it pays to SARS by a monthly amount for each qualifying employee, for up to 24 months. The employee’s pay is not affected.
Need help navigating local labour compliance?
Schedule a strategy callWho qualifies
A qualifying employee must generally:
- be aged 18 to 29 at the end of the month, a limit that does not apply to employees working mainly for an employer in a designated special economic zone;
- have a South African ID or a refugee identity document;
- have been employed on or after 1 October 2013;
- earn less than R7,500 a month;
- not be a domestic worker or a person connected to the employer.
The employer must be registered for employees’ tax and pay at least the applicable minimum wage. An employer that displaces an employee to claim the ETI pays a penalty of R30,000 for that employee.
How much it is worth
Since 1 April 2025, the monthly amount for an employee working 160 hours is:
- below R2,500 of pay: 60% of pay in the first 12 months, then 30%;
- R2,500 to R5,499.99: R1,500 in the first 12 months, then R750;
- R5,500 to R7,499.99: R1,500 minus 75% of pay above R5,500 in the first 12 months, then R750 minus 37.5% of pay above R5,500.
For fewer than 160 hours, pay is grossed up to 160 hours to find the amount, which is then reduced in the same ratio.
How it is claimed
The employer calculates the incentive each month and claims it on the EMP201, which reduces the PAYE due. Any excess can only be claimed through the interim and annual EMP501 reconciliations, and an employer that does not submit them, or is not tax compliant, forfeits unused ETI.
The ETI when TopSource runs your payroll
When TopSource runs your payroll in South Africa, we check each employee against the conditions every month, calculate the amount, claim it on the EMP201 and report it on the employee’s tax certificate.
Frequently asked questions
How much is the Employment Tax Incentive?
Up to R1,500 a month per employee in the first 12 qualifying months and up to R750 in the next 12, depending on pay.
What is the salary limit for the ETI?
The employee must earn less than R7,500 a month, a limit in force since 1 April 2025.
Does the ETI reduce an employee’s salary?
No. It reduces the PAYE the employer pays over to SARS.
Related terms in South Africa
- Temporary Employment Services (South Africa)
- Section 198B Fixed-Term Rule (South Africa)
- BCEA Earnings Threshold (South Africa)
- Retrenchment (South Africa)
- Restraint of Trade (South Africa)
- Family Responsibility Leave (South Africa)
- Sick Leave Cycle (South Africa)
- Employment Equity Act Reporting (South Africa)
- B-BBEE Scorecard (South Africa)
- Critical Skills Work Visa (South Africa)
- POPIA and Employee Data (South Africa)
- EMP201 Monthly Return (South Africa)
- EMP501 Reconciliation (South Africa)
- IRP5 and IT3(a) Certificates (South Africa)
- Tax Directive (South Africa)
- Fringe Benefits Tax (South Africa)
- Travel Allowance (South Africa)
- Retirement Fund Two-Pot System (South Africa)
- Medical Scheme Fees Tax Credit (South Africa)