Making Sense of the Employment Tax Incentive (ETI): What You Need to Know in 2025:

The Employment Tax Incentive (ETI) is a government-backed initiative designed to help employers reduce their PAYE liability while creating job opportunities for young South Africans. Here’s everything you need to know—especially with the updated rules effective from 1 April 2025.

The ETI is a reward from SARS for hiring young work seekers (mainly aged 18 to 29). It was introduced in January 2014 and runs until February 2029. It gives businesses a monthly tax break for giving young people a chance at employment.

How Does ETI Help Employers?

  • PAYE Reduction: Substantial monthly savings on payroll tax.

  • No Impact on Wages: Employees receive their full salary.

  • Claim for 24 Months: Per qualifying employee.

  • Supports Skills Development: Complements other initiatives like learnerships.
Employment Tax Incentive

Who Can Claim ETI?

Employers can claim ETI if they:

    • Are registered for PAYE with SARS

       

    • Operate in the private sector (not government or municipal entities)

       

    • Have not been disqualified by the Minister of Finance

       

    • Do not replace existing workers just to qualify (increasing their workforce)
Confident businessman in suit shaking hands at office desk, symbolizing successful partnership.

Who Can Employers Claim For?

Employment Tax Incentive

To qualify, your employee must:

  • Be aged 18–29, or work in a Special Economic Zone if older,
  • Have a valid SA ID, asylum seeker permit, or refugee ID,
  • Not be a domestic worker or related to the employer,
  • Be paid the minimum wage applicable to that employer under a wage regulating measure or is paid the national minimum amount contemplated in the National Minimum Wage Act and not more than R7 500 remuneration.

If there is no prescribed wage regulating measure or not subject to section 3 of the National Minimum Wage or exempt from the requirements of the National Minimum Wage Act, a wage of at least R2 500 (where the qualifying employee was employed for 160 hours in a month) must be paid.

What’s New from 1 April 2025?

Here are the updated ETI amounts you can claim:

Monthly Remuneration
ETI (First 12 Months)
ETI (Second 12 Months)
R0 – R2,499.99
60% of monthly pay
30% of monthly pay
R2,500 – R5,499.99
R1,500
R750
R5,500 – R7,499.99
Formula-based: R1,500 – [0.75 × (Remuneration – R5,500)]
R750 – [0.375 × (Remuneration – R5,500)]

Higher Maximum Claim:

  • If your employee works 160+ hours/month: R2,500 (up from R2,000)

  • For fewer hours: claim pro-rata based on time worked

New Salary Limit:

  • Now covers employees earning up to R7,500/month (previously R6,500)

Watch Out for Penalties

You could face serious penalties if:

    • You claim ETI for someone who doesn’t qualify.
    • You pay below the minimum wage.
    • You replace existing employees just to claim ETI.

Penalties include:

  • 100% of the ETI claimed for that employee.
  • A fine of R30,000 per displaced worker.
  • Possible interest and tax penalties under the Tax Administration Act.

 

hammer, law, justice, judge, auction, judgement, authority, courtroom, offer, legislation, penalty, judge, judge, auction, auction, courtroom, courtroom, courtroom, courtroom, courtroom, legislation, penalty

In conclusion, the Employment Tax Incentive (ETI) remains a valuable tool for both young South Africans seeking work experience and employers looking to reduce payroll costs. 

With the updated rules effective from 1 April 2025 – featuring increased claim amounts and revised salary limits – it’s more important than ever to stay informed.

By carefully adhering to these new guidelines, employers can maximize their benefits while avoiding costly penalties.

Embracing the ETI not only supports youth employment but also contributes to building a stronger, more inclusive workforce for the future.

Need help claiming ETI or making sure your payroll is compliant?

📞 Contact Meyer Rens Accountants — we’re here to help make tax easy.

Scroll to Top