Tax incentive ‘put 270,000 in jobs’
23 January 2015
Posted by: Author: Natasha Marrian
Natasha Marrian (BDlive)
The Employment Tax
Incentive Act had led to 270 000 people being employed, with 29 000 employers
claiming from the scheme in the 12 months it had been in effect, the Treasury
said on Wednesday.
The tax incentive was
implemented in January last year with the aim of encouraging business to employ
the youth — the group hardest hit by unemployment in the country.
The act reduces the cost
to employers of hiring young people, with the government paying half of the
It was a hotly contested
law, with the African National Congress (ANC) alliance partner, the Congress of
South African Trade Unions (Cosatu), vehemently opposed to it, arguing that it
would see older workers displaced.
The federation said it
would benefit employers most, who would hire young people at a fraction of the
cost of older workers.
The law has been in
place for a year so far — after a three-year battle over its earlier
incarnation, the youth wage subsidy — with the ANC placating its ally by
assuring it that the scheme would be under constant review and would contain
checks and balances to prevent abuse.
Jabulani Sikhakhane said on Wednesday the initial take-up of the incentive by
29 000 employers was higher than anticipated by the government, marking a
"positive start" for the legislation.
He said the incentive
had resulted in the employment of 270 000 workers up to the end of December,
bearing in mind that the last month of the year was generally slow in terms of
companies hiring new staff.
take-up of the incentive has been higher than expected, which can be seen as a
positive start," Mr Sikhakhane said.
However, a study by the
Southern African Labour and Development Research Unit at the University of Cape
Town found that the impact of the incentive was, "at best, small in
magnitude" in the first six months of its existence.
"We also found no
evidence that the rate at which youth find or lose employment has changed since
the ETI (employment tax incentive) was introduced," the study reads.
It found there could be
several reasons for this, the first being that more time was needed to assess
the incentive. The second was that the way in which the incentive is
implemented could be limiting its effects — it was probably aimed mainly at
medium-size to large companies, excluding smaller ones.
Third, the value of the
incentive might be too low to substantially affect firms’ hiring decisions.
Mr Sikhakhane said that
while the initial take-up has been positive, more time was required to assess
the overall success of the policy, which would depend on the number of new jobs
created, future opportunities created and the progression of those employed as
a result of the incentive.
The incentive would be
reviewed next year when adjustments might be made to improve its effect, he
The main concern
identified by Cosatu, of older workers being displaced, was addressed in the
legislation itself, Mr Sikhakhane said.
legislation was amended to include penalties on employers if they were found to
have displaced any workers, and employers are explicitly required to uphold all
minimum wage requirements," he told Business Day.
The legislation allowed
employers to claim for employees who joined them after October 2013. This was
to prevent employers claiming for workers already hired before the incentive
scheme took effect.
The Treasury would
monitor the implementation of the incentive and had not ruled out changing it,
should any "unintended consequences" arise.
For more information on the benefits of the
Employment Tax Incentive, please click here.
This article first
appeared on bdlive.co.za.