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Why investing in youth is good for your business

It was Nelson Mandela who famously said, “The youth of today are the leaders of tomorrow”.  Although some years have passed since his death, his words still ring true. How we treat our youth (legally defined in South Africa as people between the ages of 15-35) will have a lasting impact on the growth of our country and even local businesses.

Staggeringly, however, youth unemployment has remained over 55% for the last two years and was last under 50% in 2011. This is a worrying statistic, but it does not have to remain so. There are many reasons why participation in the youth employment movement is smart and responsible for employers.

Over the years, many employers have failed to realise that the demand for technologically-skilled individuals is rapidly increasing. While this should by no means be an encouragement to phase out older workers (with good strategy, workers of any age can learn new skills and apply the latest technology to their work), it does incentivise employers to consider employing younger talent that has more recent exposure to training within newer technological frameworks.

Furthermore, there are a variety of incentives for employing youth:

Employment Tax Incentive (ETI)*

Beyond the advantages in employing people with the most relevant skills in your industry, there are also tax incentives for employing young people. The ETI was implemented in 2014 with the express aim of encouraging employers to hire young workers between the ages of 18 and 29 who earn less than R6 000p/m.

The incentive has the following benefits:

  • Reduced amount of PAYE (Pay-As-You-Earn) payable by the employer
  • ETI can be claimed for a total of 24 qualifying months
  • It serves as complement to existing learnership agreements
  • More young people are employed and the economy is boosted

SDL & SETA Registration

By registering for the Skills Development Levy (SDL) and registering at your relevant Sector Education and Training Authority (SETA), you can offer learnerships and apprenticeships in your company. If you can secure a grant, you can use it to train your employees and invest in their skills, which is desperately needed in a country where unemployment rates have been sky-high for years.

The SDL is non-optional for any business owner who expects to pay more than R500 000 in salaries over 12 months. The payable SDL amount is 1% of the total salaries paid. However, a large portion of these funds can be claimed back in various ways through:

  • Mandatory grants: If you submit both your valid Workplace Skills Plan (WSP) along with your Annual Training Report (ATR) by the end of April every year, you qualify for a 20% return on the funds paid to the SDL.
  • Discretionary grants: Employers may apply for these grants with their respective SETA. The purpose of these grants is to incentivise employers to contribute to skills development while addressing skills shortages within their industry. This both creates jobs and is a worthwhile way to invest in upskilling young people through learnerships. Discretionary grants can be worth up to 49.5% of the amount contributed to the SDL.

How are you investing in the leaders of tomorrow?

The path to a brighter future starts with you, the business leader. Not only are there many ways by which employing youth can save you money, but it also combats youth unemployment in South Africa while ensuring that the staff in your company can go a long way with you.

*Please note that this is a simplified summary and any consideration regarding the use of the ETI should be discussed with your tax adviser. 

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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