Preparing for the 2025 SETA submission period, it is important to reflect on the last 12 months and consider the economic impact caused by loadshedding—thankfully, the lowest number of active loadshedding days in years. For businesses focusing on B-BBEE and skills development on a budget, this shift presents an opportunity to optimise training investments through available grants and tax incentives.
As a result, companies have seen an increase in their revenue and profit figures, however not all industries and companies have fared as well, as many are still recuperating from years of power cuts, water restrictions, and, for some, still feeling the long-term effects of the Covid-19 pandemic. However, certain aspects of learning and development cannot be ignored, specifically regarding training conducted for B-BBEE purposes.
Fortunately for the proactive, there are existing relief measures designed for the purpose of assisting with one’s training budget in the form of various grants and tax rebates provided by the Sector Education and Training Authorities (SETAs), as well as from SARS directly.
Mandatory and Discretionary Grants
Whilst most companies are aware of their annual reporting requirements with the SETAs (i.e., an annual submission consisting of an Annual Training Report and a Workplace Skills Plan), a vast majority are only aware of the “Mandatory Grants” that are available to them.
To simplify this concept, a “Mandatory Grant” is paid annually to companies for reporting on their completed training (under the Annual Training Report) for the previous 12 months and their planned training (under the Workplace Skills Plan) for the following 12 months. This grant equates to 20% of the Skills Development Levies, or SDL, which is a monthly 1% levy paid to SARS based on the total salaries and wage bill by organisations with a payroll equal to, or more than, R 500 000 per annum.
“Discretionary Grants” are simpler to understand as these grants are awarded to a company at the discretion of the SETA. So-called “Discretionary Grant windows” open sporadically throughout the year (and in some cases are open alongside the standard annual reporting), with specific requirements communicated to all interested companies. These requirements may be for a specific training programme, a specific field or job title, or could simply be available for training programmes that align to the SETA’s Sector Skills Plan (SSP) which is a formal document, published annually, indicating the scare and/or critical skills with the hard-to-fill vacancies identified within the industry of the specific SETA. The value of a “Discretionary Grant” can add up to 49.5% of an organisation’s annual paid Skills Development Levies.
The Employment Tax Incentive (ETI)
The Employment Tax Incentive (ETI) is an incentive introduced by SARS in 2014 to encourage companies to hire young and less experienced job seekers and provide them with legitimate and meaningful workplace experience. This incentive is applied for on a monthly basis when submitting the monthly SARS EMP201 Employer Declaration Form to SARS, and the process itself is managed either by the payroll or finance departments. There is no limitation on the number of employees that may be claimed, and this incentive is also effective till 2029.
For a company to be eligible, they must:
- Be registered for Employee Tax (PAYE), or must be eligible to register for PAYE,
- Not be operating in the national, provincial, or local spheres of government,
- Not be a public entity listed in the Public Finance Management Act,
- Not be a municipal entity, and
- Not be disqualified by the Minister of Finance due to the displacement of an employee or by not meeting the conditions that may be prescribed by the Minister via a regulation.
For an employee to qualify, he or she must:
- Have a valid South African ID, Asylum Seeker permit, or an ID issued in terms of the Refugee Act,
- Be between the age of 18 to 29 years old,
- Not be a domestic worker,
- Not be a “connected person” to the employer,
- Be employed by the employer or an associated person to the employer on or after 1 October 2013, and
- Be paid the minimum wage applicable to that employer or if a minimum wage does not apply, is paid the amount contemplated in the Minimum Wage Act and not more than R6 000 remuneration per month. If there is no prescribed wage regulating measure or if it is not subject to or exempt from the requirements of the National Minimum Wage Act, a wage of at least R2 000 (where the qualifying employee was employed for 160 hours in a month) must be paid.
The 12H Learnership Allowance
The 12H Learnership Allowance was introduced to motivate employers to develop their employees and unemployed persons, and is made available in two parts, i.e. an Annual Allowance and a Completion Allowance. This allowance is seen as a tax credit and is deducted annually at the end of the tax assessment period during the submission of annual returns.
An employer will only qualify for the Annual Allowance if:
- During any year of assessment, the learner is a party to a registered learnership agreement with the employer,
- The learner holds an NQF-level qualification ranging from NQF Level 1 to 10,
- The agreement was entered into pursuant to a trade carried on by that employer, and
- The employer has derived “income”, as defined, from that trade.
An employer will qualify for the Completion Allowance if they meet the criteria for the Annual Allowance above, and if the learner(s) have successfully completed the learnership programme during the year of assessment.
An employer will not qualify for any part of this allowance during any assessment period in which there is no registered learnership agreement and if the claimed learner is not employed and placed on the company’s payroll.
Both allowances can be broken down as per the below table, with a pro-rata amount applicable should the programme not run for the full 12 months of the tax assessment year:
By taking advantage of the above rebates and grants and shifting one’s thinking around what learning and development is, how it should be implemented and what it entails, it is possible for all companies to meet their training needs and to continue to upskill their workforce whilst ensuring successful claims B-BBEE and Skills Development on a budget.
For full-fledged compliance with the Skills Development Act and to ensure your organisation meets the set B-BBEE targets and/or applicable requirements, it is critical for companies to have a good working relationship with their preferred training providers and reporting SETA(s), or to make use of external consultants to manage this on their behalf.
Written by Cameron Ross.