The South African Revenue Service (SARS) published Issue 5 of its Guide to the Employment Tax Incentive on 27 July 2026, and it remains the funder’s own word on a payroll cash-flow support open to employers of every size. The incentive cuts the PAYE a business sends to SARS by up to R1 500 a month for each qualifying young employee, and it is available until 28 February 2029. This funding watch sets out what the guide says, as at 9 November 2026.
What the incentive is, and what it is not
The Employment Tax Incentive (ETI) is not a grant, a loan or a cheque. SARS pays it by letting an eligible employer reduce the employees’ tax it owes each month, whether the tax was withheld from qualifying or non-qualifying staff. The guide’s own example has an employer with R32 800 in employees’ tax and R3 500 of ETI paying SARS R29 300 for the month. The employee’s pay, and the tax deducted from them, do not change.
The guide says the incentive was designed to encourage employers to hire young and less experienced work seekers, and that it is “not intended to be an incentive for training unskilled workers”. It started on 1 January 2014 and will end on 28 February 2029. It is not available on or after 1 March 2029.
Who qualifies
An employer must be registered for employees’ tax, must be up to date on tax, and must not be on the excluded list. National, provincial and local government, listed public entities (unless the Minister designates them) and municipal entities cannot claim. The guide says an employer is not eligible in any month in which it has an outstanding tax return or an outstanding tax debt, across every tax type it is registered for, including VAT, skills development levy and UIF.
A qualifying employee must:
- be aged 18 to 29 at the end of the month in which the incentive is claimed (there is no age limit for a qualifying company in a special economic zone);
- hold an identity card, an asylum seeker permit or a refugee identity document;
- not be a connected person of the employer and not be a domestic worker, as defined in the Basic Conditions of Employment Act;
- receive monthly remuneration of less than R7 500, a ceiling the guide says was previously R6 500 and was raised with effect from 1 April 2025; and
- not be mainly occupied with studying, which the guide reads as more than 50% of their hours, unless a learning programme under the Skills Development Act applies.
What it is worth
For employees paid from 1 April 2025, the guide gives this schedule, split between the first 12 months and the next 12 months that an employee qualifies:
- R0 to R2 499 a month: 60% of monthly remuneration in the first 12 months, 30% in the next 12.
- R2 500 to R5 499: R1 500 a month, then R750.
- R5 500 to R7 499: R1 500 less 75% of the amount above R5 500 in the first 12 months, and R750 less 37.5% of the amount above R5 500 in the next 12.
Worked from that table, an employee on R4 000 a month earns the employer R1 500 a month for 12 months and R750 for the following 12, a maximum of R27 000 over 24 months. An employee on R6 500 earns R750 a month, then R375. The guide caps claims at 24 months per employee, and those months need not be consecutive. They count from when the employee qualifies, even if the employer did not claim in some months, so a missed claim is not a month saved.
The minimum wage condition
The incentive can vanish in a month if pay falls short. An employer subject to a sectoral determination or other wage regulating measure must pay at least the higher of that measure and the national minimum wage. An employer that is not subject to such a measure must pay at least R2 500 for 160 hours in the month, scaled down in proportion for fewer hours. The guide’s example has an employee paid R2 300 for 140 hours: the apportioned minimum is R2 187,50, so the employer still qualifies. Overtime, bonuses and allowances generally do not count as wages for this test.
How to claim, and what can go wrong
There is no separate application. The employer reduces the employees’ tax on its monthly EMP201 return, due seven days after month end, or on the last business day before if the seventh falls on a weekend or public holiday. If the incentive exceeds the tax due, the excess rolls into the next month. The guide says unclaimed and carried-forward amounts are deemed nil, for each qualifying employee then employed, after each six-month reconciliation period, normally the periods ending August and February. An excess that remains can be refunded on an EMP501 declaration, but only if the employer is tax compliant. Our earlier explainers on the interim reconciliation and ETI forfeiture and on two SARS incentives employers overlook cover that timing.
Two penalties are worth knowing. An employer deemed to have displaced an employee, by an automatically unfair dismissal followed by replacing that worker with an ETI-eligible one to benefit unjustly, pays SARS R30 000 for each displaced employee and can be disqualified. Records must be kept for five years, and SARS may ask for contracts, job descriptions, payslips and timecards.
What it means for businesses
For any employer, from a start-up to a corporate, that hires people aged 18 to 29 on modest pay, the incentive is a direct reduction in the monthly PAYE bill, not a competitive funding round. Nothing needs to be approved in advance, but eligibility is tested every month: a late VAT return or a pay run below the minimum can wipe out that month’s claim. It sits alongside, not instead of, the funding routes in our DSBD funding guide, and an employer should confirm the position with its payroll provider or tax practitioner before relying on it. The guide itself says it is not a binding ruling.
What is not yet known
SARS’s guide reflects legislation as at 27 July 2026. We could not confirm from SARS’s pages whether any change to the amounts or the end date is planned, and the guide notes that the Minister can alter the amounts through a budget announcement. SARS can be reached on 0800 00 7277, and the SARS page for the guide is here. Our wider list of routes is in what is open right now.
