South Africa: Proposed increase to employment tax incentive thresholds

The Minister of Finance has proposed an increase to the eligible remuneration thresholds for the employment tax incentive (ETI), effective April 1, 2025.

Background

The ETI—introduced on January 1, 2014, and scheduled to be available through February 28, 2029—aims to encourage employers to hire young and less experienced workers by reducing the amount of employees' tax (PAYE) to be remitted by the employer to the South African Revenue Service (SARS).

Initially, the monthly remuneration thresholds for ETI were set between R2,000 and R6,000 per month, with the top end increased to R6,500 from March 1, 2019. The National Minimum Wage Act, effective January 1, 2019, set the wage at R20 per hour, which has since increased to R27.58 per hour as of March 1, 2024. Inflation has averaged 5.092% over the past five years.

Proposed increase

In response to these economic changes, the Minister of Finance proposed increasing the eligible remuneration thresholds from April 1, 2025:

• The minimum monthly remuneration band would be adjusted to R2,500 (from R2,000).
• 60% of the remuneration below R2,500, when such minimum is allowed due to existing exemptions, would be available to the employer as an incentive.
• The maximum value of R1,500 of the incentive would apply to remuneration between R2,500 and R5,500 (increased from R2,000 and R4,500, respectively).
• The value of the incentive would continue to decline as remuneration increases, tapering to zero where remuneration reaches R7,500 (previously R6,500).

These adjustments aim to enhance the attractiveness of the ETI for employers and to manage increased employment costs and encourage higher wages for workers.

Read a March 2025 report prepared by the KPMG member firm in South Africa