The Employment Tax Incentive is worth up to R1,500 per qualifying employee per month in the first 12 months of employment, claimed as a reduction of your PAYE liability on the monthly EMP201. The employee must be aged 18 to 29, earn at least R2,500 and less than R7,500 a month, and hold a valid South African ID or asylum seeker or refugee permit.
It is the most under-claimed incentive in South African payroll. Not because it is complicated — it is not — but because most employers of young staff have never been told it exists, and payroll software will not claim it unless someone switches it on.
TL;DR
Up to R1,500 a month per qualifying employee in the first 12 months.
Up to R750 a month in the second 12 months.
Employee must be 18 to 29, earning R2,500 or more and under R7,500 a month.
Claimed by reducing the PAYE you pay on the EMP201 — not as a separate refund.
Employee must have been employed on or after 1 October 2013.
Paying any employee below the National Minimum Wage disqualifies your entire ETI claim for that month.
The employer must be tax compliant.
What ETI is and how it works
ETI is a wage subsidy delivered through the payroll system. Government's aim is to reduce the cost of employing young, low-earning workers who have the highest unemployment rate in the country.
The mechanism is simple: you calculate what you owe SARS in PAYE for the month, then reduce that amount by your total ETI for the month. You keep the difference.
It costs the employee nothing. Their salary, PAYE and UIF are entirely unaffected. The benefit sits with the employer.
Where it appears on the EMP201
| Line | Amount |
|---|---|
| PAYE for the month | R28,400 |
| UIF (employee + employer) | R1,850 |
| SDL | R1,420 |
| Subtotal | R31,670 |
| Less: ETI claimed (4 qualifying employees) | (R6,000) |
| Payable to SARS | R25,670 |
Four qualifying employees at R1,500 each is R6,000 a month, or R72,000 a year, retained in the business.
Who qualifies
The employee must:
| Requirement | Detail |
|---|---|
| Age | 18 to 29 on the last day of the month. A 30th birthday ends eligibility. |
| Identity | Valid South African ID, asylum seeker permit, or refugee ID |
| Start date | Employed on or after 1 October 2013 |
| Monthly remuneration | R2,500 or more and less than R7,500 |
| Relationship | Not a connected person to the employer |
| Domestic workers | Excluded |
The age rule has no exception in Special Economic Zones. Employers operating in designated SEZs, and in certain industries designated by the Minister, can claim regardless of the employee's age — a genuinely significant carve-out for qualifying businesses.
The employer must:
Be registered for PAYE
Be tax compliant — outstanding returns or debt disqualify the claim
Not be a government entity, municipality or public entity (with limited exceptions)
Pay every employee at or above the National Minimum Wage
How much you can claim
The amount depends on the employee's monthly remuneration and how long you have been claiming for them.
First 12 months of ETI-qualifying employment
| Monthly remuneration | Monthly ETI |
|---|---|
| Below R2,500 | R0 — does not qualify |
| R2,500 – R5,500 | R1,500 (the maximum) |
| R5,500 – R7,500 | Tapers down from R1,500 to R0 as remuneration rises |
| R7,500 and above | R0 — does not qualify |
Second 12 months
The amount roughly halves, with a maximum of R750 a month over the same bands.
The extended R750 band
A further monthly ETI of R750 applies for a four-month period for employees aged 18 to 29 who are no longer eligible after the employer has already claimed ETI for 24 months.
The sweet spot
The maximum R1,500 applies across the R2,500 to R5,500 band. That means an employee on R2,500 and an employee on R5,500 both attract R1,500 — but the R2,500 employee is receiving a subsidy equal to 60% of their wage, against 27% for the R5,500 employee.
Above R5,500 the incentive tapers, and it disappears entirely at R7,500. These thresholds were raised from 1 April 2025, when the minimum band moved from R2,000 to R2,500 and the upper cut-off from R6,500 to R7,500.
Worked example: a retail business
Four staff, all aged 18 to 29, all employed within the last 12 months.
| Employee | Monthly wage | Months claimed | Monthly ETI |
|---|---|---|---|
| Employee A | R4,200 | 3 | R1,500 |
| Employee B | R5,100 | 7 | R1,500 |
| Employee C | R6,800 | 2 | Tapered — partial claim |
| Employee D | R8,200 | 5 | R0 — above R7,500 |
Employees A and B alone are worth R3,000 a month, or R36,000 a year.
Employee D is the interesting case. At R8,200 they are above the cut-off. Whether it is worth restructuring the role to fall inside the band is a real question — but only where the lower wage still complies with the National Minimum Wage and any applicable sectoral determination, and only where it is a genuine commercial decision rather than a device. Cutting someone's pay to claim a subsidy is both bad practice and likely to be challenged.
The minimum wage trap
This is the rule that catches employers, and it is disproportionately harsh.
The National Minimum Wage increased to R30.23 per hour from 2 March 2026, up from R28.79 — a 5% increase, gazetted in Government Gazette No. 54075. It applies to all workers.
If any employee is paid below the National Minimum Wage, the employer's entire ETI claim is disqualified for that month — not just the claim relating to that employee.
One underpaid worker in a business claiming R6,000 of ETI costs the full R6,000 for that month.
At R30.23 an hour, a standard 45-hour week works out to roughly R5,895 a month. Check every employee against the hourly rate rather than the monthly total, because part-time and variable-hours staff are where breaches occur.
Note also that some sectors have sectoral determinations setting rates above the national minimum. Where a determination applies, that is the wage floor for ETI purposes.
The compliance conditions people overlook
You must be tax compliant. Outstanding returns or an unpaid SARS debt disqualify the claim. This turns a cash flow problem into a compounding one — the business least able to fund its PAYE is also the one that loses the incentive designed to help it.
Connected persons do not qualify. Employing a family member does not attract ETI.
Domestic workers are excluded.
The ETI must not exceed your PAYE liability for the month. ETI reduces PAYE; it does not create a refund beyond it. Where your ETI exceeds the PAYE payable, the excess is generally carried forward and can be refunded at the reconciliation, subject to the rules and to compliance.
Records matter. You need to be able to evidence each employee's age, identity document, start date and monthly remuneration. ETI is a routine target in payroll audits precisely because it is a direct reduction of tax paid.
Part-month and part-time employees
Two situations that produce a reduced claim rather than no claim at all.
Employees who work fewer than 160 hours in a month. Where a qualifying employee works less than the standard 160 hours, the remuneration must be grossed up to a 160-hour equivalent to test against the R2,500 and R7,500 bands, and the ETI amount is then apportioned back down to the hours actually worked.
This matters for part-time and shift staff. A worker on R2,000 for 80 hours grosses up to R4,000 for 160 hours — which falls inside the qualifying band — so a proportionate claim is available even though their actual monthly wage is below R2,500.
Employees who start or leave mid-month. The same gross-up and apportionment logic applies. A qualifying employee who starts on the 15th does not produce a nil claim; they produce a part-month one.
Getting this right is where payroll software earns its cost, and it is a common source of under-claiming where the calculation is being done manually.
Surviving an ETI audit
ETI is a direct reduction of tax paid over to SARS, which makes it a standing target in payroll verifications. The claims that survive have documentation for every condition.
Keep, per claimed employee:
A copy of the identity document, asylum seeker permit or refugee ID — this is the evidence of both age and eligibility
The employment contract showing the start date
Monthly payslips evidencing remuneration
Hours worked records, particularly for part-time staff where gross-up applies
Evidence of National Minimum Wage compliance for the whole workforce, not just ETI employees
Keep, at business level:
A monthly ETI calculation schedule reconciling to the amount claimed on each EMP201
Evidence of your tax compliance status in the months claimed
The two findings that come up most often:
No ID on file, so age cannot be substantiated and the claim fails on the most basic requirement.
A minimum wage breach somewhere in the workforce, disqualifying every claim for that month regardless of the ETI employees' own wages.
Both are entirely preventable with a filing habit rather than a system.
How to start claiming
1. Run the qualification test across your current payroll. Age, ID type, start date, monthly remuneration. This takes an hour and frequently identifies claims nobody knew about.
2. Check the National Minimum Wage compliance of every employee, not just the ETI candidates. One breach kills the whole month.
3. Confirm your own tax compliance status on eFiling.
4. Enable ETI in your payroll software. Most South African payroll packages support it, but almost none default it on. This is the single most common reason a qualifying employer claims nothing.
5. Claim it on the EMP201 as a reduction of the PAYE liability.
6. Reconcile it on the EMP501. ETI claimed monthly must reconcile at the interim and annual reconciliations.
You can backdate
ETI not claimed in a month can generally be corrected, but the rules on how far back are specific and depend on the reconciliation periods involved. If you have been employing qualifying young staff for a year without claiming, it is worth having the position reviewed — the recovery can be substantial.
Frequently asked questions
How much is the Employment Tax Incentive worth? Up to R1,500 per qualifying employee per month during the first 12 months of ETI-qualifying employment, and up to R750 a month in the second 12 months. A further R750 a month applies for a four-month period for employees aged 18 to 29 who are no longer eligible after 24 months of claims.
Who qualifies for ETI in South Africa? Employees aged 18 to 29 with a valid South African ID, asylum seeker permit or refugee ID, employed on or after 1 October 2013, earning at least R2,500 and less than R7,500 a month, who are not connected persons to the employer and are not domestic workers. Employers in designated Special Economic Zones can claim regardless of the employee's age.
How do I claim ETI? By reducing the PAYE liability declared on your monthly EMP201 by the total ETI for that month. It is not a separate application or refund — you simply pay SARS less.
What is the ETI salary limit? Employees earning R7,500 or more a month do not qualify. The minimum is R2,500. The maximum R1,500 incentive applies across the R2,500 to R5,500 band, tapering to zero between R5,500 and R7,500.
Does paying below the minimum wage affect my ETI claim? Severely. If any employee is paid below the National Minimum Wage — R30.23 per hour from 2 March 2026 — the employer's entire ETI claim is disqualified for that month, not merely the claim for that employee.
Can I claim ETI for a family member? No. Connected persons to the employer are excluded.
What happens if my ETI is more than my PAYE for the month? ETI reduces the PAYE payable and does not create a refund beyond it in that month. Excess amounts are generally carried forward and may be refunded at the reconciliation, subject to the rules and to the employer being tax compliant.
Can I claim ETI retrospectively? Often yes, though the rules on how far back depend on the reconciliation periods involved. If you have been employing qualifying young staff without claiming, have the position reviewed — the recovery can be significant.
Money most employers of young staff never claim
Four qualifying employees is R72,000 a year. For a small retailer, restaurant or workshop employing young people, that is meaningful — and the most common reason it goes unclaimed is that a checkbox in the payroll software was never ticked.
Smartbook runs the ETI qualification test across your payroll as part of monthly processing, checks minimum wage compliance before every claim, and reconciles the ETI at both EMP501 submissions.
Last reviewed: 26 July 2026. Written by the Smartbook team — SAIPA and SAICA accredited, SARS registered tax practitioners. ETI thresholds shown reflect the changes effective 1 April 2025. The tapering calculation between R5,500 and R7,500 follows a prescribed formula — confirm the exact amount for a specific employee against the SARS ETI employer guide. General guidance, not advice on your circumstances.
Primary sources: SARS — Employment Tax Incentive (ETI) · SARS — How does the Employment Tax Incentive work · SARS — ETI changes with effect from 1 April 2025 · SARS — Guide for Employers in respect of the Employment Tax Incentive · SARS — Budget 2026 FAQs