The public has been given until October 11 to comment on the draft Employment Tax Incentive Bill before Cabinet submitted the proposed legislation to Parliament in late October.

The draft Bill aimed to incentivise the employment of young, first-time workers, between the ages of 19 and 29 and to reduce the cost to employers through a cost-sharing mechanism with government.

Tax-registered employers would cut their pay-as-you-earn employees’ tax by as much as 50% if the firm hired a qualifying South African young person under the proposed employment tax incentive.

The National Treasury had allocated about R500-million of 2013 tax revenue for the incentive during the 2013/14 tax year.

The incentive was expected to start on January 1, but employers would be able to claim the incentive for employment that started after October 1.

During the first year of employment, the monthly value of the incentive would be 50% of the monthly salary – up to R2 000 – of the qualifying employee. For employees earning monthly salaries of between R2 000 and R4 000, a set incentive of R1 000 a month per qualifying employee during the first 12 months was established.

The value of the incentive would be halved as the young employee entered the second year of employment and the value of the incentive would decrease from R1 000 to zero for qualifying employees with a salary between R4 000 and R6 000.

The incentive, without an age restriction, would also apply within special economic zones and designated industries, as well as some public entities identified by the Finance Minister.

However, the new legislation limited an employer’s ability to unfairly dismiss an employee to hire a new qualifying employee to take advantage of the incentive. In this case, the employers would face a penalty of 150% of the value of the incentive that the company had received over a 12-month period.

These employers would also be excluded from any future participation in the incentive.

The draft Bill noted that the employee must not be related or connected to the employer in any way and domestic workers were not eligible for the incentive.

The incentive would also only be available for the first two years of the youth’s employment.