The Employment Tax Incentive qualifying salary threshold increased to R7,500 in 2026. Here is what that means for employers claiming the incentive — and what to check before you do.
The Employment Tax Incentive reduces the PAYE an employer pays to SARS when they employ qualifying young workers. In 2026, the maximum qualifying monthly wage — the salary below which an employee can qualify for the full ETI calculation — increased to **R7,500**, up from the previous R6,500 threshold. For employers who have not reviewed their ETI claims recently, or who have been incorrectly applying the old threshold, this update is worth checking now. This guide covers: - How the ETI works and what changed in 2026 - Who qualifies — employer and employee requirements - The calculation in plain terms - Common errors and how to avoid them ## How the ETI Works The ETI allows qualifying employers to offset part of their PAYE liability each month for up to 24 months per qualifying employee. It does not reduce the employee's take-home pay — it reduces what the employer pays to SARS. The incentive is calculated against a sliding scale based on the employee's monthly wage and which phase of the two-year incentive they are in (the first 12 months and the second 12 months carry different maximum values). The ETI is claimed on the **EMP201** return — the same monthly submission used for PAYE, UIF, and SDL. Your payroll software should calculate the ETI automatically for qualifying employees once their details are correctly configured. > The ETI does not change what the employee earns. It changes what the employer pays to SARS on their behalf. That distinction matters for how it is explained internally. ## What Changed in 2026 The maximum qualifying monthly wage threshold increased from R6,500 to **R7,500**. This means employees earning up to R7,500 per month can now qualify for the incentive (subject to the other conditions being met), where previously those earning between R6,500 and R7,500 fell outside the threshold. Employers who have employees in that R6,500–R7,500 band should review whether those employees now qualify and update their payroll configuration accordingly. Retroactive claims are subject to SARS rules — confirm the specific provisions with your payroll provider. ## Employer Eligibility Requirements To claim the ETI, the employer must: - Be registered for PAYE with SARS - Have no outstanding tax debt, or have an approved payment arrangement with SARS - Not be a government entity or public entity - Be operating in the private sector (special rules apply for Designated Special Economic Zones) ## Employee Eligibility Requirements Each qualifying employee must: - Be aged **18 to 29** (age exceptions apply for workers in designated SEZs — confirm with your payroll provider) - Be a **South African citizen, permanent resident, or refugee** with the relevant documentation - Earn a monthly wage of **R7,500 or less** in 2026 - **Not be a domestic worker** or connected to the employer through a relationship that disqualifies the claim (domestic workers, relatives employed by a natural person employer, and workers employed by labour brokers are excluded) - Have an **Income Tax Reference Number (ITRN)** on record with the employer That last requirement is now enforced. Without a valid ITRN for the employee, the ETI claim will not process correctly and may cause issues with EMP201 submissions. ## The Calculation in Plain Terms The ETI calculation uses a sliding scale based on the employee's monthly remuneration. For the first 12 months of the claim: - Employees earning up to R2,500 per month: the employer may claim up to R1,500 per month (50% of remuneration, capped) - Employees earning between R2,500 and R7,500: the claim amount decreases on a sliding scale as wages increase For months 13–24, the amounts are halved. After 24 months, the incentive ends for that employee with that employer — it does not transfer if the employee moves to a new employer. The actual calculation formula uses the specific remuneration figure, so your payroll software performs this automatically. The key is that the inputs — employee age, remuneration, employment start date — are correctly captured. ## Common Errors to Check **Old threshold still applied.** If your payroll system was not updated to reflect R7,500, employees in the R6,500–R7,500 band may be missing claims they now qualify for. **Missing ITRNs.** From 2026, employees without a valid ITRN cannot be included in payroll submissions cleanly. ETI claims for employees without ITRNs are at risk. Audit your payroll records against the ITRN field before the next EMP201 submission. **Incorrect employment start date.** The 24-month clock starts from the employment start date. If this is captured incorrectly, the calculation phases will be wrong. **Claiming for excluded categories.** Domestic workers, relatives, and employees placed by labour brokers are excluded. Review your employee types against the exclusion list. This is general information about how the ETI works and should not be read as tax advice. Confirm the current calculation method and any retroactive claim options with yo...