The Employment Tax Incentive applies to qualifying employees earning less than R7,500 a month, the limit in force since 1 April 2025. Here is what employers claiming the incentive in 2026 need to check.
The Employment Tax Incentive (ETI) reduces the PAYE an employer pays to SARS when it employs qualifying young workers. Since **1 April 2025**, employees earning **less than R7,500** a month can qualify, up from the previous R6,500 limit, and that remains the position in 2026. Employers who have not reviewed their ETI claims since the change, or who are still applying the old limit, should check them now. > **Key facts (as at 26 September 2026)** > - Qualifying monthly remuneration: **less than R7,500**, in force since **1 April 2025** (SARS; enacted by the Rates and Monetary Amounts and Amendment of Revenue Laws Act 3 of 2026). > - Maximum incentive: **R1,500 a month** in the first 12 qualifying months and **R750 a month** in the second 12 (SARS). > - Qualifying employees: aged **18 to 29**, except those working for a section 12R qualifying company mainly inside a Special Economic Zone (SARS). > - Claim period: up to **24 qualifying months** per employee. The scheme is scheduled to end on **28 February 2029** (SARS). This guide covers: - How the ETI works - What changed on 1 April 2025 - Who qualifies: employer and employee requirements - The calculation in plain terms, with one worked example - Common errors to check - Answers to the questions employers ask most ## How the ETI Works The ETI lets a qualifying employer reduce its monthly PAYE by an amount for each qualifying employee, for up to 24 qualifying months per employee. It does not change what the employee earns or what is deducted from the employee's pay. It reduces what the employer pays over to SARS. The incentive is claimed on the **EMP201**, the same monthly return used for PAYE, UIF and SDL, and it is reconciled twice a year on the **EMP501**. Payroll software calculates it once each employee's details are captured correctly, so the work for the employer is mainly in getting the inputs right. ## What Changed on 1 April 2025 With effect from 1 April 2025, the upper limit rose from R6,500 to **R7,500**, and the bands were moved up so that the incentive now tapers to zero at R7,500. Employees earning less than R7,500 a month can now qualify (subject to the other conditions), where previously those earning R6,500 or more fell outside. The change was later enacted by the Rates and Monetary Amounts and Amendment of Revenue Laws Act 3 of 2026. The 2026 Budget made no further change, and SARS had published none as at 26 September 2026. | First 12 months | Before 1 April 2025 | From 1 April 2025 | |---|---|---| | Upper limit (monthly remuneration) | Less than R6,500 | **Less than R7,500** | | Lowest band | Below R2,000: 75% of remuneration | **Below R2,500: 60% of remuneration** | | Flat R1,500 band | R2,000 – R4,499.99 | **R2,500 – R5,499.99** | | Band where the incentive tapers | R4,500 – R6,499.99 | **R5,500 – R7,499.99** | The maximum amounts did not change: **R1,500** a month in the first 12 months and **R750** in the second 12. What moved were the bands, so that more employees on or above the minimum wage fall into the flat band. Employers with employees earning between R6,500 and R7,499.99 should check whether those employees now qualify and whether the payroll system was updated. Under the SARS guide, under-claimed ETI can only be corrected within the same six-month reconciliation period, by its last month (August or February). Anything not claimed by then is forfeited, so under-claims for months before September 2026 can no longer be recovered. Correct the payroll set-up now. ## Employer Eligibility Requirements To claim the ETI, the employer must: - Be **registered for PAYE** with SARS - Not be a government body in any sphere, a public entity listed in Schedule 2 or 3 of the Public Finance Management Act, or a municipal entity - Not have been disqualified by the Minister of Finance - Be **tax compliant** to receive ETI refunds at the end of each reconciliation period ## Employee Eligibility Requirements Each qualifying employee must: - Be aged **18 to 29**, unless the employee works for a section 12R qualifying company and renders services mainly inside a Special Economic Zone - Hold a valid **South African ID, asylum-seeker permit or refugee ID** - Earn **less than R7,500** a month - Be paid at least the applicable **minimum wage**, or at least R2,500 for 160 hours in a month where no wage-regulating measure applies - Have been employed on or after **1 October 2013** - Not be a **domestic worker**, and not be a person **connected to the employer** (such as a relative) - Not be mainly involved in studying, unless the employer and employee have entered into a learning programme under the Skills Development Act (for example, a learnership) ## The Calculation in Plain Terms The amounts per month are: | Monthly remuneration | First 12 months | Second 12 months | |---|---|---| | R0 – R2,499.99 | 60% of remuneration | 30% of remuneration | | R2,500 – R5,499.99 | R1,500 | R750 | | R5,500 – R7,499.99 | R1,500 − (0.75 × (remuneration − R5,500)) | R750...