THE Employment Tax Incentive (ETI) calculations explained

A diversified Financial Services Group.

A diversified Financial Services Group.

Formulas are sometimes difficult to understand so we have step-by-step examples and a handy ETI calculator. The examples and the ETI calculator are intended to help you work out your incentive amount which may be claimed.

We draw your attention to the following:

 Disclaimer:
  • What is contained in this calculator is intended as a guide only and is not considered to be a legal reference nor is it a binding ruling. The calculator does not take the place of legislation and readers who are in doubt regarding any aspect of the information displayed in the questionnaire should refer to the relevant legislation, or seek a formal opinion from a suitably qualified individual.
  • More information
  • It remains the responsibility of the employer to ensure the information provided, when using the ETI calculator, is accurate and the requirements are met for the employer and the employees to qualify.
[spoiler title=”Example 1 – Employees who earn between R0 – R2 000 ” style=”fancy”]

 

Monthly Remuneration ETI per month during the first 12 months of employment of the qualifying employee ETI per month during the next 12 months of employment of the qualifying employee
R 0 – R2 000 ​50% of Monthly Remuneration ​25% of Monthly Remuneration

 

You have 3 employees, who qualify, each earning R2 000 a month. They have been employed from 1 October 2013.

Top Tip: Remember follow the 4 simple steps to calculate you ETI.

  1. Identify all qualifying employees for the month – 3 employees
  2. Work out the applicable employment period for each qualifying employee – Within the first 12 months of the ETI programme
  3. Then work out each employee’s “monthly remuneration” – R2 000 per month per qualifying employee
  4. Calculate the amount of the incentive per qualifying employee according to the calculation.

The amount which may be claimed on the EMP201 is:

 

Monthly Remuneration ETI per month during the first 12 months of employment of the qualifying employee Amount which may be claimed on the EMP201
R2 000 per employee ​50% of Monthly Remuneration

50% X R2 000 = R1 000 per employee

​R1 000 per employee X 3 employees who qualify =

R3 000 per month

From the 13th month of employment, the incentive amount will be calculated as:

Monthly Remuneration ETI per month during the next 12 months of employment of the qualifying employee Amount which may be claimed on the EMP201
R2 000 per employee ​25% of Monthly Remuneration

 

25% X R2 000 = R500 per employee

​R500 per employee X 3 employees who qualify =

R1 500 per month

[/spoiler] [spoiler title=”Example 2 – Employees who earn between R2 001 – R4 000″ style=”fancy”]

Monthly Remuneration ETI per month during the first 12 months of employment of the qualifying employee ETI per month during the next 12 months of employment of the qualifying employee

R 2 001 – R4 000

​R1 000 ​R500

You have 3 employees, who qualify, each earning R3 500 a month. They have been employed from 1 January 2014.

  1. Identify all qualifying employees for the month – 3 employees
  2. Work out the applicable employment period for each qualifying employee – Within the first 12 months of the ETI programme
  3. Then work out each employee’s “monthly remuneration” – R3 500 per month per qualifying employee
  4. Calculate the amount of the incentive per qualifying employee according to the calculation.

The amount which may be claimed on the EMP201 is:

 

Monthly Remuneration ETI per month during the first 12 months of employment of the qualifying employee Amount which may be claimed on the EMP201
R3 500 per employee ​A fixed amount may be claimed for employees who earn between R2 001 – R4 000 =

 

R1 000 per employee

​R1 000 per employee X 3 employees who qualify =

R3 000 per month

From the 13th month of employment, the incentive amount will be calculated as:

Monthly Remuneration ETI per month during the next 12 months of employment of the qualifying employee Amount which may be claimed on the EMP201
R3 500 per employee ​A fixed amount may be claimed for employees who earn between R2 001 – R4 000 =

R500 per employee

 

​R500 per employee X 3 employees who qualify =

R1 500 per month

[/spoiler] [spoiler title=”Example 3 – Employees who earn between R4 001 – R6 000″ style=”fancy”]

Monthly Remuneration ETI per month during the first 12 months of employment of the qualifying employee ETI per month during the next 12 months of employment of the qualifying employee

R 4 001 – R6 000

Formula:

R1 000 – (0.5 x (Monthly Remuneration – R4 000)) ​

​Formula:

R500 – (0.25 x (Monthly Remuneration – R4 000))

You have 3 employees, who qualify, each earning R5 000 a month. They have been employed from 1 January 2014.

  1. Identify all qualifying employees for the month – 3 employees
  2. Work out the applicable employment period for each qualifying employee – Within the first 12 months of the ETI programme
  3. Then work out each employee’s “monthly remuneration” – R5 000 per month per qualifying employee
  4. Calculate the amount of the incentive per qualifying employee according to the calculation.

The amount which may be claimed on the EMP201 is:
Top Tip: Remember to always do all calculations in brackets first.

Step 1: Take the monthly remuneration and subtract R4 000 – R5 000 – R4 000
Step 2: Take the result in step 1 and halve the number – R1 000/2
Step 3: Take R1 000 and subtract the amount calculated in steps 2 – R1 000 – R500
The result of the calculation is what you can claim for that one person – R500 per employee.

 

The total ETI amount which may be claimed for all employees who qualify during the first 12 months = R500 per employee X 3 employees who qualify = R1 500

 

Step 1: Take the monthly remuneration and subtract R4 000. – R5 000 – R4 000
Step 2: Take the result in step 1 and take a quarter of the number – R1 000/4
Step 3: Take R500 and subtract the amount calculated in steps 2. – R500 – R250


The result of the calculation is what you can claim for that one person – R250 per employee.

The total ETI amount which may be claimed for all employees who qualify during the next 12 months = R250 per employee X 3 employees who qualify = R750

[/spoiler] [spoiler title=”Example 4 – Part month employment” style=”fancy”]

5 new employees will earn the following monthly salaries. They start employment on 17 March 2014 and receive an apportioned salary for March.

  • Employee 1 – R2 000
  • Employee 2 – R3 500
  • Employee 3 – R4 500
  • Employee 4 – R5 000
  • Employee 5 – R6 500

March has 20 working days, of which the employees worked 10 days. Therefore the remuneration for March will be adjusted to the ratio of the days worked to the number of working days in March.

  • Employee 1 : R2 000 x 10/20 = R1 000
  • Employee 2 : R3 500 x 10/20 = R1 750
  • Employee 3 : R4 500 x 10/20 = R2 250
  • Employee 4 : R5 000 x 10/20 = R2 500
  • Employee 5 : Does not qualify because he earns more than R6000

The ETI amount which may be claimed on the March Monthly Employer Declaration (EMP201) is calculated as follows:

EMPLOYEE

MONTHLY REMUNERATION

Calculation

ETI for the full month
(In
the first 12 months)

Calculation
(Apport
ionment for part of the month)

Amount which may be claimed on March EMP201

1

R2 000​

R2 000 x 50%​

​R1 000

R1 000 x (1 000/2 000)​

R500​

2

​R3 500

​Fixed ETI amount for remuneration between more than R2 001 – R4 000

​R1 000

​R1 000 x (R1 000/R2 000)​

R500​

3

​R4 500

​R1 000 – [0.5 x (R4 500 – R4 000)]

R750​

R750 x (R2 250/R4 500)​

​R375

4

​R5 000

​R1 000 – [0.5 x (R5 000 – R4 000)]

​R500

​R500 x (R2 500/R5 000)

​R250

5

​R6 500

Does not qualify​​​​

Total

R3 250​

R1 625​

[/spoiler] [spoiler title=”Example 5 – Associated person” style=”fancy”]Where an employee moves between companies (who are part of a group) with the same PAYE reference number, for ETI purposes this will be deemed to be continuous service by the employee and the ETI will continue and not start again.[/spoiler] [spoiler title=”More worked examples” style=”fancy”]Available on request – Request For Information (RFI) / Contact Us[/spoiler]

 

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