Skills Development Levies Act (No 9 of 1999)
The purpose of the Skills Development Levies Act
This Act regulates a compulsory levy scheme to fund education and training in businesses within various sectors in South Africa. It aims to expand the knowledge and competencies of the labour force and in so doing increase the supply of skilled labour in South Africa, providing for greater productivity and employability.
The criteria currently used for employers to become eligible to pay Skills Levies
If the company has staff registered for PAYE and the annual payroll exceeds R500 000 per annum, the company must register with SARS and pay a skills levy of 1% of the monthly payroll. If the company does not fall within these criteria, it does not have to pay levies or register with SARS.
How is the amount determined?
The leviable amount, i.e. the 'tax base' on which the levy is calculated, is the balance of remuneration paid or payable to an employee, as determined for purposes of the Employees' tax deduction, i.e. remuneration after deduction of allowable deductions. The levy remains payable in respect of remuneration amounts that fall below the tax threshold.
The following amounts are not subject to the payment of the levy:
- Remuneration payable to a labour broker if an exemption certificate in respect of PAYE has been issued to such labour broker;
- Pension, superannuation and retirement fund receipts;
- Lump sum payments in respect of retirement;
- Lump sum payments in respect of loss or termination of employment or office;
- Deemed remuneration (needs a definition) amounts in respect of directors of private companies. However, the levy is payable on the final actual remuneration paid to a director during the year;
- Remuneration payable to a learner in terms of a contract of employment contemplated in terms of Section 18(3) of the Skills Development Act.
The following employers are exempt from paying the levy:
- A public service employer (i.e. national or provincial government);
- Any employer where there are reasonable grounds for believing that the total amount of remuneration payable to all its employees during the following twelve month period will not exceed R500 000;
- Certain public benefit organisations which are exempt from income tax;
- Any national or provincial public entity if 80% or more of its expenditure is defrayed directly or indirectly from funds voted by Parliament;
- Any municipality which has been issued with a certificate of exemption by the Minister of Labour.
- This levy cannot be deducted from the agent or staff of the business and is payable by the principal or business owner.
How to determine which SETA your company belongs to
Each SETA has a mandate to serve the Sector Industry Classification Codes (Sic Codes) under its control as determined by the Department of Higher Education from time to time.
If your company activities fall within more than one SETA, only one SETA must be selected, taking the following into consideration:
- Composition of the workforce.
- Amount of remuneration paid or payable to the different categories of employees.
- Training needs of the different categories of employees.
Distribution of Skills Levies
Currently Skills Levies are paid to the relevant SETA and distributed as follows:
For business to be eligible to apply for the Mandatory Grant rebate of 50%, it has to observe the following:
Employ 50 or more employees and have submitted a Workplace Skills Plan (WSP) and Annual Training Report (ATR) which is due for submission to the relevant SETA by 30 June each year.
If less than 50 employees are employed and an application for a grant has been submitted by 30 June on a SME Claim form provided by the SETA.
Have registered for the first time in terms of Section 5(1) of the Skills Development Act and have submitted an application for a Workplace Skills Planning grant within six months of registration.
- Have registered with SARS in terms of Section 5 of the Skills Development Act, to pay skills levies.
- Have paid your levies directly to SARS in the right way and ontime in terms of Section 6 of the Skills Development Act.
- Are up to date with your skills levy payments to SARS for the period applied for.
- Have submitted a Workplace Skills Plan (WSP) within the required time.
- Have submitted an Annual Training Report (ATR) which shows that the implementation of the training which was submitted with the previous Workplace Skills Plan (WSP) and which has been accepted by the SETA.
Please note that the Skills Development Act and the Skills Levies Act is currently under review and it is proposed that the percentage of the Mandatory Grant is to be reduced from 50% to 40% and a Pivotal Grant of 10 % is introduced.
Mandatory grants reimbursement
As an organisation paying skills development levies to the Services SETA you are entitled to a 50% Mandatory Grant on your levies paid to the Services SETA.
How does a re-imbursement grant work?
All payments are based on submitted ATR and expenditure incurred. If you pay R100k in levies you are entitled to R50k back.
Companies who train to the value of R50k and more will receive a grant payment of R50k.
Companies who train the value of R40k yet are entitled to R50k will only receive a grant payment of R40k.
1) Implementation Report
After the successful implementation of the Workplace Skills Plan, a company will be eligible or a Workplace Implementation Grant. This grant is equal to 45% of the total levies received. The company will be required to submit a report which indicates what actual training and development has taken place at the workplaces as well as give reasons for deviations, if any, from the WSP submitted.
2) Discretionary Grant
The discretionary grant is equal to 20% of the total levies received. Unlike the two mandatory types of grants discussed above, this grant is indeed at the discretion of the SETA. In order to qualify for this grant, Companies will have to comply with SSETA discretionary grant criteria to be eligible for grant. Learning interventions funded from the Discretionary fund window includes but not limited to active participation in SETA's activities.
A company who qualifies will be paid quarterly in arrears.
If the mandatory grant is not claimed by 30 June each year, you will forfeit it. The Services SETA will transfer the funds to the discretionary grant fund.