The Skills Development Act 97 of 1998 which falls under the Department of Labour, was introduced to develop and improve the country’s workforce. It is part of the Government’s strategy to finance training initiatives and to promote skills development in South Africa. The SDL Act establishes a compulsory levy scheme for purposes of funding education and training as envisaged by the act. This levy has to be paid by employers.
It is a payroll-tax designed to finance training initiatives and is fixed at 1% of total employee remuneration and is payable monthly not later than 7 days after the end of each month. SARS is responsible for collecting the levy.
Every employer who is registered with SARS for PAYE is liable to pay their Skills Development Levy and who has:
- An annual payroll in excess of R500 000
- Staff of 50 or more
How to register for payment of the levies:
- The employer must register with SARS by completing a registration form (EMP101) obtainable from any SARS office or from their website www.sars.org.za
- The employer must choose a SETA (Sector Education Training Authority) that is most representative of its business’ core business or main activity.
- The employer must choose a relevant Standard Industry Code (SIC).
- The employer must submit documentation to SARS.
Employers, who have an Exemption Certificate approved and supplied by SARS, will be exempt from the 1% Skills Development Levy.
Employers that do not pay a Skills Development Levy:
- Any public service employer in national or provincial sphere.
- Religious or charitable institutions or any fund which is exempt from the payment of income tax.
- National or provincial public entities if 80% or more of its expenditure is defrayed directly or indirectly from funds voted by Parliament.
- Employers whose wage bill is less than R500 000 per annum and are not required to register for employees tax purposes.
- Any municipality in possession of a certificate of exemption from the Minister of Labour.
Refusal to register for or pay the Skills Development Levy is an offense and will therefore lead to penalties.
The “leviable amount” means “the total amount of remuneration, paid or payable or deemed to be paid or payable, by an employer to its employees during one month”. Remuneration paid to employees below the income tax threshold must be incorporated into the total remuneration when determining the leviable amount.
Amounts of remuneration which is included when calculating the levy payable:
- Normal salaries, wages, overtime pay, bonus, gratuity, commission, leave pay, etc.
- 50% of a traveling allowance.
- 50% of any allowance to a holder of a public office as contemplated in section 8(1) (d) and (e) of the Income Tax Act 85 of 1962.
- Fringe benefits valued in terms of the Seventh Schedule of the Income Tax Act 85 of 1962.
Amounts which are excluded when calculating the levy payable:
- Pension & retirement allowances and lump sums from pension, provident and retirement annuity funds.
- Amounts payable to a trainee in terms of a contract of employment as defined in the SDL Act.
- Amounts paid to independent consultants or labour brokers.
- Reimbursive allowances.
- Amounts paid to directors of private companies or members of close corporations.
SDL paid to SARS is allocated as follows:
- 18% goes to the National Skills Fund (NSF) to use in national skills development programmes.
- 2% goes to SARS for administration costs incurred for collecting the levies.
- 80% are paid by SARS to the SETA.
A part of the levies paid to the SETA’s can be claimed back by employers In the form of grants when certain criteria is met.
A Skills Development Facilitator can assist the employer with claiming back grants.
Different grants and their purposes.
Grants are amounts of money paid back to the employers by the SETA’s when certain conditions are met. Grants are not refunded automatically. Employers have to apply for these grants to be refunded.
There are 2 Mandatory Grants and 2 Discretionary Grants which can be refunded to the employers.
- Mandatory Grant 1: Workplace Skills Plan (WSP)
The WSP Grant is the most important grant application and it is a requirement that a WSP is submitted before any other grants may be applied for. The WSP identifies training that is planned ahead for a 12 month period – 01 April to 31 March. The WSP is due on 30 June and it allows the employer to claim back a percentage of their levy paid to SARS. To access the WSP Grant, the WSP needs to be completed in the particular SETA’s format and submitted by the deadline date.
- Mandatory Grant 2: Annual Training Report (ATR)
The ATR Grant is an application that is submitted to the SETA about the training that was implemented for a 12 month period – 01 April to 31 March. The ATR is due on 30 June and it allows the employer to claim back a percentage of their levy paid to SARS. To access the ATR Grant, the ATS needs to be completed in the particular SETA’s format and submitted by the deadline date.
- Discretionary Grant 1: Strategic Cash Grant (SCG)
The SETAs have the discretion over this grant and is usually dependant on the employer developing scarce and critical skills in others.
- Discretionary Grant 2: Learnership Grants
Learnership grants are available to employers who meet specific SETA criteria concerning Learnerships. Employers implementing Learnerships are also able to enjoy tax deductions available via SARS.
The actual training costs incurred for training are not refunded either in part or completely. Only a part of the SDL of 1% that the employer paid SARS is refunded.n The grants that can be refunded to the employer amounts to a total of 70% of the SDL paid by the employer provided that certain requirements are met.
How the refundable 70% is made up:
- 50% of the levies can be refunded as Mandatory Grant after submission and approval of the WSP and ATR.
- 20% of the levies can be refunded as a Discretionary Grant, but it is at the discretion of the SETA (it usually depends on scarce and critical skills being developed by the employer).
Not all levy-payers make the effort to claim back their SDL grants. A SETA may use the unclaimed money to support strategic training interventions. A SETA’s management team may also consider spending some of this money on developing scarce and critical skills in the sector.
Interaction with the SETA to access grants.
The Skills Development Facilitator (SDF) as an employee or consultant who will liaise with the SETA about ensuring grants are refunded to the employer.
Safe-T-Con offers the assistance of a qualified Skills Development Facilitator to its clients, to guide and consult through the process of accessing grants to be refunded.
For larger employers the SDF should be elected by means of consultation with employees and training committees.