With the Skills Development Act receiving a lot of attention lately, here is how you can get the most out of the Act, and how this benefits the evolving South African business landscape.
The purpose of the Skills Development Act of 1998 is to provide an institutional framework to devise and implement national, sector and workplace strategies to develop and improve the skills of the South African workforce, together with the relevant Sector Education and Training Authorities (SETA). Meanwhile, the Skills Development Levies Act of 1999 is aimed at providing the promotion of a skills development levy.
According to human capital management solutions provider Manpower South Africa, businesses can benefit from these acts, in turn benefiting the South African economy. “The Skills Development Act looks at integrating those strategies within the National Qualifications Framework contemplated in the South African Qualifications Authority Act of 1995; to provide for learnerships that lead to recognised occupational qualifications; to provide for the financing of skills development by means of a levy-grant scheme and a National Skills Fund; to provide for and regulate employment services; and to provide for matters connected to this”, notes Managing Director Lyndy van den Barselaar.
“The Skills Development Levies 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 doing so, increase the supply of skilled labour in the country. This provides for greater productivity for businesses, greater employability for the workforce and a positive effect on the economy”.
If a business has staff registered for PAYE and an annual payroll exceeding R500 000 per annum, the company must register with SARS and pay a skills levy of 1% of the monthly payroll.
“Companies not falling within these criteria will not have to register with SARS, or pay the levy,” explains van den Barselaar.
The leviable amount (or tax base on which the levy is calculated), is the balance of remuneration paid or payable to an employee as determined for purposes of employee tax deduction. “This is the employee’s remuneration after the deduction of allowable deductions,” explains van den Barselaar. 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.
Van den Barselaar explains that there are certain employers who are exempt from paying the levy. These include:
A public service employer (i.e. national or provincial government);
any employer where the total amount of remuneration payable to all its employees during the year 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,” she explains.
For a 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, an application for a grant must be submitted by 30 June on a SME Claim form, provided by SETA.
• Have registered for the first time in terms of Section 5(1) of the Skills Development Act, and submitted an application for a Workplace Skills Planning grant within six months of registration.
“The mandatory grant relating to WSP’s and ATR’s was this year reduced to 20% of the employers 1% skills levy, from the 50% paid in previous years,” explains van den Barselaar.However, in addition to that 20%, employers can also benefit from discretionary grants by implementing Pivotal training. Once the employer has submitted the Pivotal plan as part of the WSP/ATR submission, they will be granted access to the process for applying for discretionary grants. The Services SETA has allocated 80% of its discretionary fund budget for Pivotal Programmes.
“Therefore, businesses who train their employees on SETA accredited training courses that are registered on the National Qualification Framework will certainly get the most out of these acts, as the rebates go a long way to further assist in the funding of training and development initiatives. Up-skilled staff add value to the workforce of any organisation and ensure success for the company, thereby positively contributing to the country’s economy,” concludes van den Barselaar.
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