In the 2013 Budget speech, Finance Minister, Pravin Gordhan, emphasised that one of Government’s most pressing development challenges is to expand work opportunities for young people: “There has been extensive debate on how this should be done and the answer is that a wide range of measures are needed, including further education, training, public employment opportunities and support for job creation in the private sector.”
Learnerships help young people to obtain a formal qualification, while gaining relevant workplace experience. While there are many benefits to the prospective learners, there are also advantages to the employer implementing the learnership. Employers have the peace of mind that their employees are not away from the office for extended periods of time and while they are away, they are improving their relevant work based skills to be more productive and efficient at what they are employed to do.
In 2002, the Government introduced a Learnership Allowance Incentive, for employers to:
- Encourage job creation by reducing the cost of hiring and training employees through learnerships
- Promote skills development
- Encourage human capacity development
However, there is a very specific legislation that guides the process and it poses certain challenges. Tax Talk spoke to Rob Cooper, tax expert and Director of Legislation Updates and Proposed legislation at Sage VIP, part of the Sage Group plc, about some of the recent changes made to the Learnership Allowance Incentive.
Cooper says: “To encourage employers to participate in learnerships, an allowance in the form of a deduction from the company’s taxable income has been available for many years. To qualify for the learnership allowance, employers must register the learnership with SETA. There is a R30 000 allowance at the start of the learnership, and a further R30 000 upon the successful completion. The value of the actual incentive has always been influenced by the when the learner is registered and the learner’s failure to complete. However, with new legislation introduced in January, the scenario will change.”
Cooper explains: “In the past, the allowance (deduction) was only allowed during the year in which the learnership agreement was officially registered with SETA. For a variety of reasons, registration often takes a couple of months and this resulted in reduced value.”
“In future, employers will no longer have to register learnerships from the moment of the inception. A learnership will be deemed to have been registered for the duration of the agreement that falls within the employer’s year of assessment. However, it is necessary that the learnership is registered within 12 months after the year of assessment.”
“The second issue relates to failure to complete. In the past, the allowance was not granted if the learner previously failed to complete a prior registered learnership of similar nature to the new learnership. Typically, the employer was not aware of prior learnerships (i.e. the information was not easily accessible or the quality of the information was not reliable, as it is dependent on feedback from other employers). Attempts to obtain this information also delayed the registration process.”
“In future, employers will no longer have to find out details of the individuals’ learnerships entered into with other employers. Learnership allowances will only be refused if the learner failed the same type of learnership with the same employer (or associated institution).”
”Implementing a learnership programme within your company will definitely contribute to job creation, especially for young people. However, it is important to keep track of all the legislative changes. Make sure that your company is operating within the parameters of the basic conditions of employment and its legal requirements. It is crucial to being a responsible citizen,” concludes Cooper.
For more information, employers are invited to attend the Sage VIP, Payroll and Tax Seminar. You can book your seat at: www.vippayroll.co.za.