Many employers may have heard about the Skills Development Act of 2003, understanding that it is legislation impacting on the employment relationship. However, very few have an understanding of what this concept entails. Successful business owners may know that training plays a pivotal part in the success of their enterprises. It is therefore advisable that an employer aligns his training ideals with that of SETA or sectoral training authority under which it falls.
Government has introduced payment relief for employers in terms of Skills Development Levy contributions payable to SARS. However, this is merely a temporary measure, and employers will soon be expected to resume contributions. Many employers are ignorant of what the Act entails, whether they are obligated to register with the relevant SETA or whether they are exempted from paying the prescribed skills development levy.
According to South Africa’s skills development legislation, every employer who is registered with SARS for PAYE and who has an annual payroll (total salaries and wages including bonuses, commission, etc.) in excess of R500 000 (approximately R41 000 per month), or 50 plus staff members is required to pay skills development levies. By complying with certain legal and procedural requirements, employers may claim up to 60% of the skills development levy (SDL) back from their Skills Education Training Authorities (SETA).
Employers need to align their training goals with the ideals of Government and may make use of tax rebates and allowances provided for by SARS. To qualify to receive the mandatory grant, an employer needs to:
- Be registered in terms of the Skills Development Levies Act, be up to date with levy payments;
- The company must be registered with the applicable SETA (this is determined by SARS);
- Employ a skills development facilitator;
- Submit a work skills plan and annual training report by the SETA-imposed deadline that is typically around the end of April.
Not only will the implementation of a good skills development strategy maximise performance in the workplace, but the employer who does his part will play a valuable role in developing and furthering the career goals of their employees.
It is therefore vital that companies take skills development seriously, especially were pivotal training is concerned. According to SETA regulations, pivotal training is funded through discretionary funding, which means that if implemented correctly, businesses won’t need to expend any resources towards the training and development of staff. SETAS have allocated 10% of their funds towards discretionary funding which companies can apply for.
Entities exempt from Skills Development Levies
The following employers are exempt from paying SDL:
- Any public service employer in the national or provincial sphere of Government. (These employers must budget for an amount equal to the levies payable for training and education of their employees).
- Any employer where section 3(1)(a) or (b) applies and during any month, there are reasonable grounds for believing that the total amount of remuneration, as determined in accordance with section 3(4), paid or payable by that employer to all its employees during the following 12-month period will not exceed R500 000;
- Any national or provincial public entity if 80% or more of its expenditure is paid directly or indirectly from funds voted by Parliament. (These employers must budget for an amount equal to the levies payable for training and education of their employees).
- Any Public Benefit Organisation (PBO) exempt from the payment of Income Tax which solely carries on certain welfare, humanitarian, health care, religion, belief or philosophy public benefit activities or solely provides funds to such a PBO and to whom a letter of exemption has been issued by the SARS Tax Exemption Unit.
- Any municipality in respect of which a certificate of exemption is issued by the Minister of Higher Education and Training.
A short supply of skilled workers may be one of the contributing factors to poverty and hampered socio-economic growth. This Act aims to expand the knowledge and competencies of workers nationally, in an effort to improve productivity and to provide for career development. In addition, it creates a platform where employees can, through training and development, become entrepreneurs whose businesses are economically viable and sustainable – aiding in job creation.
The Act has created a framework, the National Skills Authority and National Skills Fund, as well as institutions within the Department of Labour to ensure that the purposes of the Act are achieved.
There are approximately 27 SETAs (Sectoral Training Authorities) that have been established for all the sectors in South Africa. (for example — banking; local Government; health and welfare; construction and wholesale/retail).
The Minister of Labour is mandated by the Act to establish and assist a SETA for any national economic sector. A SETA must develop and implement a sector skills plan within the national skills development strategy by utilising skills development grants. Workplaces, where apprentices can acquire skills through practical work experiences, must be identified and utilised by making use of skills development grants. SETA has been tasked with monitoring the quality of training within the sectors and has to provide feedback to the Director-General of the Department of Labour. The SETAs are financed by the levies collected from its sector and monies paid to it form the National Skills Fund.
On 25 June 2020, SARS published a guide for employers in respect of this Act which needs to be read with the Income Tax Act to clarify the concept and shed light on this commonly misunderstood legislation.
Skills Development Levy: A four-month payment holiday for employers
In addition to proposing an expansion of the scope of the provisional tax relief and employees’ tax relief that was originally announced, on 21 April the President announced, amongst other things, that there would be relief from skills development levy contributions. This was confirmed in the subsequent media statement issued by National Treasury on 23 April 2020. This means that compliant employers who have been contributing to the fund would be entitled to temporary relief from contributing to the fund effective 1 May 2020.
The skills development levy introduced on 1 April 2000 by the Skills Development Levies Act 9 of 1999 (Levies Act), is a levy imposed to encourage learning and development. The purpose of the compulsory scheme is to fund education and training.
Once the COVID-19 dust settles, employers who qualify should make use of the benefits which the Act has to offer through its applicable SETAs. Employers who are obligated to register with their applicable SETAs and contribute to the fund should take reasonable steps to ensure compliance. The Act should not be viewed as yet another piece of legislation which places an administrative burden on the employer, but rather as a means to assist employees in reaching their full potential within the workplace and to encourage sustainability and growth.