This article was written by Jonathan Jones, an associate at Norton Rose Fulbright South Africa
The Employment Tax Incentive Act, 26 of 2013, that came into effect on 1 January 2014, seeks to reward employers in the private sector for employing young adults, but also contains a hidden pitfall.
Employers are eligible to receive an employment tax incentive that is directly linked to the number of employees between the ages of 18 and 29 in their service. The purpose of the Act is to encourage the employment of young adults. In the State of the Nation Address of 17 June 2014, it was noted that approximately 11 000 employers have to date participated in the incentive scheme, benefiting 133 000 employees.
Whilst the Act has a laudable purpose, employers should be cautioned against amending their employment practices in an attempt to qualify for a greater benefit in terms of the incentive scheme. The Act attempts to avoid abuse of the incentive scheme by penalising employers for deliberately replacing older employees with younger employees. But it fails to address a more fundamental issue, because relying on age as the determining ground for employment could constitute unfair discrimination.
The Employment Equity Act, 1998, provides a list of grounds on which employees and candidates for employment may not be discriminated against. This list includes criteria such as race, gender, HIV status and age. There are very limited exceptions to discrimination on these listed grounds. The most notable exception is that employers may discriminate based on race, gender or disability when recruiting in accordance with a properly established affirmative action plan. Even though affirmative action will always be a contentious subject, preferring employees based on race, gender or disability is considered a justifiable limitation of equality rights under the limitation of rights provisions in the Constitution. No similar exceptions are applicable for preferring candidates for employment based on age. Where a candidate for employment fails to be appointed because they are older than 29 years of age, the aggrieved candidate for employment may well have a valid claim for unfair discrimination against the prospective employer.
Given the protection against unfair discrimination based on age, employers should not actively seek to benefit from the incentive scheme by aiming to employ purely based on age. The employment tax incentive scheme should be used merely to serve as a reward for employers who have employed young adults for reasons other than their age.