Is the employment tax incentive a success?

During the State of the Nation address the president announced that the tax incentive to incentivise employers to employ youths was claimed by 29 000 employers for at least 270 000 young people. He further stated that jobs in South Africa grew by 203 000. Two questions arise; what is the quality of the jobs that have been created and will these jobs be maintained in the face of the recent amendments to the Labour Relations Act (LRA).

Numerous social commentators reported that the jobs that are created by the employment tax incentive scheme are not full time permanent positions. If this is correct, these jobs will all be affected by the limitations placed on atypical employment by the amendments to the LRA, which come into full effect on 1 April. The most important amendment will be that an employee may not be employed on a fixed term contract or through a labour broker for a period of longer than 3 months unless special circumstances exist.  If the special circumstances do not exist, then the labour broker’s employee will be deemed to be the client’s employee and the temporary employee will be deemed a permanent employee.

There is thus a significant risk that the number of temporary jobs and jobs provided by labour brokers will reduce during 2015 and so, it is feared, would be the number of youths in employment.

There have been reports that some employers may choose not to employ young job seekers through labour brokers or on temporary contracts in an attempt to avoid being saddled with a higher number of permanent employees on their books than would otherwise have been the case before the amendments are in effect. Should this prove to be correct, the employment tax incentive scheme may prove less successful when the President presents the next State of the Nation address.

Hermann Nieuwoudt

Joe Mothibi