This article was written by Jonathan Jones, a Director at Norton Rose Fulbright South Africa
The Employment Tax Incentive Act, 26 of 2013, which 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.
In terms of the Act, employers are eligible to receive an employment tax incentive which is directly linked to the amount of employees in their service between the ages of 18 and 29. The purpose of the Act is to encourage the employment of young adults. The incentive scheme has recently received much public attention, with more than 10 000 employers have participated, to the benefit of more than 150 000 employees.
Whilst the Act has a laudable purpose, employers should be cautioned against amending their recruitment practices 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: the fact that relying on age as the determining ground for employment would very likely constitute unfair discrimination based on age.
The Employment Equity Act, 55 of 1998, provides a list of grounds based 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 properly legislated and acceptable. 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. Whilst this is contrary to the purpose of the Act, currently, the incentive scheme can merely serve as a reward for employers who have employed young adults for reasons other than their age.