Budget Speech 2018 Employment Tax Incentive(ETI)

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Mar 1, 2018 - From March 2018, 'employed and remunerated hours' in terms of wage refers to ordinary hours only, and addi
Budget Speech 2018 Employment Tax Incentive(ETI)

Legislative Changes From March 2018

The legislation has been amended to clarify the exact hours to be included in ‘employed and remunerated hours’ in terms of wage. From March 2018, ‘employed and remunerated hours’ in terms of wage refers to ordinary hours only, and additional hours in excess or ordinary hours (such as overtime) must not be taken into account when calculating the ‘employed and remunerated hours’ for wage. Any unpaid hours (such as unpaid leave) should reduce the employee’s ‘employed and remunerated hours’ for wage, because it is hours for which the employee was employed but not paid remuneration. In other words ‘Employed and remunerated hours’ for wage = + Ordinary hours - Unpaid hours Summary of change Wage Test Hours for Employee Without a Wage Regulating Measure - Change Before 1 March 2018

From 1 March 2018

+ Ordinary hours - Unpaid Hours + Additional hours

+ Ordinary hours - Unpaid hours

Remuneration Hours for Employees with and without a Wage Regulating Measure – No Change Before 1 March 2018

From 1 March 2018

+ Ordinary hours - Unpaid Hours + Additional hours

+ Ordinary hours - Unpaid Hours + Additional hours

The ‘employed and remunerated hours’ used to calculate the monthly remuneration and the ETI amount remain unchanged (ordinary hours/employed hours less any unpaid hours plus any additional hours). Remember: Wage is used to determine if the employee qualifies for ETI (wage test), and remuneration is used to calculate the incentive amount.

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Example The employment contract states that the employee’s ordinary hours of work are 40 hours a week, 8 hours per day for 5 days a week (Monday to Friday). March contains 4 weeks which is 160 ordinary hours (40 x 4). Employee A was appointed on 1 March (first day of the tax year). Employee A meets all other qualifying criteria in terms of ETI. In the month of March, employee A took 30 hours unpaid leave (unpaid hours) and worked 30 hours overtime (additional hours). Payslip: Salary = R2 400.00 Overtime = R675.00 Unpaid Leave = R450.00 Commission = R1 200.00

Actual wage ‘Employed and remunerated hours’ used for wage Grossed-up wage

Actual remuneration ‘Employed and remunerated hours’ used for monthly remuneration and ETI amount Grossed-up remuneration

ETI Amount

March 2017 R1 950.00 (wage – unpaid leave) 160 (ordinary/contractual hours – unpaid hours + additional hours) No gross-up required as the ‘employed and remunerated hours’ are 160 or more. Employee does not qualify R3 825 160 (ordinary/contractual hours – unpaid hours + additional hours)

March 2018 R1 950.00 (wage – unpaid leave) 130 (ordinary/contractual hours – unpaid hours)

No gross-up required as the ‘employed and remunerated hours’ are 160 or more. R0.00 (does not pass the wage qualifying test)

No gross-up required as the ‘employed and remunerated hours’ are 160 or more. R1000.00

R1 950 / 130 x 160 R2 400.00 Employee qualifies R3 825 160 (ordinary/contractual hours – unpaid hours + additional hours)

Please Note: At the time of printing, no special economic zone (SEZ) was published and no industry was designated by the Minister of Finance.

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