SDL Overview Skills Development Levy
The Background of the Skills Development Act, No. 97 of 1998
This piece of legislation defines the elements necessary to calculate and pay over the levy.
As its name implies, this Act deals only with the calculation and payment of the monthly levy by employers, and the administration thereof by SARS.
The levy first became payable from 1 April 2000 at a rate of 0.5% of the ‘leviable’ amount, and this was increased to 1.0% from 1 April 2001.
The purpose of the Skills Development Act is to improve the skills level of the South African workforce by increasing the levels of investment in education and training in the labour market.
Employers and employees are encouraged to participate in leanership's and skills programs. For this purpose, the use of the workplace itself as an active learning environment is encouraged.
By implementing these initiatives, the level of skills of previously disadvantage persons would be increased substantially, and the prospects of employment would be improved.
It can be argued that the skills development upliftment process is one of the most vital elements necessary for South Africa to be able to compete in the global economy in the years to come.
This Act defines brings into being SETAS (to administer skills upliftment process), the concept of a levy, and various grants to incentivise employers to participate in the process by appointing a skills development facilitator and submitting workplace skills plants to the relevant SETA.
Who is an Employer?
The employer must apply to SARS in writing to be registered as an employer for skill development and must indicate in the application (EMP 101) the SETA under whose jurisdiction the main activities of the employer fall.
All employers registered with SARS for employees tax purposes must register with SARS for skills development, irrespective of whether they are excluded from paying the levy.
By one of the following conditions:
Any public service employer in the national or provincial sphere of government;
Any national or provincial public entity, if 80% or more of its expenditure is defrayed directly or indirectly from funds voted by parliament;
Any religious or charitable institution;
Any employer where during any month, there are reasonable grounds to believe that the total remuneration (leviable amounts as defined below) paid or payable by that employees during the following 12 month period will not exceed R250 000, and the employer is not required for employees tax purposes with SARS.
Who is an Employee?
An employee for skills development purposes begins with the definition of an employee as defined in the Fourth Schedule for employees’ tax purposes, excluding only the following:
- A labour broker to whom an exemption certificate has been issued;
- A learner as defined in the Skills Development Act.
The above two exceptions make sense – the labour broker will pay the levy when he pays his workers, and a learner is a person that the levy is going to uplift.
Note that a labour broker without an exemption certificate is not excluded as an employee for the calculation of the levy. This means that an employer using brokered labour supplied by a labour broker, and the broker, in turn, must pay the levy based on the remuneration paid to his workers (employees). A double whammy!
If one remembers the definition of an employee for the Fourth Schedule on which the above is based, it is important to note that the following employees are included for calculation of the levy:
- Directors of private companies and members of cc’s
- Personal service companies
- Personal service trust
- Labour broker without an exemption certificate
- Labour law independent contractors who are ‘deemed’ to be employees by the ‘regular’ payment test
- Temporary employees (taxed at 25%)