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Paying the skills development levy: What are the benefits?

Skills development and training is one of the most important factors governing the working industry in South Africa.  It contributes largely to advancing the skills set and knowledge of employees, entrepreneurs, and the broader community. It is no secret that the short supply of skilled staff has quite an impact on the competitiveness of the work industry in South Africa. In efforts to address this the Skills Development Levies Act was promulgated. But what is the skills development levy? The skills development levies Act of 1999 is set out to fund the skills development in the country. The levy is also applied in order to encourage learning and development in South Africa and to grow the economy. The payable levy is determined by an employer’s salary bill, it is calculated as 1% of an employer’s salary and wage bill payable monthly. Every employer who is registered with the South African Revenue Services (SARS) for PAYE and whose annual payroll is in excess of R500 000  is required to register with SARS to pay for the skills development levy. The funds that are generated are then used to develop and improve the skills of employees to help them thrive in their respective workplaces and in their careers. This is essentially achieved through innovative approaches to planning for training, learning programmes, incentives, and an improved employment service.  

The Skills Development Levies Act primarily aims to achieve the following:  

  • To advance the skills of the South African workforce.  
  • To increase the levels of investment in education and training in the labour market and to improve return on that investment.  
  • To encourage employers to use the workplace as an active learning environment, acquire new skills and provide new entrants to marketplace.  

How do employers benefit from the skills development levies Act? 

Full participation in the Act ensures that employers will reap the benefits of a better skilled and more productive workforce. Therefore, employers who promotes learning and training in the workplace and who are consistent in paying the Skills Development levy monthly are entitled to the following benefits:  

  • Skills development grants: mandatory and discretionary grants. Mandatory grants are paid by the SETA (Sector Education and Training Authority) to companies who qualify to receive funding. Mandatory grants are calculated at 20% of an employer’s 1% skills levy. To claim back the 20% as a mandatory grant, employers are required to submit a Workplace Skills Plan, an Annual Training Report and a tracking report by 30 April annually. A mandatory grant is a reimbursement to compliant employers of their training expenses both internally and externally. Discretionary grants are paid out to companies for skills development projects linked to scarce and critical skills and are equal to 49.5% of the skills levy paid. A discretionary grant is paid out at the discretion of the SETA. This means the grant will only be paid out where the SETA feels that the company has done training according to the SETA’s objectives and requirements.  A company must keep proper records of all its PIVOTAL (Professional, Vocational, Technical and Academic Learning) programmes that include learnerships, work integrated learning, internships, bursaries, and skills programmes in order to qualify for this grant. PIVOTAL programmes can be defined as professional, vocational, technical and academic learning programmes that result in qualifications or part qualification on the National Qualifications Framework (NQF). Non-PIVOTAL programmes are the opposite of PIVOTAL programmes. However, according to SETA policy this grant can be paid out to PIVOTAL and Non-PIVOTAL programmes.  
  • Substantial tax allowances upon implementing learnerships in your company. The tax allowance was introduced to encourage skills development and job creation and it assists businesses by significantly reducing the cost of training. 
  • A more Skilled Workforce. Employers gain skilled staff within their company. This translates into advantages such as improved sales, increased production, and satisfied customers. This ultimately means a greater return on investment for employers.  

How do employees benefit from the skills development levies act? 

However, employers are not the only ones who benefit from the Skills Development Levies Act, there are also benefits for employees. These benefits include: 

  • Getting equipped with scarce skills (these scarce skills are normally determined by the Department of Labour). There are many positions available, however these roles cannot be filled due to a shortage of skilled staff. This is one of the reasons why unemployment rises and others unable to keep their positions at work. When people are presented with opportunities to upgrade their skills, they become more employable and those who are employed get to perform their duties properly and thoroughly at work.  
  • Increases the chances of promotions. No employee should be in one position for their whole life. Learning scarce skills will allow you to apply for that position in your company you have always wanted. You might even become qualified for a promotion once your employer sees your potential with your newfound skills.  
  • Opportunity to further studies. The opportunity to study further does not present itself to everyone. Making use of skills development levies to improve skills can change all that.  

For more information on Skills Development Levies you are more than welcome to speak to one of our experts at Cham-training 010 040 8335.