Access to education is a tremendous challenge in South Africa. Schooling at all levels costs money. Many employees all over the country struggle to afford even basic education and yet it is such a vital pillar of the young democracy that South Africa is. Nelson Mandela famously said, “Education is the most powerful weapon which you can use to change the world.” He could not have been more right.
Bursaries: Happy Employee Happy Future
Ignoring the human element and emotion that surrounds education in South Africa is impossible. For this reason, anything an employer can do to assist employees in affording good education is a powerful and worthwhile incentive. One of the ways in which an employer can help employees fund education is through a bursary. A bursary also benefits the company.
A bursary is often misunderstood—a fact that was covered back in 2017, by Paymaster People Solutions CEO, Ian Hurst where bursaries’ implications around tax were explained. In a nutshell a bursary is a win-win solution for employers and employees and it is not just something for bright kids. A company-sponsored bursary, once clarified, but can be for anyone. A bursary really is good for the employee, the company and the future of South Africa.
What is a bursary?
A bursary is often seen as an elusive pot of money to pay for education that is financially out of reach to candidates who’ve demonstrated the potential and ability to further their education. However, for savvy employers who value their staff and of course have some financial capacity, a bursary can be created for almost any employee earning under R600,000 a year. A bursary of up to R20,000 per annum—to cover or go towards the education of an employee’s child or children—can be established with relative ease.
As long as the education is being offered at a recognised academic institution, up to R20,000 may be set aside as a tax-free benefit to the employee. Further to this, the bursary must adhere to some simple rules:
- If the child fails to finish the education being funded, the bursary must be paid back in full.
- Employees must earn less than R600,000 per annum.
- The bursary may not exceed R20,000 for grades R to 12 or NQF Level 1-4, or R60,000 for NQF levels 5 to 10.
- In-house courses cannot be included as education funded by a bursary.
Further details around Bursaries and the tax implications can be found in this article by Ian Hurst: the recommendations surrounding bursaries that were made back then, remains the same for today too. A review of your company’s policy and processes of providing bursaries should be undertaken. If no process or policy is in place, then it is worthwhile implementing a bursary program. It will also make sense to review the cost-to-company salary packages currently on offer to employees. A bursary will make any package more attractive as well as play a part in a staff retention strategy. In this regard, please contact Paymaster People Solutions for more information.
Skills Development Levy: Encouraging Learning
The Skills Development Levy (SDL) came into force in 1999. Under the Skills Development Levies Act (1999) it is compulsory for South African businesses pay a levy to fund education and training across a variety of sectors. With the primary purpose of improving the levels of knowledge and competency and the numbers of skilled and qualified people within the workforce, the SDL aims to increase productivity and create people of greater employability.
Payment of, and exemptions from SDL
It is compulsory for every business in South Africa to pay the Skills Development Levy. The funds are used to grow and improve upon employees skills. The levy is determined by the overall salary bill of the employer, however there are a handful of exemptions that may apply:
- SDL does not need to be paid if the salary bill is less than R500,000 per annum. Employers with salary bills of this amount need not register for SDL.
- Municipalities and general government are exempt from paying SDL.
- Public Benefit Organisations undertaking welfare, humanitarian, health care and religious activities are also exempt from paying SDL.
Effective from 1 April 2001, the skills development Levy is currently 1%. The leviable amount is made up of:
- Taxable Income
- Taxable Fringe Benefits
- 80% / 20% of Travel Allowance
- Less Tax-Deductible Deductions
This total leviable amount excludes:
- Amounts payable to persons to whom a certificate of exemption has been issued by the Commissioner of SARS.
- Amounts payable as a pension, Superannuation Allowance, or Retiring Allowance
- Pension lump sums as prescribed in Section 1 of the Income Tax Act.
The calculation is very straightforward. However, for assistance and advice on calculating SDL, you’re invited to contact Paymaster People Solutions.
When should the Skills Development Levy be Paid?
Payment of the Skills Development Levy should be made within 7 days of the completion of month end processing. It is common for businesses to pay the SDL via eFiling with SARS, Paymaster Payroll has the process available for ease of payment each month.
Once collected, the levies are distributed via the relevant Sector Education and Training Authority (SETA).
In summary, South Africa legislation and payroll practices can help your business play a major role in improving the country for everyone. Bursaries can help individuals gain access to education that would otherwise be out of reach. The Skills Development Levy (SDL) assists a wide number of people gain and develop crucial skills to improve South Africa’s collective workforce.
Paymaster can advise and assist your business with newly establishing or improving upon your company’s bursary processes as well as assist with the calculation and payment of your company’s SDL. With decades of experience and at the forefront of all things tax and payroll, Paymaster People Solutions is here to help you, help your business and help others.
Paymaster People Solutions has a team of experts on hand to assist you with and advise you on the best way to get a handle on bursaries in your organisation.
You are welcome to email Ian Hurst, for more information.