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Minimum Wage & ETI: Why Your Payroll System Better Be Up to Date!

South Africa’s national minimum wage just got a little fatter!

South Africa’s national minimum wage just got a little fatter! As of the 1st of next month, it’s climbing from R27.58 per hour to R28.79 per hour. That may seem like small change, but in the world of payroll, even a few cents can trigger a ripple effect—especially when it comes to the Employment Tax Incentive (ETI). So, if you’re running payroll like it’s still last year, you might be setting yourself up for a compliance nightmare. Let’s unpack why.

ETI: The Payroll Hack You Can’t Ignore

For the uninitiated, ETI is South Africa’s way of giving businesses a tax break for hiring young, less experienced workers. It’s like a loyalty rewards program, but for job creation! The incentive allows eligible employers to reduce the amount of PAYE (Pay-As-You-Earn) they owe to SARS, effectively lowering the cost of hiring new staff. Sounds like a sweet deal, right? It is—if you know the rules.

Who Gets the Golden Ticket?

Not every employee qualifies for ETI, and SARS is pretty picky about it. To be eligible, employees must:

  • Be between 18 and 29 years old (unless they work in a designated Special Economic Zone—then age doesn’t matter).
  • Earn at least the national minimum wage but not more than R6,500 per month.
  • Work for an employer registered for PAYE.

Employers, in turn, need to ensure they keep meticulous records because SARS doesn’t take kindly to mistakes.

Minimum Wage Hike: The ETI Plot Twist

Here’s where things get interesting. The national minimum wage increase means that employees who were previously eligible for ETI may suddenly become ineligible—simply because their wages are now too low. Yes, too low! SARS requires that all employees earning under the national minimum wage be excluded from ETI calculations. So, if your payroll system isn’t updated, you might accidentally be claiming ETI for employees who no longer qualify. And trust us, SARS audits are about as enjoyable as stepping on a LEGO in the dark.

What Happens If You Don’t Update Your Payroll?

Let’s talk consequences. Running payroll on outdated data isn’t just an “oops” moment—it can land your business in hot water. Here’s what’s at stake:

  1. Incorrect ETI Claims – If you continue to claim ETI for employees who no longer qualify, SARS will eventually come knocking. And when they do, expect penalties, interest, and possibly a one-way ticket to payroll purgatory.
  2. Non-Compliance Fines – Not paying employees the correct minimum wage? That’s a direct violation of the law, and the Department of Labour isn’t exactly known for leniency.
  3. Labour Disputes – If employees expect a raise based on the wage increase but don’t get one, you could be looking at workplace tension, grievances, and even legal battles.

The Solution? Update. Test. Repeat.

Payroll isn’t a set-it-and-forget-it system. It needs regular maintenance, much like your car (or your Netflix subscription if you don’t want unexpected debits). Here’s how to stay ahead:

✔ Update your payroll system before the wage increase kicks in. ✔ Run compliance checks to ensure all employees still qualify for ETI. ✔ Communicate with employees about any changes to their salaries or benefits. ✔ Double-check SARS submissions to avoid costly corrections later.

Bottom Line

The national minimum wage increase isn’t just a number change—it has real financial and compliance implications, especially for businesses leveraging ETI. Keeping your payroll system updated isn’t just best practice; it’s a survival strategy. So, before you get caught in a payroll pickle, make the updates, crunch the numbers, and stay compliant. Future-you will thank you!

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