SARS audits of ETI claims have increased significantly, particularly around learnerships and youth programmes. We explore what outcomes SARS appears to prioritise, where risks arise, and why many organisations are rethinking ETI claims.
Over the past few years, Employment Tax Incentive (ETI) credits have played a meaningful role in supporting youth employment, learnerships and YES Youth programmes in South Africa. For many corporates, ETI helped offset the cost of bringing young people into the workplace while contributing to broader transformation and employment goals. Recently, however, we have seen a noticeable shift. SARS audits related to ETI claims have increased significantly, and the outcomes of these audits are far stricter than they were historically. Claims that would previously have passed with limited queries are now being closely examined — and in many cases disallowed. This article does not offer tax advice. Instead, it shares practical insights into what SARS appears to be focusing on, what outcomes they are looking for, and why many organisations are reconsidering whether ETI still fits into their youth employment strategies. ## Increased scrutiny: what has changed? The ETI legislation itself has not disappeared, but its application has become far more conservative. SARS has made it clear through audits and correspondence that ETI is intended to incentivise **real employment**, not simply participation in training or placement programmes. In recent audits, SARS has been asking more detailed questions around: - Whether an individual is genuinely an “employee” as envisaged by the ETI Act - Where the individual physically works and who supervises them - Whether the work performed contributes directly to the employer’s own operations - How remuneration is structured, paid, and evidenced Where these elements are not clearly aligned, ETI claims are increasingly being disallowed — even where the underlying intention of the programme was positive and employment-focused. > *The direction of travel is clear: SARS is drawing a much firmer line between training exposure and actual employment.* ## What outcomes SARS appears to be looking for Based on recent audit trends, SARS is consistently prioritising substance over structure. While every case is assessed on its own merits, the following outcomes appear to carry the most weight: - **Direct employment relationship**: The individual must be employed by the entity claiming ETI, with clear contractual, payroll and supervisory responsibility. - **Work performed for the employer**: The individual’s day-to-day activities should support the business operations of the claiming entity, not only those of a third party. - **Clear remuneration flow**: Wages should be paid directly to the employee, supported by payslips, bank records and payroll submissions, without complex offsets or deductions that undermine the reality of payment. - **Operational integration**: The employee should be integrated into the employer’s workplace systems, processes and reporting lines. When these elements are present and well-documented, ETI claims are more likely to withstand scrutiny. ## Where challenges often arise: learnerships and third-party placements Learnerships, YES Youth projects and youth placements hosted at third-party SMMEs have historically been an important part of South Africa’s employment ecosystem. However, these structures now attract heightened scrutiny. Common risk areas include: - Learners who are placed full-time at host organisations rather than working within the claiming employer’s business - Limited evidence of supervision, performance management or operational control by the claiming employer - Arrangements where the employer’s role is primarily administrative or funding-based In these scenarios, SARS may conclude that the individual is not working *for* the ETI-claiming employer in a meaningful way — even if PAYE has been deducted and contracts are in place. ## A growing trend: caution over claiming ETI As a result of these developments, many organisations are reassessing their approach. A clear trend is emerging: - ETI is increasingly viewed as **appropriate where youth are employed directly within the company** - ETI is seen as **higher risk** where learners or youth are hosted externally, even within well-run and well-intentioned programmes - Some corporates are choosing not to claim ETI at all, instead focusing on skills development, absorption outcomes and verified job creation without reliance on tax incentives This shift reflects a broader compliance-first mindset — prioritising certainty, audit resilience and long-term credibility over short-term tax benefits. ## What this means for corporates planning youth programmes For organisations considering learnerships or YES Youth initiatives, the current environment calls for careful structuring and clear expectations. Increasingly, the question is not “can we claim ETI?”, but rather: - Are these young people genuinely part of our workforce? - Can we clearly demonstrate real work, supervision and integration? - Are we comfortable defending this structure under detailed audit conditions? Where the answer is uncertain, many organisatio...