SDL Holiday – the rock in the water
All companies are happy about the 4 month SDL holiday, that is affective from 1 May 2020. Any company having an annual payroll of R500 000 or more, have to, as per legislation, pay Skills Development Levies over to SARS. This tax is 1% of the payroll and gets paid over to SARS with UIF and PAYE payments to SARS.
Now what exactly does this payment holiday mean? Well, firstly it allows companies not to pay over this tax to SARS over the next 4 months. Unlike some other tax reliefs initiated by SARS, this amount does not have to be paid over at a later stage nor will companies get penalised and penalties fees. The money saved can be used in any which way the company sees fit to assist them with cash flow and surviving the current Covid-19 Lockdown and the impact it has on the business.
As with all things, the payment holiday will provide positive and negative effects being felt in the industry for the next year or so.
SDL is directly linked to your payroll, so if you do not have a current payroll, the Skills Levies will be zero in any case.
These levies that go to SARS are distributed by SARS to the National Skills Fund and the SETA’s. The National Skills Fund use the money to fund special projects, which will now include initiatives in the skills development area regarding Covid-19 awareness and preventions.
SETA uses this money to pay for their administration, mandatory and discretionary grants. The latter two gets paid back to the companies that contributed to the Skills Development Levies Fund.
The SDL holiday will have a massive impact on the budgets allocated to the SETA’s. We all know the WSP/ATR deadline is 31 May 2020. With submission and approval of the WSP/ATR, companies receives 20% of their skills levies back. This amount is calculated on your previous Skills Development Year. Therefore, the impact of the skills levies on the mandatory grant will be felt next year with the submission of the WSP/ATR for the next skills year in 2021. The 20% received back will be based on the skills levies paid this year. Now consider the fact that we have a four month payment holiday and will only be paying skills levies for 8 months and not 12.
Some companies bank on this refund to fund some of their internal or non-credit bearing skills interventions to meet their BEE targets on their scorecard. BEE targets are linked to your leviable amount and not the levy, which means there is no relaxation on the skills spend on the BEE scorecard, unless no payroll has been run.
Also, with retrenchment and layoffs looming, payroll will also decrease influencing the budget allocation to the SETA and indirectly the employer implementing the skills intervention.
Still on the subject of the mandatory grant, let us not forget the high court ruling where SETA’s can set the percentage of the mandatory grant payments. This might lead to a decrease percentage of payment on mandatory grants in the next skills year to assist the SETA’s with a bigger pool of budget for discretionary grants.
The impact on discretionary grants will be felt this year already and SETA’s are already planning and readjusting their Skills Implementation plans and targets for the current skills year. Just looking at the W&RSETA who had communicated with their stakeholders, indicating a planned budget cut of 45%. This is massive and will have a dire effect on skills implementation in the sectors affected. We will see the decrease of funded learnerships and internships. The decrease of these programmes will lead to a higher rate of youth not having access to further education and therefore increase the unemployment rate under the youth. We all know the increase in unemployed results in the increase of crime. And so the ripple effects continue…….
