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We encourage participation and interaction between funders and providers at our events with the aim of achieving better understanding of each other's needs and to achieve the goal of improved patient outcomes within an environment of limited funding. As South Africa progresses on the journey of healthcare reforms the challenge for medical schemes and administrators is to become more efficient. Improving employee's skills has become a business imperative.

The value of learnerships - Tax and B-BBEEE tax implications

The value of learnerships is that they assist in creating jobs. Learnerships are developed by the industry for the industry so that the learning programme and qualification are relevant to a specific occupation. The companies that we deal with often embark upon learnerships to:

  • fulfil their operational staffing needs
  • subsidise their wage bill through SETA funding
  • obtain tax relief
  • improve their B BBEE scorecard

Learnerships provide an opportunity to meet workplace needs using customised learning programmes in collaboration with training providers.

Financial benefits of learnerships

SETA FUNDING

Employers may request a SETA funded learnership. There are two types of SETA funding:

Mandatory SETA Grants – Claim back the learnership fee from the Skills Development Levy you pay each month.

Discretionary SETA Grants – Request an additional SETA grant for the full course costs, which if you have not claimed before, you should get.

TAX BENEFITS

The tax benefits for employers for learnership agreements is set out by SARS in the document "SARS - Interpretation Note 20 (Issue 7) on 12 October 2017 Income Tax Act Section 12H - Additional deductions for learnership agreements".

This note provides clarity on the interpretation and application of section 12H which provides deductions for registered learnership agreements.

This note is effective from 1 October 2016 and applicable to all learnership agreements entered into on or after that date.

We have summarised the key points below.

Background

Section 12H provides additional deductions to employers for qualifying learnership agreements. These additional deductions are intended as an incentive for employers to train employees in a regulated environment in order to encourage skills development and job creation.

Learnership agreements must be registered with a SETA.

The deduction to an employer is in addition to any other deductions allowable under the Income Tax Act for any registered learnership agreement if all the requirements of section 12H are met.

Employers

Only the “lead employer” may claim the allowances under section 12H, if more than one employer is a party to a registered learnership agreement.

The lead employer is usually the employer that pays the learner’s remuneration.

It is not a requirement of section 12H that the employers be registered with the same SETA. The allowance is not linked to the Skills Development Levy, so employers who are not levy payers may still claim the allowance

Types of deductions

  • An annual allowance to which the employer is entitled in any year of assessment in which a learner is a party to a registered learnership
  • A completion allowance during any year of assessment in which the learner successfully completes the learnership

Requirements for the deductions

The employer will qualify if:

  • During any year of assessment the learner is party to a registered learnership agreement with the employer
  • The learner holds an NQF level qualification 1 – 10
  • The agreement was entered into pursuant to a trade carried on by that employer
  • The employer has derived income as defined in 1(1) from that trade.

Deductions

The deduction must be made against income derived from the trade in which the employee is employed. There must therefore be some income in order to achieve the deduction.

The wording does not prevent the allowance from creating a loss from the trade, or to prevent such a loss from being set off against income from another trade.

Annual allowances

If a learner is a person with a qualifying disability an additional deduction is allowed. For twelve full months during any year of assessment the maximum deduction allowed is:

R40 000 For a learner holding an NQF-level 1 to 6 qualification
R60 000 For a learner with a disability holding an NQF‑level 1 to 6 qualification
R20 000 For a learner holding an NQF‑level 7 to 10 qualification
R50 000 For a learner with a disability holding an NQF‑level 7 to 10 qualification

Completion allowances

The completion allowance is granted once-off in addition to the annual allowance and is deductible in the year of assessment in which the learner successfully completes the learnership.

Usually confirmation from the relevant SETA is accepted by SARS.

R40 000 For a learner holding an NQF level 1 to 6 qualification
R60 000 For a learner holding an NQF level 7 to 10 qualification

Selecting learners with a higher level of education, including matric, numeracy and literacy improves their chances of completing a programme. Further improvements are seen when the monthly stipend provided by the SETA is topped up.

B-BBEE benefits

B-BBEE is designed to ensure economic transformation and redistribution within the South African corporate sector. In terms of B-BBEE policy, companies are assigned a score based on various criteria. The score is measured on what is known as a B-BBEE scorecard and companies that achieve high B-BBEE score stand to benefit in various ways.

The BEE criteria

In order to get a good BEE rating, a number of criteria are set out by which the score is calculated. The seven criteria of the past have been reduced to five under the new B-BBEE scorecard. These are as follows:

Equity Ownership – 25% weighting

This pertains to voting rights and shareholding. In calculating the score, one looks at black ownership in general, and ownership by black women specifically. The score also depends on ownership and voting rights among certain groups such as those below the age of 35 and above the age of 65.

Management Control – 15% weighting with 4% bonus for certain criteria

This refers to the extent to which voting rights on the board is held by black members, control of the executive board, and percentage of senior management.

Skills development -20% weighting with 5% bonus for certain criteria

Skills development refers to the extent to which a company invests in and works towards improving the skills and competencies of its black workforce. The minimum of 40% of the points within this element must be scored to avoid dropping a level.

Companies can only score points on skills development if there is sufficient evidence indicating that black people are being trained in scarce and critical skills. This means that a company can include training conducted on any person that satisfies the definition of black as per the BEE Codes of Good Practise regardless of employment status.

The company must spend 6% of leviable (skills development levy) payroll on training. Trainees do not need to be permanent employees.

  • Only 15% of your training spend can be used on internal/non accredited training.
  • Learnerships must account for 5% of staff headcount, 100% gainful employment equals 5 additional points.
  • Training is probably one of the easiest ways to improve your B-BBEE rating.
  • Any grant funding received from your SETA still becomes part of your expenditure.
  • Learnerships increase your training spend without increasing costs and increase your B-BBEE score.
  • You can claim points for training in skills development, supplier development or enterprise development. You can score in two of the above three elements for one contribution. Learnerships for disabled employees allow you to score in all three elements.

Enterprise development – 40% weighting with 4% bonus for certain criteria

This aspect of the new B-BBEE scorecard record the extent to which small, black-owned companies are supported and developed.

Socio-economic development – 5% weighting

The extent to which a company carries out social investment initiatives.

Depending on the B BBEE status of the suppliers, maximum points can be scored in the Preferential Procurement section. Because IHRM is now a Level 2 contributor the additional value that this provides our clients is significant when completing their Preferential Procurement section.

SARS Interpretation Note 20