Are you faced with the challenge to execute the BBBEE instructions of spending for BEE purposes and doing it in the most effective way to benefit all aspects including your company budget?
The BBBEE landscape combined with SETA requirements can be a space filled with many pitfalls.
Some of the points that we will need understanding and knowledge about to develop a plan that can be successfully implemented are.
What is a learnership?
A learnership is a registered work-based education and training program geared towards a NQF registered qualification and is key to the success of the National Skills Development Strategy.
The SETA accredited qualification needs to consist of a minimum of 120 credits to be recognized as a learnership.
A learnership is based on a legally binding agreement between an employer, a learner, Training Provider, and the SETA. This agreement is intended to spell out the tasks and duties of the employer, learner, training provider and SETA. It is designed to ensure the quality of the training and to protect the interest of all parties.
Who should be considered for learnerships and what does the BEE Codes require in this regard?
Any employee or un-employed person can be considered for a learnership as long as they meet the minimum entry requirements of that specific qualification. In the workplace they need exposure to the content of the qualification.
Learner categories as per the BEE Codes and need consideration for best possible BEE point allocations is:
Employees (referred to in the BEE Codes as 18.1) learners.
Unemployed people (referred to in the BEE codes as 18.2) learners.
People with disabilities (Depending on the SECTOR code the client falls under they might be employed or unemployed
Another consideration is youth to benefit from incentives by the Government.
An unemployed learner can be seconded to another company for workplace experience so do not necessarily be on the sponsor’s site. These learners will be managed by a skills coordinator and feedback given to the client on a monthly basis.
The BEE codes also calculate the BEE spend per race and gender group and it is important for the client to understand these as no points are awarded for overspending on one specific group.
What learnerships is available and how do I know what to implement?
First step here would be to determine your primary SETA’s scares skills. The BEE codes do require that these will be addressed.
There are thousands of learnerships available, but your Skills Consultant will assist you and determine employees or unemployed learners’ skills gaps and how best to address the gap through a learnership.
Importantly the mode of delivery will have an impact on the choice of the learnership. Group size and also the availability of time out of work should traditional classroom style learning be the chosen.
What are the benefits to the learner?
Improved job performance and job opportunities
Believe in the company’s commitment to its employees.
If on an unemployed fixed term contract, it might open the door to full time employment although there is no guarantees.
Obtain a National Qualification
Self-confidence and achievement
What are the benefits to the Company (Sponsor)?
Motivation and career planning including EE planning.
Possible SETA funding opportunities
SARS TAX savings
Let us focus on the cost and the possible benefits for the Company when they implement learnerships as part of their BEE strategy.
Depending on the qualification and NQF level and delivery mode the below module will vary and is only used to assist with understanding. I will be discussing two scenarios. Employed learner on a learnership and an unemployed learner sponsored by your company but hosted off site. Examples exclude VAT.
Example 1: Employee enrolled on a learnership.
Training Intervention cost: R36 000.00
SARS 12H Deduction from NPBT: R80 000.00 x 28% (company tax rate) = R22 400.00 (Note 1)
Cost to Company for intervention: R36 000.00 x 28% (company tax) = R10 080.00
(Training cost reduce profit thus company tax saving)
Cost: R 36 000.00
TAX savings: R32 480.00
Example Cost to company – R3 520.00 (for a 12-month learning intervention)
Should the client apply for a Discretionary Grant from their registered SETA an amount of up to 39.6% of the SDL amount can be granted. If awarded by the SETA, this will further reduce the cost and have the potential to become a negative amount.
A discretionary grant is at the discretion of the SETA and therefore not a guarantee but have the potential to reduce the cost of training even further.
As the SETA procedures varies and allocations are not guaranteed we will gladly sit down with you to explain this in more detail.
Example 2: Unemployed learner Sponsored by your Company and hosted off site:
Unemployed Disabled Learner
Training Intervention cost: R50 000.00
Stipend Cost: R4000.00 x 12 Months = R48 000.00
SARS 12H Deduction for disabled learner from NPBT: R120 000.00 x 28% (company tax rate) = R33,600.00 (Note 1)
Cost to Company for intervention: R50 000.00 x 28% (company tax) = R14000.00
(Training cost reduce profit thus company tax saving)
Cost to Company for stipend: R48 000.00 x 28% (company tax) = R13 440.00
(Stipend cost reduce profit thus company tax saving)
Cost: R 50 000.00 (Training Intervention) R48 000.00 (Stipend) = R98 000.00
TAX savings: R61 040.00
Example Cost to company – R36 960.00 (for a 12-month learning intervention)
In this example let us assume that a minimum discretionary grant has been awarded to a client of R18 000.00 (no guarantee and depended on which Primary SETA. This amount might be more)
The discretionary grant will further reduce the cost of the Disabled learners cost to company to R18 960.00 (for a 12-month learning intervention)
Section 12 H SARS:
Section 12H provides a deduction to an employer in addition to any other deductions allowable under the Act for any registered learnership agreement if all the requirements referred to in section 12H are met. The lead employer (Sponsoring company) may claim the allowance.
Two types of deductions are available, namely:
an annual allowance, to which the employer is entitled in any year of assessment in which a learner is party to a registered learnership agreement; and
a completion allowance during any year of the assessment in which the learner successfully completes the learnership
The annual allowance is subject to a pro rata reduction of the registered learnership agreement does not cover the full 12 months during any year of assessment (TAX year)
We will supply our client with the SARS presentation to fully understand the deductions.
Let us help and guide you to ensure that you receive the best possible financial and human resource benefits whilst ensuring that you achieve the B-BBEE score required for the success of your company.