In terms of the EITA, a “qualifying employee” is:

• aged between 18 and 29 ; or
• is employed by an employer operating through a fixed place of business located within a special economic zone designated as such by the Minister of Finance and who renders services to the employer mainly within that economic zone; or
• is employed in an industry designated by the Minister of Finance.

The designated industries include:

• buses
• textile, clothing, leather and footwear
• power pylons
• canned or processed vegetables
• rolling stock
• pharmaceutical products
• set-top boxes for TV migration
• furniture products
• solar water heater components
• electrical and telecom cables

The special economic zones will be established in the yet to be enacted Special Economic Zones Act. In order to be a qualifying employee in terms of the EITA the employee:

• must be in possession of a valid South African identity document or asylum seeker permit;
• must not be a connected person vis-a-vis the employer;
• must not be a domestic worker;
• must have been employed on or after 1 October 2013; and
• must not be an individual in respect of whom the employer is ineligible to receive the incentive.

Section 4 renders the employer ineligible to receive the employment tax incentive:

• if the employer has paid that employee less than the amount payable by virtue of a wage regulating measure (for example, an applicable collective agreement such as a sectoral determination or a binding bargaining council agreement) or,
• if the wage paid to the employee is not regulated by a wage regulating measure, if the employer pays the employee less than R2 000 a month.

An “eligible employer”:

• must be registered for the purposes of the withholding and payment of employees’ tax by virtue of the Fourth Schedule to the Income Tax Act, 1961;
• is not the government or a public entity or a municipality; and
• must not be disqualified from receiving the incentive.

The EITA sets out the consequences for displacing older employees in favour of younger ones by providing that an employer may be disqualified from receiving the incentive if it has displaced an employee or if it has not complied with such conditions as the Minister of Finance may prescribe in relation to training requirements or conditions based on the classification of trade.
An employer is deemed to have displaced an employee if the dismissal of the employee is found to have been automatically unfair and if the employer replaces the employee with a qualifying employee. A dismissal would be automatically unfair if the reason is unfair discrimination on any of the grounds listed in section 187(1) of the Labour Relations Act, 1995 (LRA). These grounds of unfair discrimination age.

Accordingly, the dismissal of older workers simply because of their age in order to replace them with qualifying employees would disentitle the employer from receipt of the employment tax incentive contemplated by the EITA, and put the employer at risk of a R30 000 penalty in respect of each employee displaced.

An attempt to retrench older employees in favour of employing qualifying employees may also be regarded as substantively unfair (and potentially also automatically unfair) on the basis of discrimination on the grounds of age. Unless an employer can establish that retrenchments are due to genuine operational requirements, such as the elimination or reduction of roles through structural changes or the introduction of technology, such retrenchments may be unfair.

Of course, the EITA does not altogether prohibit or prevent the replacing of older employees with younger ones. Employees who resign or retire or who are dismissed for reasons that are not automatically unfair (for example, for reasons related to their conduct or capacity) may be replaced with “qualifying employees”. It seems therefore that the EITA attempts to strike a balance between addressing a crucial government objective and addressing labour’s concerns in as far as ensuring that the EITA does not become a threat to the job security of older workers. The extent to which it is successful in achieving this balance remains to be seen.