Getting the most out of the skills development levy

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Skills development levy is a grudge purchase. Target getting the most out of it.

Getting the most out of the skills development levy

Jan 9, 2022

The Skills Development Levy (otherwise known as the SDL), is a tax imposed to encourage learning and development in South Africa. The funds are normally used to develop and improve the skills of employees. This is a compulsory levy scheme for the purposes of funding education and training as envisaged in the Skills Development Act of 1998. This levy came into operation on 1 April 2000 and is payable by employers on a monthly basis.

If your company has Pay As You Earn (PAYE)-registered employees and they earn more than R500 000 per year, you as the employer have to pay the Skills Development Levy (SDL) to SARS every month.

So what is the purpose of SDL?

To develop the skills of the South African workforce, which will inevitably improve and promote:

  • The quality of life of workers;
  • Their prospects of work and labour mobility;
  • Productivity in the workplace and the competitiveness of employers;
  • Self-employment;
  • The delivery of social services;
  • An increase in the levels of investment in education and training in the labour market and to improve the return on that investment.

All of the aforementioned seem like some great benefits, and in fact, if done correctly, you can not only grow your employees but also grow your business through leveraging your SDL funds. Properly empowered employees are more efficient workers, and the more competent they are, with a wider reach in their skill set, the more contributions they can make in the workplace.

In a similar vein, the SDL also holds a myriad of benefits that your business could accrue from being an active participant – tax incentives, discretionary grants, assistance from SETAs, and free workshops and courses given to your employees.

Okay, so now that you’re aware that the SDL is not only important but also largely beneficial, where does one take it from here?

An important first question to ask is how competent is your current workforce vs the competencies required to achieve the strategic objectives, and where can their skills be improved? Sometimes this is very hard to ascertain, and guessing can lead to a misallocation of your SDL fund. An imperative first step would be to conduct a skills audit. This is a process that can be used to identify the skill gaps in your organisation. The outcome is a training needs analysis that identifies where development is really needed, what can be best sourced, how long it will take and how much it will cost.

At Litha-Lethu we pride ourselves on a rigorous skills audit and competency assessment process that assists businesses in organisational growth, understanding their core competencies and the surrounding requirements, improving leadership capabilities, enhancing talent management, and entrenching succession planning.

If you want to set your SDL on the right track for 2018, do not hesitate to get in contact with us. You can read more about competency and skills auditing here: