African Fusion talks to Lezann Louw, head of training at the Cosmo Training Academy, about the value and importance of skills training and how industry can use the skills development levy to grow and transform their businesses.
Lezanne Louw joined Cosmo to manage its training offering backing 2017. “Prior to that I was a private skills development consultant offering admin services to clients seeking accreditation for its programmes, “she begins.
“I first met Cosmo’s directors, Pierre van Nieuwenhuizen and Rossouw van der Merwe, while they were trying to get accreditation for the Cosmo Training Academy,” she says, adding: “I was struck by their vision and liked the way they were doing business.
“Cosmo and I believe in the value of high quality training. Our passion is to support industry by providing the skilled people it needs to grow and transform. We strive to ensure that all SETA funds are allocated and used correctly, for the benefit of working people, industry and the country as a whole. We also feel we must help our unemployed youth to become properly skilled, so they can have good career and pay prospects,” Louw tells African Fusion.
While the need for more skilled people is widely acknowledged, many in industry avoid using the skills development opportunities available to them. “Every company with a wage bill of over R500 000 has to pay 1% of its total PAYE salary spend to the Skills Development Levy (SDL). Most, however, even those that do some training, do not attempt to reclaim this money, largely because the admin demand required is perceived as impossible,” says Louw.
“Also, there are additional incentives to be gained by using the levy to train and employ unemployed people for gainful work in industry, particularly if properly accredited and customised training is delivered,” Louw suggests.
Every company with an annual salary bill over R500 000 is obliged to register with SARS and to pay the SDL every month, based on its total PAYE submissions. The Skills Development Fund gets 20% of the money, which is used for special training, while the remainder is allocated to the education and training authority for the relevant industrial sector (SETA).
In addition to the SDL, generic companies with turnover above R50-million, and QSE (qualifying small enterprise) companies with turnover between R10-million and R50-million, are required to spend 6% and 3%, respectively, of their annual salary bill on ETI (employee tax incentive).
In return, SARS offers a tax break of R60 000 per participant on a learnership and it will also allow companies to deduct up to R1 000 per young person per month who is employed. The total benefit from SARS for the above amounts to an approximate saving of R50 000 per young and/or unemployed person on a learnership.
But if companies do not engage with their SETAs to do training, apprenticeships or learnerships, via properly submitting their WSP (workplace skills plan) and learnership contracts, for example, all of this money will be lost as additional taxes,” Louw points out.
“Companies involved in manufacturing often make use of contract staff on a regular basis to fulfil these needs. Instead of using contract staff, the SDL along with other tax incentives can be used to take on unemployed people as trainees. To employ a ‘trained’ contract welder, for example, will cost about R12 000/month – and the employer may not know where he or she has been trained and to what skills level.
“From a cost point of view, instead of simply paying R12 000 for new ‘skilled’ recruit, the trainee will be placed on an accredited training programme, which costs around R7 000/month. They will also receive a stipend of around R5 000. By using the skills levy properly, up to 80% of the training costs can be recouped at the end of each year,” she continues, “and the training can be customised to deliver the exact skills needed when they are needed. We call this ‘raising people by hand’, and it leads to better loyalty and long-term skills retention,” explains Louw.
Cosmo, through Lezann Louw’s expertise, also takes care of the entire administrative load necessary to extract the SDL rebates from the SETAs. “At the starting point, we offer audits to determine skills development needs. Then we can complete and submit the annual work- place skills plans (WPSs) and draw up the learnership contracts. While training proceeds, we maintain the attendance records, invoicing and reporting in the format required for proof of compliance – and we will even submit the annual claim on the company’s behalf,” Louw assures.
“We take on full responsibility for the admin burden and the training quality to deliver suitably trained people that are a best-fit for the employing company,” she concludes.