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A learnership consists of two parts: theory training and practical work experience and runs for a specified period which is normally a year. Any learnership requires an agreement between a learner, employer, training provider and the SETA, which is commonly referred to as a four-party agreement. Once the learners have completed the learnership successfully and are found competent, they will have a National Qualification or credits towards a National Qualification, in the case of learners who have obtained competence against part of the qualification.
Types of Learnerships
There are 2 different ways in which a learner can achieve a full qualification by completing a learnership, namely:
Full theoretical training is given to the learner in order for them to obtain the qualification. This is applicable when the learner has little or no work experience that is relevant to the qualification or little or no previous training in this regard.
Learning is assumed to be in place based on current or previous work experience and / or previous training. This is ideal for employees who are currently in the job but have no formal qualification in their field.
In the instance when an employee has some work experience and or has been trained on short skills programmes and therefore does not need to undergo the full theoretical component of the learnership then a combination of theoretical training and RPL can be applied in order to acquire the qualification.
In this instance an employer applies to their SETA for‘bursary funds’, which are funds allocated to put the learner through a full learnership qualification. When submitting the application, the company would need to apply for the following type of bursaries, either:
8.1 Employed Learners: This type of learnership is applicable when an employer would like one or more of its existing staff to obtain a formal qualification. The funds paid out by the SETA will cover the cost of training / assessing the learner in order to achieve the full qualification.
8.2 Unemployed Learnership: In this instance, the employer would be employing new employees either on a permanent, temporary or contractual basis. In many instances, the SETA will pay a stipend which can be used to supplement the learner’s salary during the duration of the learnership as well as an amount to cover the cost of training the learner on the full qualification.
In the instance where no funding is available from the relevant SETA / SETAs for a learnership, an employer can elect to do an unfunded learnership.
The only difference is that all costs of training is for the employer’s expense and there is no stipend to supplement the payroll in the instance of learners, however the tax breaks that a company qualifies for as a result of entering into a learnership agreement with one or more learners and upon their completion thereof, will off-set any cost of theoretical training or assessment.
An employer qualifies for certain tax allowances when its employees undergo a learnership. This is not a monetary amount paid to the employer as is the case of the bursary funds paid by the SETA.An employer may apply for a tax break based on prescribed amounts as stipulated by SARS which will be deducted off the employer’s tax bill owing to the receiver. The employer will qualify for this tax break regardless of whether or not the learnership was funded by the SETA.
Example: 18.1 Learnership (Existing Employees)
If an existing employee commences a learnership, the employer is entitled to apply for the following tax breaks:
Commencement of Learnership: Upon signing of the learnership agreement the employee can apply for the following:
A commencement allowance of R40,000
Upon Completion of the Learnership:
A completion allowance of R40,0000
Total Amount Claimed: R80, 000 x 28% (28% being the normal tax rate) = R22,400 deducted off company tax bill per person completing a learnership. This does not require competence to be achieved.
For learners with disabilities, the relevant allowances are increased to R60,000.
Learnerships of less than 12 full months will be eligible for a pro-rata amount of the allowance regardless of the reason that the learnership falls short of the 12 month period.If the employee leaves before completion – you are no longer required to reverse the allowance claimed on commencement.
Example of 100 Employees undergoing a learnership:
R 22,400 x 100 = R2,240,000 off the company’s tax bill. The actual tax saving above can be calculated by calculating the taxable amount of income of a business with and without the learnership tax deduction. The difference between the two taxable amounts is the actual tax saving to the company. An example of how this is calculated assumes that a company has a revenue of R30 million and its combined salaries, expenses and deductions amount to R10 million It then runs 100 learnerships with abled learners, which entitles the company to the tax breaks.
Revenue: R 30 000 000.00
Expenses: R 10 000 000.00
NPBT: R 20 000 000.00
NPBT: R 20 000 000.00 x 27% = R 5 400 000.00
Revenue: R 30 000 000.00
Expenses: R 10 000 000.00
Learnership Tax Incentive: R 8 000 000.00
NPBT: R 12 000 000.00
NPBT: R 12 000 000.00 x 27% = R 3 240 000.00
Companies often make the mistake of ignoring this very significant benefit and because it is deducted rather than paid back don’t realize the benefit. If we take the above example of the R2,240,000 tax deduction, and if the company did not enter into these learnership agreements, it would have had to pay that amount over to SARS.
Many companies, who cannot access SETA funds for their learnerships, still put employees through an unfunded learnership and although they have to pay a training provider fee to do the training, this is off-set by the tax break and there is usually still an amount left over.
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