Op-Ed: Skills development levy payment holiday will have major consequences down the line

Faryn Pearson, head of legal and corporate strategy for NEXT writes:

As part of the South African government’s Covid-19 relief interventions, businesses have been given a four-month holiday from the Skills Development Levy (SDL).

While this will undoubtedly help some companies stay afloat and mitigate massive job losses, it will have major consequences down the line.

One potential positive is that online skills development will be accelerated to the benefit of companies and regulatory bodies alike.

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In the ordinary course of events, all South African companies are required to pay skills development levies at a rate of one per cent of a leviable amount, according to the relevant provisions of the Income Tax Act.

The aim of the levy imposed is to encourage learning and development and it is a key component in companies maintaining their broad-based black economic empowerment (BBBEE) status.

Until now, much of the learning and training funded by the levy has been face-to-face, with significant costs attached for the employer and the relevant sector education and training authorities (SETAs).

Many of South Africa’s largest corporates spend hundreds of millions of Rands every year upskilling their staff, to say nothing of the costs associated with those employees being out of the office and any travel the company has to pay for.

Like so much of ordinary life, all of that came crashing to a halt on March 23, when President Cyril Ramaphosa announced a nationwide lockdown in a bid to curb the spread of the novel coronavirus behind Covid-19.

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• A new approach to skills development:

While the skills development levy holiday will provide some much-needed relief for companies, there’s no doubt that it will come at a significant cost.

Even if the holiday is simply a deferment, the number of companies who’ve either shut down or taken dramatic hits to their income means that there will be less money to go around for some time to come.

That means if South Africa is going to continue prioritising education and training (as it should), we’re going to have to find ways of doing more with less.

Fortunately, there are plenty of lessons we can draw on that front from how we’ve adapted to new ways of working under lockdown.

Just as it’s become apparent that companies could readily adapt to remote work, so it’s becoming increasingly clear that being in the same room as an educator or facilitator isn’t a prerequisite to effective training and skills development.

While this kind of change has been coming for some time (one needs only to look at the rapid growth of online learning over the past decade), the current crisis has only accelerated the pace of change.

Even as lockdown restrictions are easing, we shouldn’t try to go back to the way things were before.

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There is simply no reason for companies to send their employees on off-site courses, robbing them of valuable working time, especially when they can achieve the same quality of skills development online.

Moreover, the road back to prosperity post Covid-19 will be long and difficult for many companies.

The truth is, many simply won’t be able to justify the expense of sending staff on that kind of training.

That does not, however, mean they should give up on skills development.

Far from it. It’s likely to remain a prerequisite for anyone looking to remain a viable business concern for some time to come.

So why not approach it in a way that provides your company with the maximum skills development value at the minimum financial cost?

Dear reader,

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