South Africa’s drive for inclusive economic growth is closely tied to the development of a skilled workforce. One of the main funding mechanisms supporting this goal is the Skills Development Levy (SDL), which enables the functioning of the country’s 21 Sector Education and Training Authorities (SETAs). Employers who contribute to this levy may qualify for a mandatory grant from SETA, designed to promote continuous workplace learning.
This guide breaks down what the SDL is, how it works, and how employers can benefit from reclaiming funds through mandatory grants.
What Is the Skills Development Levy (SDL)?
The Skills Development Levy (SDL) is a tax that registered South African employers pay to the South African Revenue Service (SARS). The purpose of this levy is to fund national skills development initiatives, with a strong emphasis on training and upskilling the current and future workforce.
Key facts about the SDL:
- Legislated under the Skills Development Levies Act (No. 9 of 1999)
- Employers with an annual payroll of more than R500,000 are required to pay
- The levy amount is calculated at 1% of total monthly payroll
- Collected by SARS and redistributed to SETAs and the National Skills Fund (NSF)
This funding is then used to support training projects, learnerships, internships, and capacity-building efforts across various industries.
How Is the SDL Distributed?
Once collected by SARS, the SDL is distributed as follows:
- 20% is allocated back to the employer in the form of a mandatory grant
- 49.5% is allocated to the relevant SETA (based on the employer’s sector)
- 0.5% goes to the Quality Council for Trades and Occupations (QCTO)
- 30% goes to the National Skills Fund (NSF) for broader development programmes
Employers who wish to claim the mandatory grant from SETA must comply with several requirements, including the submission of a Workplace Skills Plan (WSP) and an Annual Training Report (ATR).
What Is a Mandatory Grant?
A mandatory grant is a partial refund (20%) of the Skills Development Levy paid by the employer. It serves as an incentive for employers to invest in staff development and contribute to national skills targets.
Employers can use this refund to cover costs such as:
- Training courses
- Learnership facilitation
- Skills programme implementation
- Internal employee upskilling
However, the grant is only disbursed if certain compliance requirements are met.
Eligibility for the Mandatory Grant
To qualify for the mandatory grant SETA funding, an employer must:
- Be registered with SARS for SDL
- Be paying the SDL consistently
- Be registered with the appropriate SETA
- Appoint a Skills Development Facilitator (SDF)
- Submit a Workplace Skills Plan (WSP)
- Submit an Annual Training Report (ATR)
- Ensure submissions are completed by the SETA’s due date, typically 30 April each year
Employers who fail to meet these criteria will forfeit the 20% refund for that year.
What Is a Workplace Skills Plan (WSP)?
A Workplace Skills Plan (WSP) is a strategic document that outlines the training and development activities an employer plans to implement in the coming year. It identifies skills gaps within the organisation and proposes targeted training interventions.
A WSP must include:
- Organisation profile and employment breakdown
- Identified skills gaps
- Training needs and strategies
- Proposed training initiatives aligned with SETA priorities
Submitting an accurate WSP is crucial for accessing mandatory grants.
What Is an Annual Training Report (ATR)?
An Annual Training Report (ATR) complements the WSP. It outlines all the training activities the employer has completed over the past 12 months, including:
- Details of employees trained
- Types of training provided
- Training costs incurred
- Outcomes achieved
Together, the WSP and ATR show how the employer is contributing to the national skills development agenda.
Benefits of Claiming the Mandatory Grant
Reclaiming your mandatory grant from SETA not only helps you recover part of your SDL contribution—it also positions your organisation as a leader in workforce development. Here are a few key benefits:
- Cost recovery on training expenditure
- Alignment with sector-specific skills development priorities
- Improved BBBEE scorecard under the skills development pillar
- Access to discretionary grants and funding for learnerships
- Enhanced employee productivity and morale
Mandatory grant compliance also opens doors to broader partnerships with SETAs and training institutions.
How to Submit Your Mandatory Grant Application
Here’s a step-by-step breakdown:
- Appoint a registered SDF who will coordinate your WSP and ATR
- Register with your sector-specific SETA (e.g., HWSETA, CETA, MerSETA)
- Prepare and complete the WSP and ATR documents
- Submit via the SETA’s online grant system by 30 April
- Track confirmation and feedback from the SETA
- Ensure compliance with all post-submission audits or reviews
If your application is approved, you will receive the 20% mandatory grant directly into your nominated account.
Common Reasons for Mandatory Grant Rejection
Even if you’re eligible, your application might be rejected due to:
- Late submission
- Incomplete or inaccurate WSP/ATR
- Lack of SDL registration or non-payment
- Incorrect SETA affiliation
- No appointed SDF
To avoid rejection, start preparations early and ensure that all required documentation is complete and up to date.
The Skills Development Levy in South Africa is not just a statutory requirement—it’s a powerful tool that employers can use to build skills, support economic growth, and recover a portion of their training costs through mandatory grant SETA funding. By understanding how the SDL works and meeting all compliance requirements, businesses can unlock valuable financial and developmental benefits.
Don’t miss the annual deadline to submit your WSP and ATR. Being proactive can help your organisation lead in skills development and benefit from the full SETA funding ecosystem