Skills Development Levy (SDL)
Also known as: SDL, Skills Development Levy.
What is Skills Development Levy?
The Skills Development Levy (SDL) is a 1% payroll tax payable by most South African employers under the Skills Development Levies Act 9 of 1999. It is levied on leviable payroll as defined in Section 3 and is collected monthly by SARS alongside PAYE and UIF on the EMP201.
Drafted and reviewed by
Attorney & Founder, My-Contracts.co.za · Legal Practice Council of South Africa (LPC F17333)
Definition and context
The Skills Development Levy is the funding mechanism behind the SETA system. It is payable by every employer whose total annual remuneration is R500 000 or more (Section 4(1)(b) of the Skills Development Levies Act 9 of 1999 exemption threshold). The levy is 1% of "leviable amount" as defined in Section 3 — broadly, remuneration paid or payable, with adjustments for certain fringe benefits and exemptions. Collection happens monthly on the SARS EMP201 return, with final reconciliation on the bi-annual EMP501.
SDL receipts are apportioned by statute: 80% flows to the 21 SETAs for sector training, with 20% to the National Skills Fund for national priorities (under Section 27 of the Skills Development Act 97 of 1998). Employers can recover a portion of SDL through SETA grants — Mandatory Grants (20% of SDL paid, payable annually on submission of a compliant Workplace Skills Plan and Annual Training Report) and Discretionary Grants (awarded competitively for learnerships, apprenticeships, and bursaries aligned to the Sector Skills Plan). Poor SDL planning is a common source of "leakage" — employers pay the levy but fail to submit WSP/ATR on time, forfeiting the Mandatory Grant.
The SDL sits alongside three complementary mechanisms that together fund skills development in South Africa: the B-BBEE Skills Development scorecard (Amended Codes of Good Practice), the Employment Tax Incentive (Employment Tax Incentive Act 26 of 2013 for qualifying young employees), and Section 12H of the Income Tax Act 58 of 1962 for registered learnerships. The Skills Development Policy template on My-Contracts frames the employer\'s obligations and SDF appointment under this four-part framework.
Where this term lives in law
Skills Development Act 97 of 1998
Sections: 27
Creates the SETA framework and governs learnerships, apprenticeships, and skills planning in South Africa.
Income Tax Act 58 of 1962
Sections: 12H
The principal statute governing the taxation of individuals and companies in South Africa.
Frequently asked questions
Who is exempt from paying SDL?
Under Section 4 of the Skills Development Levies Act 9 of 1999, the levy does not apply to public-service employers in the national and provincial spheres, certain religious and charitable organisations (section 10(1)(cN) of the Income Tax Act), public benefit organisations, and employers whose total remuneration over the preceding 12 months does not exceed R500 000. Below-threshold employers voluntarily registering for SDL can still claim SETA grants.
How is SDL calculated?
SDL is 1% of the leviable amount — broadly, the total remuneration paid or payable to employees, subject to adjustments set out in Section 3 of the Act. Certain amounts are excluded, including pension fund contributions made by the employee and payments to independent contractors not treated as employees for PAYE. The SARS EMP201 return calculates and collects SDL monthly. Annual true-up happens on the EMP501.
Can I recover SDL through SETA grants?
Yes — that is the statutory mechanism. Employers who submit a Workplace Skills Plan and Annual Training Report to the relevant SETA by 30 April each year recover 20% of the SDL paid in the previous 1 April–31 March tax year as a Mandatory Grant. Additional Discretionary Grants (for learnerships, apprenticeships, bursaries) can be applied for against the SETA's published funding windows. A well-run skills programme can reclaim a majority of SDL spend.
Does SDL interact with B-BBEE scoring?
Yes. The B-BBEE Amended Codes of Good Practice award points on the Skills Development scorecard based on the employer's Skills Development Spend as a percentage of leviable amount. SDL paid is a component of that spend, and learnerships / bursaries / internships registered with a SETA score additional points. A QSE or Generic employer chasing a Level 4 or better B-BBEE rating must treat SDL not as a cost but as the entry ticket to a structured training programme with triple-benefit returns.
Contract templates using this term
3 templates reference Skills Development Levy (SDL).