President Jacob Zuma signed the Employment Tax Incentive Act, better known as the youth wage subsidy Bill, into law on Wednesday in a bid to provide work experience to school leavers and youth.
The legislation, which has not received the support of Cosatu – which is concerned that it will, among other things, prejudice older workers – comes into effect on January 1 2014.
The treasury, however, said in its statement that checks and balances had been put in place to ensure the incentive would not lead to discrimination against older workers.
"The Act will encourage private employers to employ young workers by providing a tax incentive to employers, with government sharing costs of such employment for a maximum of two years under certain conditions," treasury said.
"Government recognises that no one tool or incentive will be a panacea to solve our unemployment problem; however, the tax incentive has the potential to make a real contribution."
The incentive involves decreasing the amount of pay-as-you-earn tax payable to the South African Revenue Service (Sars). An employer is eligible for the rebate for any employee hired after October 1, with a South African identity document and is between the ages of 18 and 29.
How to claim
This does not apply to domestic workers and employees connected or related to the employer, treasury said.
Sars will publish further details on its website in early January to assist employers in understanding how the incentive will work and how to claim.
Trade unions have vigorously opposed the law, saying older staff members would be fired so companies could take advantage of the incentive.
Treasury said: "On the job experience is crucial for attaining the appropriate skills and for future employment prospects. Government is committed to work with the private sector to enhance employment opportunities and skills development for all workers, but especially for youth with limited work experience."