Company sponsored bursaries

Educational bursaries for your employees and their children

by
Article

Author: Ian Hurst — Managing Director, Paymaster Business Solutions

In these tough economic times, where affordable education is out of reach for a growing number of people, your company could make a meaningful contribution by offering bursaries to your employees (and their children). You can directly uplift them this way. A maximum of R20 000 per employee may be off-set as a tax-free benefit to them. In South Africa, a company may contribute R20 000 per year to their employee’s children too.

NOTE: a bursary is money paid by the company, to a recognised educational institution, on behalf of its employees and/or their children. Usually, this is intended for employees who cannot afford to pay the fees required by the academic institution.

Rules for granting a company-sponsored bursary

Bursaries article illustration

  1. In the bursary agreement, there must be a clause that states should the employee (or their child) fail to complete their studies, or fail the exams, the money will be paid back to the company, by the employee.
  2. Employees that earn less than R600 000 per year are eligible to receive a bursary.
  3. For Grades R – 12 or NQF levels 1-4, the bursary may not exceed R20 000.
  4. For NQF levels 5-10 ( this includes a university education) the bursary may not exceed R60 000.

PLEASE NOTE: In -house training (or on-the-job training) run by the company should be offered FREE of charge, and be NOT funded by the employee. Examples of these courses are;

  • computer courses
  • management and administration courses
  • bookkeeping courses
  • sales courses
  • language courses
  • courses on use of technical equipment
NOTE: where the bona-fide bursary does not qualify for tax exemption, the full bursary amount must be processed as a fully taxable benefit. For example;

Details:

  1. A low-interest or interest-free loan granted by the employer is not a bursary. Such educational financial assistance remains a low-or interest-free loan.
  2. Where the employee is not required to repay the loan, it is considered a taxable benefit. Therefore, employee tax must be deducted and the benefit processed as a PAYE annual payment.
  3. If an employer chooses to reward an employee for obtaining a qualification, it will be considered a taxable remuneration. However, if the company reimburses them for study expenses incurred, it is considered a bursary, of which R20 000 is not taxable.
  4. Only the taxable portion of a bursary paid to an employee (or their child), is subject to the deduction of employee tax.
  5. A bursary to be repaid by the employee because of non-fulfillment of stipulated conditions, is considered a bona fide bursary until the non-fulfillment conditions of the agreement are invoked.

Child educationExample

An employer grants a bursary of R24,000 to each of the employee’s two children — intended for their school education. The employee earns an annual salary of R390,000, a bonus of R18,000 and a housing subsidy of R8,000. The employer does not operate a bursary scheme that is open to the general public.

1. Although the employee’s remuneration does not exceed R600,000 per annum, the bursaries are paid in consequence of services rendered by him.

2. The bursaries of R24,000 each exceed the tax-exemption limit of R20,000 per individual. However, only the additional portion (i.e. R4,000 x2) is deemed taxable: in other words, only R8,000 (R48,000 minus R40,000) will be taxed.

However, if the employee’s remuneration exceeds R600,000 per annum, then the full amount of both bursaries (R48,000) will be taxable.

Paymaster recommendation: reconsider your company bursary policy and employee contracts.

GraduationBased on the above points, if you view your company as a progressive employer, consider offering a bursary scheme to your well-deserving staff ( and their children). This will facilitate their access to education they might otherwise never be able to afford.

And relook, and amend, the cost-to-company packages and employment contracts of employees who earn less than R600 000 per year.

Education is an investment into the future. Facilitating access to education for your employees and their children, will foster loyalty to the company, employee well-being and develop your human capital.

Email our helpdesk for more information. We will be happy to assist with any further inquiries that you might have.

References:

[1] http://www.saqa.org.za/docs/brochures/2015/updated%20nqf%20levevl%20descriptors.pdf

Paymaster Business Solutions. Accurate • Timeous • Client-Centered • Process-Driven Payroll.

Copyright 2023 Paymaster – Online Payroll Solutions | All Rights

28 Responses

  2. Precious

    Hi

    if as part of your level/grade at work you are requested to do a higher degree and the employer wants to pay for it. Do I still get taxed… remember I didn’t ask for it but its part of my development…

  3. olivia

    can a company charge interest on the investment if the bursary fails to complete his/her studies when they need to pay the investment back to the ocmpnay

    • Amber Stynes

      Hi Olivia, that depends on the contract you signed.
      If the amount is larger than R 3500 and is converted into a loan, then interest needs to be charged to avoid you paying a fringe benefit tax.

  4. Hope

    Hi Ian Hurst

    I just need a brief clarity regarding my situation where by my company is willing to fund my child for 2018 University studies.
    The company stipulate that if a child has obtained a part time or full time bursary from somewhere else, so the company will not fund your child at all if she/he has full bursary but they can only pay for the difference if it is a part bursary.

    Here’s where I need your input on ” During September last year 2017 she applied for NSFAS loan of which was approved for 2018 University studies”. Now the question is ” Does the company ( my employer ) still has to pay for my child university fees or does the company has the right not to pay any such money that will care other needs for my child?”

    • Ian Hurst

      Hi Hope

      This is a company decision to assist you or not. I think you need to talk to them because there is a difference between a loan and a bursary. I would suggest that the bursary may be a better option.

      Thanks
      Ian Hurst

  5. Tina von La Chevallerie

    Hi

    In the case of a family with both parents owning less than R600 000 per year – would both parents qualify for the tax free saving on bursaries – for examply; both parents restructure their salaries in order to make use of the R20 000 tax free bursary, which is then paid over to the relevant school/education facility – and can they claim R20 000 per child in the family?

  6. Ronel

    Hi Ian,

    Hoping you can help to clarify.

    I have three children, all still in school and I earn less than R600 000.00 per year… does this mean that (should my company agree of coarse) I can qualify for 3 x R20 000.00 per year (R20 000.00 for each child)?

  7. Mark

    Hi Ian.

    Really helpful stuff, thank you.

    I have a married couple on my staff, married in community of property. One earns above the R600k limit and the other below it. Would we still be able to do the tax free bursary option for their children and structure it as a bursary to the spouse that earns less than the R600k?

    Kind regards

  8. Ronell Lubbe

    Mr A. owner, but also employee of company wants to grant a bursary to his daughter – also an employee of the company, but also a part time student at a University in SA. Mr A earns under R 600 000 and his daughter a small salary in the company. Can both, he and his daughter, qualify for the Tax free bursary option of R 60 000? Her study fees per year – R 80 000

  9. Sean

    Hi.

    Are you allowed to Adjust your Salary e.g. You usually earn R10000 and then Decrease your Salary to R8500 and make the R1500 as a Busary (Re-structure your Salary).

    Is this Practice allowed by SARS.

    Sean

  12. Charles

    Hi,

    I earn less tha R600-000 per annum.I have three children, two at Primary and one at high school and need to apply for the bursary for all three.My wife is unemployed and would like to take her back to school,will she also qualify to get the bursary?

  13. Caro

    Hi. Our employer added our workers money and separate R1000 that was paid into the school as part of our agreement when we started working for them, it was paid separate into my husbands account. then they “learned” about the bursary. they then told him they want to add the workers money and R1000 together onto his salary and gave him an increase. And labeled that as the Bursary so that it’s not vat able. We have 3 kids and according to the employer we would get R20 000 per child per year. And according to us, that money we received from the beginning and what they did is like “cheating” us and the system. We got it in our minds that it would be an Additional amount that would be paid to the school regarding the bursary. But it’s not happening.

  15. Marisa

    Hi

    Like to find out if a company can claim VAT on tax invoices received for staff training.
    Like to find out if a company can claim VAT on tax invoices received from institution for Bursary given to employees.
    Like to find out if you can claim VAT on tax invoice given for meals to employees

Add a Comment

Your email address will not be published. Required fields are marked *