FINANCE Minister Pravin Gordhan has set aside a R5-billion youth employment subsidy for the current financial year - from April 1 2012.

The subsidy compensates employers for taking on young employees and can act to offset the costs of training or risk incurred by employers - especially those running small enterprises.

Gordhan said unemployment is a serious problem in South Africa, with 41% or only two out of five people of working age in South Africa have a job.

The National Treasury believes that the subsidy will encourage youth, who believe they may more easily find work, to search for jobs more actively.

The idea is that the subsidy will run through the Pay As You Earn (PAYE) tax system operated by the South African Revenue Service (Sars).

To qualify, workers must be aged between 18 and 29 and their wages must fall below the personal income tax threshold - which for the coming tax year (2011) is set at R59750.

The subsidy is expected to cover 423,000 young workers and given that some of these workers are likely to be hired anyway, the number of new jobs is estimated at 178,000 - at a cost of R28,000.

The plan is that as Sars already uses its PAYE system to reconcile the records on employees and employers twice a year, the system will allow for Sars to corroborate information on employers and employees claiming the subsidy.

The subsidy is yet to be implemented as the proposal is being debated at National Economic Development and Labour Council where Cosatu is opposing it.

The labour federation says it opposes the subsidy because it gives employers large amounts of money for hiring young employees. That could make companies retrench older workers in a bid to make more profit.