EMPLOYMENT EQUITY

UNDERSTANDING EMPLOYMENT EQUITY UNDER THE SOUTH AFRICAN CONSTRUCTS AND APPLICABLE LEGISLATION

South African employment is intertwined and directly related to our past socio-political legal framework. This political framework directly influenced the socio-economic structures and legislation that would ensue in trying to ensure that equality, economic growth and stability became the new foundation for employment law that would impact both the employer and employee’s in South Africa. The new legislation sought to ensure that the inequity of the past was reset thereby promoting equal opportunity based on statistical formulas to ensure people of all races, gender and disabilities would be considered for positions that they would not have in the past.

DIFFERENTIATING BETWEEN THE EMPLOYMENT EQUITY ACT & BLACK ECONOMIC EMPOWERMENT ACT

Employment Equity and Black Economic Empowerment are governed by two main government acts. The core of these two pieces of legislation is focused on combating unequal opportunity in the country. While these two acts essentially have one common goal, they are distinguishable by a few unique variances.

The two Acts have distinctive components that differentiate them from one another. However, there is a symbiosis between the two based on how an Employer implements the Employment Equity rules governed by the Act and this will have a bearing on their company’s Black Economic Empowerment (BEE) status.

EMPLOYMENT EQUITY ACT

This act aims to create workspaces that promotes people from minority groups and affords equal opportunities to people based on their race, gender or disabilities. The notion supporting this act is to promote equal opportunity for people of these minority groups to enter the workspace, develop and grow into their roles. The only group that is not represented by the Employment Equity Act is white males that do not have disabilities. If a company does not comply with the legalities of the Employment Equity Act, they could face being penalised. Employment equity requires that the employer creates a customised plan whereby they create an environment that supports equal opportunity for all their employee’s.

1. EMPLOYMENT EQUITY REPORTING

While employment equity reporting has been a prerequisite for employers there is going to be a shift towards ensuring that the reporting is accurate that sets out specific attainable equity targets. Employers must be advised that should they fail to accurately submit an Employment Equity Report it will lead to enforcement proceedings and / or substantial fines. All designated employers must in term of Section 21 of the Employment Equity Act, No 55 of 1998, submit their annual employment equity report for the period 1 October 2021 to 30 September 2022 by 1 October 2022. The electronic submission of the employment equity report is open until 15 January 2023, thereafter the portal closes and no adjustments or reporting will be possible and employers will not be permitted to submit their annual reports thereafter, thereby placing their company at risk for non-compliance.

There is a direct correlation between the Employment Equity Act and affirmative action considerations that need to be accounted for when reaching and maintaining employment equity. There is an expectation that employers will run through a checklist when setting up the implementation of reporting on the employment equity of their company.

• There is an obligation on the employer to consult with the unions and employees in order to ensure that the proposed plan is accepted by everybody furthermore this affords all parties to comment;
• An analysis of all current employment policies, practices and procedures, needs to be evaluated. A profile of the workforce then needs to be prepared in order to identify any complications relating to employment equity.
• The following step includes the preparation and implementation of an employment equity plan. The plan needs to incorporate the affirmative action steps they intend to take in order to achieve the proposed employment equity goals.
• Employers are obliged to report the implementation of the plan to the Department of Labour in order for the department to monitor their compliance.
• A summary of the provisions of the act must be displayed in all languages relevant to their workplace. Employers can find these summaries from the government printer as well as certain offices of the Department of Labour.
  
  

WHO IS REGARDED AS A ‘DESIGNATED EMPLOYER’

• Employers who employ fewer than 50 employees (regardless of their turnover) will no longer fall within the definition of “designated employer” and will not be required to comply with Chapter III of the Act relating to affirmative action
• All ‘designated employers’ –
  • Small Companies – between 50 and 150 employees or according to rates in Schedule 4 (displayed below).
  • Large Companies – more than 150 employees
• Large employers must submit their first report within six months of being designated, and thereafter annually on the first working day of October.
• Small employers must submit their first report within twelve months of being designated, and thereafter on the first working day of October of every year that ends with an even number.
  
  

A “designated employer” is any employer with 50 or more employees OR an annual turnover of:

• R6 million – Agriculture
• R22.5 million – Mining and Quarrying
• R30 million – Manufacturing
• R30 million – Electricity, Gas and Water
• R15 million – Construction
• R45 million – Retail, Motor trade and Repair services
• R75 million – Wholesale trade, Commercial agents and Allied trades
• R15 million – Catering, Accommodation and other Trade
• R30 million – Transport, Storage and Communications
• R30 million – Finance and Business services
• R15 million – Community, Special and Personal services
  
  

Fines

The Director-General may apply to the Labour Court to impose a fine if an employer:

• Fails to submit an employment equity report;
• Fails to notify the Director-General in writing that it will not be able to submit its report timeously and provide reasons therefore; or
• Has informed the Director-General in writing that it is not able to submit its report timeously, however, the reasons provided are false or invalid.

The Labour Court may impose a fine ranging from the greater of R1.5 million or 2% of the employer’s turnover to R2.7 million or 10% of the employer’s turnover. The penalty for violations of this Act includes fines up to 10% of annual turnover and individuals can be fined or imprisoned for up to 10 years. They can also be barred from contracting with state-owned entities for a period of 10 years.

If an employer is concerned that its business will miss the deadline for manual submission of its employment equity report, you must either:

• write to the Director-General with valid reasons for your inability to submit the report manually, or
• register online in order to take advantage of the 15 January deadline.
  
  

VARIOUS EMPLOYMENT EQUITY FORMS
EEA2 – Employment Equity Report

Large employers, i.e. employers with 150 employees or more, must complete the entire EEA2 reporting form.
Small employers, i.e. employers with fewer than 150 employees, must only complete areas of the EEA2 form that apply to them.

EEA4 – Income Differential Statement

The calculation of remuneration must include twelve months of the financial year that is in line with the period covered by the EEA2 reporting form. Where this is not possible, e.g. in the case of non-permanent employees, the total payment the person received for the period worked should be divided by the number of months worked, and then multiplied by twelve.

SOUTH AFRICA’S 2021 ECONOMIC DEMOGRAPHIC PROFILE

The demographic profile of the economically active population in South Africa, 2021 was:

South Africa	African	Coloured	Indian	White
Male	43.6%	5%	1.7%	4.8%
Female	35.9%	4.1%	.9%	3.9%
Western Cape
Male	20.5%	23.9%	1.1%	10.3%
Female	15.9%	19.3%	.4%	8.6%

BLACK ECONOMIC EMPOWERMENT (BEE)

The notion of implementing BEE is directly related to ensuring the promotion and equity of the economic participation of black people in South Africa. The term “black people”, within the context of the BEE Act, refers specifically to black, mixed race and Indian race groups. The Act specifically excludes white people, including those who have disabilities. However, while a company needs to strive to be BEE compliant it also needs to adhere to the rules governed by the Employment Equity Act. Companies that are non-compliant with the BEE Act will lower their BEE level as they lose scorecard points. This could negatively impact their business as they could lose support from suppliers and consumers.

HOW TO ENSURE YOUR COMPANY IS BEE COMPLIANT?

This is a process where the entity has to come into contact with a SANAS Accredited BEE Verification Agency. Together with the BEE Agency the entity has to undergo a partial or full audit to determine its BEE Compliancy Levels.

There are three steps that need to take place:

1. Completion of Documentation and BEE Verification planning; and
2. Gathering of Evidence which consists of 5 elements, set out on a scorecard that need to be completed; and
3. Verifying the Evidence and calculating the BEE Compliance thereof.
   
   

A BRIEF OVERVIEW OF THE ELEMENTS

OWNERSHIP 25 points Proof of shares in HDI hands. A share certificate for example will need to be submitted for this purpose. This is regarded as a priority element and failure to comply with the minimum target (40% of Net Value) will result in the Level as obtained above being discounted. MANAGEMENT 15 points Proof of HDI’s (men/women) in top/senior/middle/junior management. Interviews will be held to confirm seniority, job description, salary etc. Submission of a EE report and the involvement of PDI’s in the organisation on different levels and categories. SKILLS DEVELOPMENT 20 points Proof of training spent on HDI’s employees or non-employees and accredited programs such as apprenticeships, learner ships and internships and mentorship programs. This is regarded as a priority element and failure to comply with the minimum target of 40% will result in the Level as obtained above being discounted. ENTERPRISE & SUPPLIER DEVELOPMENT 40 points Enterprise development (5 points) Supplier development (10 points) Preferential procurement (25 points) Proof of purchases from current suppliers that are BEE compliant and Empowering Suppliers as a percentage of the total procurement spend. Aiding SMME’s and emerging entities owned by HDI’s to trade in the mainstream economy. An example is setting up a CC and contracting such an entity to provide products. This is regarded as a priority element and failure to comply with the minimum target being 40% in all categories will result in the Level as obtained above being discounted. SOCIO-ECONOMIC DEVELOPMENT 5 points Social contributions towards own employees, employees families and communities such as paying employees children’s school fees and contributions towards black sports teams.