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.
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.
WHO IS REGARDED AS A ‘DESIGNATED EMPLOYER’
A “designated employer” is any employer with 50 or more employees OR an annual turnover of:
The Director-General may apply to the Labour Court to impose a fine if an employer:
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:
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:
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:
A BRIEF OVERVIEW OF THE ELEMENTS
DIFFERENTIATE BETWEEN ELEMENTS FOR LARGE VERSUS SMALL ENTERPRISES
PRIORITY ELEMENTS FOR LARGE ENTERPRISES
Large enterprise is defined as an entity with an annual turnover in excess of R50 000 000.00 in the BEE Codes. The priority elements for large enterprises are:
QUALIFYING ELEMENTS FOR SMALL ENTERPRISES
VARIOUS LEGISLATION GOVERNING BLACK ECONOMIC EMPOWERMENT
WHY COMPANIES REQUIRE A BEE RATING
It is important to view BBE in the context of the outcomes that they were set out to achieve. Through sufficient planning, BEE should be perceived as an opportunity to grow ones’ business. Employment Equity and BEE are extensive topics that encompasses various legal elements and cannot be viewed in isolation. Due to the nature of the subject matter various components were discussed briefly herein, however, should you require more specific and bespoke advice one of our business partners will gladly be of assistance.