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How will the 2020 Employment Equity changes affect my business?

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The Employment Equity Amendment Bill of 2020 has been approved by Parliament. It now only needs the President’s signature to take effect, and many businesses will be impacted by these changes.

IN A NUTSHELL

The proposed amendments to Employment Equity legislation will give the Minister of Labour the power to assign industry-specific Employment Equity targets. The need for this was established after the Commission for Employment Equity (CEE) reviewed the progress of transformation 20 years after the inception of the Employment Equity Act (EEA) of 1998. It was established by the CEE that not enough progress was made in the 20 years and that black women and people with disabilities are still largely excluded when it comes to Senior and Top Management positions.

The Department of Employment and Labour has already identified the Mining, Banking & Wholesale & Retail sectors as the first target industries.

WHY ARE THESE CHANGED INTRODUCED?

The purpose of the Employment Equity Act is to align your employee profile to the Economically Active Population (EAP) demographics. According to the CEE, employers only use the EAP distribution as a long term benchmark for the setting of self-imposed targets, there is no short to medium term benchmarks for the setting of numerical targets and goals. It became evident during the Director General’s review that most employers used the self-regulated targets as a shield to circumvent the law by setting low targets as there are no visible incentives or sanctions for not complying with the intentions of the law.

The CEE also pointed out that a number of employers that are non-compliant or in breach of the Employment Equity Act continued to unfairly benefit financially from state contracts, despite their lack of commitment and willingness to transform and create equal opportunities and inclusion of the designated groups in their organisations. It became clear to the CEE that the assumption that all employers would embrace the objectives and spirit of the Employment Equity Act to transform their workplaces, given the slow transformation pace, furthermore the CEE stated that it became evident that penalties for non-compliance that increased in 2013 did not yield positive results, because most of the non-compliant employers still budget for these penalties and are prepared to settle outside the Court of Law.

AMENDMENTS MADE TO THE EMPLOYMENT EQUITY ACT IN 2020

After the review by the CEE, the Minister proposed the following amendments to the Employment Equity Act:

  1. Insertion of Section 15A
    1. “The Minister may publish a notice in the Gazette identifying national economic sectors for the purposes of this act”
    1. “The Minister may after consulting the relevant sectors and with the advice of the Commission, for the purpose of ensuring the equitable representation of suitably qualified people from designated groups at all occupational levels in the workforce, by notice in the Gazette set numerical targets for any sector or part of a sector identified in terms of subsection (1)”
    1. “A notice issued in term of subsection (2) may set different numerical targets for different occupational levels, or regions within a sector or on the basis of any other relevant factor”
    1. “A draft of any notice that the Minister purposes to issue in terms of subsection (3) must be published in the Gazette and interested parties must be permitted at least 30 days to comment on the draft notice”
    1. “The Minister may issue regulations prescribing the criteria to be taken into account in determining a numerical target in terms of subsection (2)”
  2. Section 20 is amended by the insertion of the following subsection

“(2A) The numerical goals set by an employer in terms of subsection (2) must comply with any sectorial target in terms of section 15A that applies it”

  • Section 53 states that any employer that wishes to business with any organ the state must apply for a certificate, this certificate was usually generated in the form of an acknowledgement letter generated by Department of Labour EE submission system after your employment equity reports have been submitted online. 

Section 53 has been amended by insertion of the following subsection:

“The minister may only issue a certificate in terms of subsection (2) if the Minister is satisfied that the employer:”

  1. “Has met any sectoral targets in terms of Section 15A that applies to or has provided reasonable grounds, as contemplated by section 42(4), justifying its failure to comply”
  2. “Has submitted a report in terms of section 21”
  3. “Has not been found by CCMA or a court within the previous twelve months to have” –
  4. “Breached the prohibition of unfair discrimination in Chapter 2: or”
  5. “Failed to pay the national minimum wage in terms of the National Minimum Wage Act of 2017”
  6. The Bill repeals section 14 of the EEA, which provides for an employer that is non-designated to notify the Director General that the employer wish to voluntarily comply with the Affirmative Action measures set out in section 15 of the Act.
  • Section 64A of the EEA is repealed, which allowed for the setting of industry thresholds for employers with less than 50 employees, but high annual turnovers.

WHAT DO THESE CHANGES MEAN FOR SOUTH AFRICAN BUSINESSES?

Designated Employers

Designated Employers will need to follow the amendments to the EEA very closely, as this will affect Designated Employers in different manners because the only qualifying factor for a Designated Employer will be whether the employer employs more than 50 people or not.

Small Companies

Smaller companies that has a high annual turnover, but with an employee profile with less than 50 employees, will mostly welcome the deletion of the Section of the EEA that compels employers exceeding the annual turnover threshold for a specific industry. For these companies, the administration to comply were largely seen as a burden due to the flat occupational structures of such companies. This made it quite challenging to reach goals and targets set out for these companies due to little no staff movement. These smaller companies will be able to deregister as a Designated Employer and will no longer have to comply with the EEA.

Large Companies

Large companies (more than 50 employees) will now, more than ever, need to make sure that they comply with the EEA as the deregistration of thousands of smaller companies as Designated Employers will free up resources with Department of Employment and Labour as well as the Labour Court. We can expect to see a rise in audits from Departmental inspectors as well as stricter enforcement of the EEA by the Labour Court. In addition, should a large company be dependent on business from Government, it is of utmost importance to the survival of such a company to receive an EE Compliance certificate, that will form part of the required documents to apply for a tender.  

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