Written by Lisa Szoke
As we approach another employment equity reporting season, it is important to evaluate where we stand. The Employment Equity Act Amendment Bill is awaiting signature by the President – this is expected imminently. In this article, we look at what this means for designated employers.
The Bill came into being predominantly in reaction to a lack of transformation across the board by South African employers. The key aim is to speed up what has been so sluggish for many years.
There are two main takeaways from the new Bill: (1) the Minister is permitted to set goals and targets for various industries, and (2) the removal of the annual turnover threshold to render an employer to be a designated employer.
Goals and Targets
Up until now, the Employment Equity Act has allowed a great deal of self-regulation to employers. Employers were permitted to entirely set their own goals and targets in their Employment Equity Plans. Yes, this was guided by many standardised factors requiring you to apply logical rationale, but ultimately the number of Coloured males or Indian females at the end of your Plan was a number of your choosing. For various sectors, this will be changing.
The Minister will be gazetting sector-specific goals and targets which will need to be utilised and reflected in the Plans of those sectors. Almost all discretion in the setting of goals and targets will be removed.
The following sectors have already begun consultation with respect to the setting of goals and targets: education, agriculture, finance and insurance. The remaining sectors which have been identified to become regulated are: mining and quarrying, public administration and defence, manufacturing, information and communication, construction and real estate. These latter sectors will be consulted over the next year.
All other sectors will continue, for now, to apply the same self-regulation in terms of goals and targets.
Until the Bill, there were two ways that an employer became a designated employer. If the employer employed more than 50 employees, or if the employer had an annual turnover above the specified turnovers gazetted in Schedule 4 of the Employment Equity Act. To be a designated employer, you only needed to meet one of the two requirements.
This resulted in many successful small businesses having to comply with all employment equity obligations. A successful business with 12 employees could find itself as a designated employer solely due to turnover. However, it is this threshold which has been removed by the new Bill – and based on our example, we can probably understand why. Therefore, going forward, only employers who employ more than 50 employees will be designated employers.
The new Bill is anticipated to commence on 1 September 2023. This gives employers a year to get their house in order.
The employers who will be effected are those who fall into the regulated sectors, and those who will cease to be designated employers due to the removal of the turnover threshold.
Employers who fall into the relevant sectors will need to update their goals and targets in accordance with those set by the Minister. Employers who are no longer designated will need to apply to de-register as a designated employer, or alternatively, take the decision to continue to comply voluntarily. The remaining employers will continue as they were before the commencement of the Bill.
Should an employer wish to de-register, they will only be able to do this for the 2024 reporting year. All de-registrations must reach the Department of Employment and Labour before the end of August in any given reporting year. Given that the change to the threshold will only commence one day after that deadline, it will not be possible to de-register for the 2023 reporting period. Employers who become non-designated on 1 September 2023, will still need to submit their report prior to January 2024. Whereafter, they may complete the request to de-register.
What if we can’t achieve the sector-specific goals and targets?
The sector-specific goals and targets are likely to be more onerous than what you would have set for yourself – this essentially reveals the problem which the Minister is trying to address. As a whole, employers were not ambitious, aggressive, or intentional enough in their transformation efforts, which has led to stagnation in diversity amongst occupational levels.
This being said, they are still only goals and targets, they are not quotas. Just as before, employers are able to provide rational and objective explanations as to why they were unable to meet the goals and targets. This will suffice to still be determined to be compliant with employment equity obligations. What should be kept in mind is that we would anticipate greater scrutiny of “reasons” for missing the mark. Employers will need to ensure genuine attempts be made to meet the goals and targets, otherwise their reasons for their failure will not hold up to the mildest of scrutiny.
For this current reporting season, everything remains the same. Submit your EEA2 and EEA4 to the Department of Employment and Labour’s online platform before 15 January 2023.
If you fall into one of the sectors which has been identified, but not yet consulted on sector-specific goals and targets, we encourage you to utilise your opportunity to consult. This will usually be in the form of providing written submissions by a specified deadline, which must then be considered by the Minister when proposing goals and targets for your sector.