GAVIN STONE: Tough fines and state business bar await on amended employment act

Stinging penalties and a bar on doing business with the state are in store for companies that fail to meet the new requirements of the Employment Equity Act.

Due to an amendment bill to the act, signed into law on April 12, all companies with more than 50 employees are now “designated employers” and the minister may propose targets for industry sectors. Companies that don’t comply risk fines of R1.5m-R2.7m, or 2%-10% of annual turnover. 

A welcome change is the repeal of the turnover table, which used to require companies with fewer than 50 staff to report on and draft employment equity plans and reports. The law requires designated employers with more than 50 employees to submit an annual company employment equity report and plans to the department of employment & labour.

The plan must spell out how they will achieve equity targets measured against sectoral targets over a proposed five-year period. Employers will have to put targets to their headcount composition, in most industry sectors, based on sectoral goals. It’s now crucial for management to produce accurate long-term business forecasts incorporating business growth, a headcount, projected labour turnover and employment equity goals.

This will demand a lot of work. If you are in management you will need to make an accurate analysis of business information, ensuring your company’s strategy aligns with employment equity goals. Good record-keeping is key to this, and the first step is to obtain the proposed sectoral targets for your company’s particular industry. 

Employers will need to do gap analysis across the various management levels of their companies. Ideally, they should incorporate business forecasts that include a headcount in the workplace occupational levels. Employers need to plan what jobs will be available in five years and the racial mix in various positions. In so doing, they will create a clear road map for transformation. 

Identify barriers

It is advisable to begin with a thorough employment equity audit. This is to assess whether the company’s employment equity policy, payroll headcount, workforce profile and analysis of barriers to affirmative action fall short of the requirements of the amended act. Barriers to affirmative action are often expansive. Approaching the audit task honestly highlights policies, practices and procedures that need to be addressed and removed systematically over the life of an employment equity plan. 

In addition, section 19 of the act requires a designated employer to collect information and do an analysis of the company’s employment policies, practices, procedures and working environment to identify barriers that adversely affect designated groups. This analysis of affirmative action barriers is the starting point when preparing a new employment equity plan. It is a practical point of departure in implementing the new legislation. There is no reason to postpone this.

Another thing to consider is whether your organisation has an efficient payroll system and database to meet the requirements of the act. A good payroll system and database supplies information on race, gender, occupational profile, engagements, terminations, promotions, training and salary. This information is essential when compiling the workplace profile and reporting on year-end employment equity statistics. Audit this data and, if possible, ensure the organisation has a reputable payroll system to help meet the information requirements of the act. Start now. 

If the organisation intends doing business with state-owned entities, the act requires a section 53 certificate of compliance with the Employment Equity Act. However, the act does provide some relief. If employers do not meet the targets they may raise reasonable grounds to justify failure to comply. The act provides an EEA15 form for this purpose.  

The reasons employers can give as justifiable grounds for not meeting sectoral targets include:

• Insufficient recruitment and promotion opportunities.
• An insufficient target pool of individuals from designated groups with the relevant qualifications, skills and experience.
• Court orders.
• Mergers & acquisitions.
• A business’ (usually adverse) economic circumstances. 

The burden of evidence for all these justifiable grounds is high and will be audited. However, it does provide a rationale for issuing a section 53 certificate to an employer who does not meet the sector targets — provided justifiable reasons exist. For this reason it is advisable to keep information that supports justifiable reasons for not meeting sectoral targets in a structured format, as this information tempers employment equity plans with reality. This will help support a case where justifiable grounds for not meeting targets exist.

The regulations published in 2018, with other codes of good practice, and the new amendments, are designed to assist employers with the administration of the act. These regulations and codes help employers navigate through the implementation process. Keep it simple and follow the guidelines.

The definition of disabilities has widened to include “sensory impairment”. In addition, sectoral targets include a possible proposed target of 2% for disabilities.  

Implementing the act successfully will require a team effort from employers, employees, trade unions and shop stewards. Employers will need to move quickly to make it happen and they would do well to seek professional assistance. That is if they want to avoid a costly snotklap from the state.

• Stone, an independent human resources practitioner, is principal of Stone HR & Business Solutions.