Big or small: Here's how amendments to employment equity laws will affect your business

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Smaller businesses already have a high regulatory burden.
Smaller businesses already have a high regulatory burden.
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  • The Employment Equity Amendment Bill will bring about two important changes.
  • The one important change relates to who must comply with the act and makes it less onerous for small businesses.
  • The other important change relates to powers given to the minister of Labour and Employment regarding sectoral targets.

The Employment Equity Amendment Bill delivers a mixed bag, making compliance less onerous for small businesses – but potentially opening the door for more litigation down the line relating to sectoral targets that can be set by the minister of employment and labour.

This is according to employment law expert Asma Cachalia of Cliffe Dekker Hofmeyr, commenting on the bill, which was recently passed by the National Council of Provinces. It is awaiting President Cyril Ramaphosa's signature into law.

Once this occurs, it will amend the Employment Equity Act.

This will mean two important changes to the legislation covering employment equity: Firstly, small business employers will not be required to have an employment equity plan, submit reports, and the like.

Secondly, the minister of employment and labour will have the power to determine "sectoral numerical targets". This means the minister, after consulting with the Employment Equity Commission and relevant sectors, can set specific employment equity targets to be achieved in a specific sector – which for the purposes of the bill can mean an industry, service or part of any industry.

Once an economic sector has been identified, the minister can set numerical targets for the representation of qualified people from the designated groups at all occupational levels.

The targets must also be published in the Government Gazette and opened for public comment for 30 days.

Less red tape for small businesses

The definition of "designated employer" - meaning those employers who must comply with Chapter 3 of the Act - has been narrowed.

The amendment bill proposes the deletion of the part of the definition of a designated employer which states "… an employer who employs fewer than 50 employees but has a total annual turnover that is equal to or above the applicable annual turnover of a small business in terms of the Schedule 4 of this Act".

Accordingly, these small business employers will no longer have to meet these requirements.

"In terms of the Employment Equity Act, a business must provide an employment equity plan that aligns with certain targets. It is quite extensive what businesses are required to do. The plan must have objectives to be achieved in terms of a specific timeline. It involves a lot of administration, something larger companies can afford to assign staff to, but for smaller businesses it can be quite difficult and costly," says Cachalia. 

"Smaller businesses already have a high regulatory burden and it is difficult for them to comply with all the employment equity requirements of the current act. Bigger businesses can more easily comply with all the regulations." 

She adds that relieving smaller businesses of the compliance burden might then lead to more job creation.

"It is important to look at what the purpose of the Employment Equity Act is - it is to achieve equity in the workplace and to promote equal opportunities through the elimination of unfair discrimination. I am optimistic that the amendment relating to small businesses can improve job creation," she says.

READ | Employment equity body calls for tougher rules as transformation lags

Sectoral targets

The potential for sectoral targets met with criticism from some quarters.

READ | OPEN LETTER TO CYRIL RAMAPHOSA | Employment Equity Amendment Bill will do nothing for job crisis

"For any economic sector that has been identified, the minister may set numerical targets to ensure equitable representation of suitably qualified people from designated groups at all occupational levels in the workplace," says Cachalia.

"For example, the minister could look at the agriculture sector and decide X number of women and X number of black people should be represented at different levels."

She adds that some businesses criticise this amendment, questioning exactly how the minister will determine such targets.

She believes it is likely that substantial litigation will flow from the setting of such targets.

There is, however, a rationale behind the amendment, she notes. "Over the years there has been a realisation that there are larger gaps in employment equity in certain sectors. The amendment will, therefore, allow the minister to identify in which sectors specific employment equity targets and requirements need to be set," says Cachalia.

Most of the feedback she has had from small businesses reflects that they welcome the bill, while bigger companies appear to be more concerned by the power it will give the minister to set specific sectoral targets as it might render their current employment equity plans noncompliant.

But, Cachalia notes, the amendment bill will still allow the director general of employment and labour to apply to the Labour Court to impose a fine on those who fail to prepare or implement an employment equity plan. Resultant penalties can be up to 2% of annual turnover for a first-time offence.

"We found recently an increase in employment equity audits done by the Department of Labour on the enforcement of a designated employer's obligations in terms of the Employment Equity Act. If they discover noncompliance, they can impose a fine," says Cachalia.

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