Employment Equity Sectoral Targets: Impact on Your BEE & EE Strategy

The Employment Equity Amendment Act, which was gazetted on 14 April 2023, has resulted in a number of key changes to the Employment Equity Act.

The sectoral targets were released for public commentary on 12 May. Companies should pay close attention to their particular sectoral targets and understand if and how these targets are to be achieved.

How Has the Employment Equity Act Changed?

Changes include the introduction of an Employer Equity Certificate of Compliance which companies wishing to participate in state contracts are now required to provide. Companies without an Employment Equity Certificate of Compliance will not be able to receive any points under the Management Control pillar of the B-BBEE scorecard and could be subject to fines and penalties for non-compliance with the Employment Equity Act. Management Control has traditionally been the pillar that all sectors struggle the most with.

Sector-Specific Targets & BEE Scorecard

Sector-specific targets, set by the Minister of Employment and Labour ostensibly after consultations with industry over the past 18 months, appear to have been more closely aligned to the BEE scorecard.

However, there are no defined sectoral targets for semi-skilled or unskilled employees with the amended regulations requiring companies to apply economically active population (EAP) figures to determine employment equity plan numerical goals for semi-skilled or unskilled employees. Of concern, however, is the fact that some sector targets are now higher than the EAP for middle and junior management in those sectors making it highly unlikely that those targets will be met.

In some sectors, the five-year sectoral targets require black participation to more than double. In an economy that is regressing rather than growing and where job opportunities are thin on the ground, businesses will find these targets very difficult to achieve.

The Construction Sector & Employment Equity Sectoral Targets

In the construction sector, for example, the sectoral target for professionally qualified Africans is 65,2% within the next five years, up from the current 46,9%. In a flourishing economy in which businesses are growing, companies are able to recruit employees from underrepresented groups. However, companies in the construction sector are not growing and are not in a position to create jobs without growth. In this instance, companies can only replace employees in under-represented groups lost through natural attrition and retirement.

Similar to the BEE scorecard, the five-year sectoral target for employees living with a disability is 2%. This figure is not linked to the economically active population.

In an apparent bid to ease the reporting burden on small businesses, turnover thresholds have fallen away and only companies with a headcount of 50 employees or more are now required to report on their employment equity figures. Given the challenging sectoral targets now in place, this could result in smaller companies being disincentivised to grow the numbers in their employ.

Failure to Comply with the Employment Equity Act

Employers who fail to comply with the amended regulations may be subject to fines of up to R1.5 million or 2% of turnover for first-time offenders. Repeat offenders can face fines up to a maximum of R2.7 million or 10% of turnover.

According to the Department of Labour, reasonable grounds for non-compliance regarding meeting targets include insufficient recruitment or promotion opportunities and a lack of suitably qualified candidates from the targeted designated groups. To prove their case, companies will need to substantiate their claims with detailed documentation showing how they recruit, promote and terminate employees.

BEE & EE Act Strategy

While BEE and employment equity legislation play an important role in achieving a more inclusive economy, it should not be at the cost of economic growth. Whether these proposed employment equity sectoral targets will hamper or enhance growth depends on how stakeholders plan for and approach it.

Transcend can assist you in making sure that your organisation implements the provisions of the EE Act appropriately. Contact us today to speak to our Human Capital specialist.

Complete our Employment Equity Survey:

How do you think the draft sectoral targets will impact your business? Complete our Employment Equity Survey where we aim to gain insights on perceptions and anticipated challenges in complying with the amended regulations.