Transform, or pay the price: a new grace period before employers face affirmative action penalties

South Africa remains one of the few jurisdictions which continue to make use of racial employment practices. The notion of Broad Based Black Economic Empowerment (“BBBEE”) is a national policy aimed at advancing affirmative action practices. Essentially, affirmative action aims to redress the disadvantages in employment experienced by designated groups who were previously disadvantaged during the apartheid regime. Those belonging to “designated groups” as defined in the Employment Equity Act (“EEA”) are the beneficiaries of BBBEE and include: “black people” (Africans, Coloured’s, Indians and Chinese persons) who are citizens of South Africa by birth or descent; or who became citizens before 27 April 1994 (being the date which marks the end of the apartheid regime), or after 26 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date but who were prevented from doing so by apartheid policies.

The EEA and an Employment Equity Plan

The EEA is the statute which enables BBBEE and requires designated employers to inter alia prepare an Employment Equity Plan (“EEP”) and to report the progress of the implementation of the EEP to the Director-General annually. Designated employers are those who either employ 50 or more employees or who employ less than 50 employees but whose total annual turnover is equal to or above certain thresholds stipulated in the EEA, which thresholds are industry specific.

An employer’s EEP must be aimed at achieving reasonable progress towards employment equity in the workplace and is required to outline inter alia the affirmative action measures to be implemented, which measures aim to reach numerical goals to achieve the equitable representation of suitably qualified people from designated groups within each occupational level in the workplace. Timeframes within which these goals ought to be reached must also be stipulated. That said, the enforcement mechanisms outlined in the EEA are rarely utilised resulting in many employers failing to implement and report their EEP’s.

As a result, the government is dissatisfied with employers’ progress in achieving employment equity countrywide. Accordingly, the legislature has amended the EEA to incorporate penalties for non-compliance. In terms of the Employment Equity Amendment Act (“the Amendment Act”), an employer who fails to prepare and implement an EEP and/or fails to submit a report on the progress thereof will be liable to pay a fine of the greater of R1 500 000 or 2% of the employer’s annual turnover for a first time offence. The fines for non-compliance increase in the event of prior contraventions.

Grace period

Government have recently announced that corporates will be granted a grace period of six months (calculated from April 2016) after which government envisages auditing the EEP’s and reports submitted by employers and imposing these penalties where employers have failed to meet the goals set in the EEP’s which they, themselves, have set.

Accordingly, South African employers who have generated EEP’s and who have submitted reports to the Director-General must ensure that, by the end of October 2016, they have taken progressive steps towards achieving the goals which they have previously committed to achieving, failing which they will face the harsh penalties set out in the Amendment Act.