The deadline for Employment Equity Returns has lapsed as of 1 October and there are still employers who don’t have the facts when it comes to completing their EEA2 returns, says Keith Levenstein, CEO of EconoBEE . As a legislative requirement and BEE imperative, it’s vital that employers are thoroughly informed of the Employment Equity return processes, requirements and exemptions for businesses of varying sizes.
“Many businesses are still unaware of what an EEA2 return is and its relation to black economic empowerment,” says Levenstein. “In short, this form needs to be submitted to the Department of Labour by designated employers as set out by the Employment Equity Act. It’s important to note that depending on the size of your company there are certain sections of the EEA2 return that should be completed and others that should not.”
Employment Equity Returns Requirements
Small employers (those with more than 50 employees but less that 150) are exempt from completing certain sections of the EEA2 return. On the other hand, large employers (those that employ more than 150 people) have to complete the entire form. Furthermore, these large employers need to submit their first form within six months of being designated and from then on must submit a return annually on the first working day of October. Small employers have twelve months to submit after designation and thereafter should submit their return on the first working day of October of every year ending with an even number.
“With regards to black economic empowerment, the EEA2 form is submitted as proof of the company’s compliance with the Employment Equity Act (unless you are exempt from doing so). During verification of a company’s BEE scorecard, verification agents require the EEA2 form as supporting documentation when considering the Employment Equity and Management Control elements,” advises Levenstein. “We find that verification agencies do not operate uniformly with some saying you lose all of your points if you do not submit an EEA2, therefore it is best to just submit the form.”
What constitutes a designated employer?
Companies that employ 50 people or more or their annual turnover threshold is equal to or more than the amounts below:
What information is required in the EEA2?
The employer’s details are required along with a workforce profile which includes:
- Occupational categories (total number of employees including those with disabilities)
- Occupational levels (top management, senior management, middle management, junior management, semi-skilled and unskilled employees)
- Core operational functions which are positions that are related to the heart of the business and could lead to profit (e.g. sales department) and support functions (e.g. accounts department).
- Further to this data on workforce movement relating to recruitment, promotions (employees that were promoted in each of the occupational levels) and termination should be stipulated; clearly indicating where this is applicable to persons with disabilities.
- Large employers also need to provide information relating to all disciplinary actions that took place within the 12 months prior to the report.
- Skills development and training information specifying the total number of employees within the company who underwent training, including those with disabilities should be provided.
- A qualitative assessment (only applicable to larger employers) and, as of the second round of submission, a progress report are also required.
- Regular consultation with the Department of Labour is advised in order to get a precise idea of the requirements.
BBBEE Share Schemes – A Ticking Time Bomb?
At the forefront of these mechanisms are employee share schemes.
Since the promulgation of the amended codes of good practice under the Broad Based Black Economic Empowerment Act 53 of 2003, as amended (“BBBEE” or “the Act”), compliance with the ownership element has become a compulsory compliance element for both Qualifying Small Enterprises (“QSE” having between R10 and 50 million annual turnover) and generic enterprises (over R50 million annual turnover). As a result, businesses have found themselves considering mechanisms which aim to address this element. At the forefront of these mechanisms are employee share schemes.
The first of these structures were constructed in the early 2000’s by JSE listed companies. The aim of these structures were essentially two-fold:
- An employee retention strategy similarly constructed as executive share schemes in many ways, and
- Compliance with BBBEE.
These structures have recently been under the spotlight again . Mainly because of the questions it raises in terms of whether it is true empowerment or not.
For businesses wanting to utilise these structures, a number of aspects are to be considered:
- Employers and employees stand in a vertical relationship with one another. This is because the employer directs the expectations and the standards of the services exchanged between them. Shareholders, on the other hand, are in a horizontal relationship as they are equally entitled to regulate and direct matters which may affect their shareholding or investment. So, to shift from a vertical to a horizontal relationship requires the necessary professional inputs, management and attention.
- These share schemes are separate entities that require the necessary attention and inputs. As such, it is not just a case of setting it up and it simply running itself.
- These structures need to have a shelf life in my view. In this regard, I mean that a clear commercially feasible strategy needs to be devised and implemented in regards to the trust. This would include a structured plan whereby employees would not only be entitled to dividends but would also have the opportunity to up-skill and to improve themselves in various ways. The financial benefits should aim to facilitate direct ownership.
It is important to remember that inviting partners to sit at the table, needs to fully embrace the concept. If it does not, it not only negatively impacts the relationship, but disempowers the people involved. The human aspect thereof is as devastating as the legal non-compliance which may even go as far as constituting fronting.
Related: The 5 Elements Of BBBEE
In order to avoid this, these structures need to be setup correctly and managed correctly, which means:
- The trust deed must clearly define the beneficiaries and the proportion of their right to receive distributions;
- The trustees must actively take part in managing the trust at a level similar to the management role of shareholders in a company having a shareholding;
- Based on the aforesaid, in my view, the trustees should be appointed by the beneficiaries;
- A written record must be kept identifying the beneficiaries as well as prove that they fall within the designated groups as defined in the Act. The trustees must have no discretion in this regard;
- A written record must be kept of fixed percentages of claims or outlining formulas for calculating claims. The trustees must have no discretion in this regard;
- The trustees must present the financial reports of the trust to the beneficiaries yearly at an annual general meeting of the Trust;
- The trust deed or other relevant statutory documents of the trust must be made available, or on request, to any beneficiary in an official language in which that person is familiar;
- On winding up or termination of the trust, all accumulated interest must be transferred to the beneficiaries or to an entity representing the interests of the participants or class of beneficiaries.
Expert professional guidance is therefore crucial in order to avoid these structures becoming your own ticking time bomb.
How Incubator Project National Gives Your Enterprise a One-Stop-B-BBEE Shop
Turn your B-BBEE compliance spend into investment spend in 2017.
- Contact: +27 (0)12 259 0057
- Email: firstname.lastname@example.org
- Visit: www.theinvestmenthouse.co.za.
B-BBEE does not have to be a one-sided redistribution of wealth and power. “There certainly is a way to turn your compliance spend into investment spend. This year we are giving corporates the one-time opportunity to be part of our unparalleled Project National,” says Jack Janse van Rensburg, director of The Investment House.
“Project National is a complex incubation model that provides a one-stop-solution to empower, develop and skill South African entrepreneurs.”
Related: How To Get Your B-BBEE Money Back
The Investment House’s incubator concept, Business Mastery Program, is designed for “strategic accelerated business serendipity,” according to Janse van Rensburg.
Project National is realised nationwide in multi-industrial hubs, which create a strategic accelerated business serendipity through establishing a complete supply chain, or ‘one-stop shop’ for the public, for large scale tenders and corporates.
The unique benefits for participating enterprises include:
- Increased opportunities to be part of complex tenders and contracts
- Immediate market access through internal hub usage of each other’s services and products
- Increased marketing and sales opportunities through beneficial location strategy (at convenient, easily accessible and visible shopping malls/office parks)
- The greater chance of interactions that give birth to new ideas and collaborations
- Increased learning and development opportunities through small, medium and corporate business partnership (business skills transfer, mentoring, industry-specific training).
Project National is an unparalleled incubator concept in South Africa that brings a wide array of business advantages and B-BBEE-ROI opportunities to corporates, who can choose to make either monetary or non-monetary contributions within their B-BBEE spend.
Related: To B-BBEE Or Not To B-BBEE
How your B-BBEE compliance spend turns into investment spend with Project National:
1Create a consistent supply chain
Through your involvement in Project National, your struggle with inconsistent and unreliable supply chains can be over. Project National provides you with suppliers who can supply on demand, in the right quantity, to the right quality and the right price. More control and insight into your supply chain creates better competitiveness for your business.
2Extend your sales arm into new markets
Project National entrepreneurs provide you with an extended and widened sales arm into various different markets and distribution chains through the development of entrepreneurs acting as resellers of your product.
3Diversify your product range
Buying and financing assets can be a difficult task, therefore it’s often not possible for companies to diversify their range. Project National’s black owned start-up enterprises are more likely to obtain funding for assets and equipment and can therefore be a great asset to you when becoming a supplier to your company, allowing you to diversify your product range by outsourcing production of new components.
4Allow for lower imports
It can be hard to compete with Chinese imports on a price and now even a quantity level. While the demand for low quantities and tailor-made products is high, it’s hardly profitable for many big corporates. Project National’s entrepreneurs leave the doors open for you as they are smaller and organisational overheads are lower; making it profitable to manufacture lower quantities.
Be part of The Investment House’s unique incubator concept and see your ROI on your B-BBEE spend flowing.
How To Get Your B-BBEE Money Back
B-BBEE does not have to be a one-sided redistribution of wealth and power. In fact, B-BBEE done properly can offer a highly valuable return on investment — especially within the Enterprise and Supplier Development (ESD) element.
“There certainly is a way to turn your compliance spend into investment spend. And this year we are giving corporates the one-time opportunity to be part of our unparalleled ‘Project National’,” says Jack Janse van Rensburg, director of The Investment House.
“‘Project National’ is a complex incubation model, providing a one-stop-solution to empower, develop and skill South African entrepreneurs,” he explains.
The Investment House’s incubator programme, Business Mastery Program, is designed to display fundamental insights into business environments and requirements as well as social and educational challenges in South Africa. It provides a sustainable and integrated solution for long-term entrepreneurial development.
Related: To B-BBEE Or Not To B-BBEE
The advantage it has over other incubation centres is the strategic concept of ‘Project National’, which combines different industries in one hub. All these industries make use of each other’s services and products and are able to provide combined services to their clients — especially complex contracts and tenders.
Unique incubator concept of ‘Project National’
‘Project National’ incubator hubs offer a one-stop-shop and therefore a convenient solution for any corporate or government institution looking for a comprehensive and wide array of services or products.
Business Ripple Effect
Through this supply chain model every additional large business contract for one enterprise automatically benefits other enterprises in the hubs due to the multiplication of services required.
Entrepreneurs in the hubs use each other’s services immediately and therefore create immediate markets for each other.
Fostering Entrepreneurial Culture
Our multi-industry incubation hubs foster an entrepreneurial culture of innovation, networking and technology transfer. Multi-industrial hubs increase the prospect of interactions that give birth to new ideas and collaborations.
‘Project National’ is an unparalleled incubator concept in South Africa that brings a wide array of business advantages and B-BBEE ROI opportunities to corporates that can decide to make either momentary or non-monetary B-BBEE contributions as part of their B-BBEE spend.
How your B-BBEE compliance spend turns into investment spend with ‘Project National’
Create a consistent supply chain
Involvement in ‘Project National’, can end your struggle with inconsistent and unreliable supply chains. ‘Project National’ provides you with suppliers who can supply on demand, in the right quantity, to the right quality and at the right price. More control and insight into your supply chain creates better competitiveness for your business.
Extend your sales reach into new markets
‘Project National’ entrepreneurs provide you with an extended and widened sales reach into various markets and distribution chains through the development of entrepreneurs acting as resellers of your product.
Diversify your product range
Buying and financing assets can be a difficult task and it is often not possible for companies to diversify their range. ‘Project National’s’ black-owned start-up enterprises are more likely to obtain funding for assets and equipment and can therefore be a great asset to you when becoming a supplier to your company, allowing you to diversify your product range by outsourcing production of new components.
Allow for lower imports
It can be hard to compete with Chinese imports on price and quantity. While the demand for low quantities and tailor-made products is high, it is hardly profitable for many big corporates. ‘Project National’ entrepreneurs leave the doors open for you as they are smaller and organisational overheads are lower, making it profitable to manufacture lower quantities.
Be part of The Investment House’s unique Incubator Concept and see your ROI on your B-BBEE spend flowing.
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