Although the Employment Equity Act (EEA) was introduced 13 years ago, there are new businesses that find themselves needing to comply with EE provisions every day. And even though it shouldn’t be, we find that the concepts of ‘affirmative action’, ‘employment equity’ and ‘annual reporting’ are still rather daunting for many business owners – but you don’t need to be fearful and confused, because complying with the EEA is a lot easier than you may think.
Worldwide, men used to be considered the main breadwinners, thus relegating their economically active female counterparts to jobs and careers that paid inferior salaries and provided limited opportunities. South Africa was no exception to this phenomenon – except here, we had further inequalities and lack of opportunities based on gender and on race. Therefore, the EEA was introduced to change that landscape.
Complying with the EEA
Effectively, only companies that employ 50 or more people are required to comply with the Act. In reality though, your turnover within your industry may place you in a category where you are also required to comply, so it’s really best that you voluntary comply from the outset and avoid any stress down the road.
AA vs EE
Affirmative Action is meant to be a short-term labour policy that makes provision for preferential treatment for people who have historically been marginalised in the workplace and have not enjoyed equal access to employment and promotion opportunities.
Employment Equity on the other hand, is a long-term labour policy that aims to ensure true diversity within the workplace, across all organisational levels and in all occupations.
So, in short, AA tries to correct the workplace inequalities of the past, whereas EE tries to ensure that the situation never repeats itself and that all South Africans, regardless of race, gender or physical or mental ability, have equal access to employment opportunities and to advancement within the workplace.
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Black Owned Businesses Need to Be BEE Compliant Too. Here’s Why
5 steps to workplace diversity
Here are 5 easy steps that you can apply in your business, to ensure that you are complying with the principles of the EEA, even if you are not legally required to submit annual (150 or more employees) or bi-annual (50 to 150 employees) reports to the Department of Labour.
1. Analyse your workforce
In order to identify the demographic (race and gender) profile within your business, you can conduct a simple exercise whereby all your employees complete an EEA01 form (available free from the www.labour.gov.za) confirming their gender and their race for your records. All you need to do is collate the information and identify your overall demographics, as well as the breakdown of genders and races at each occupational level (from junior to most senior management).
By performing this exercise, you will soon see where you have ‘under-representation’ of racial groups or of specific genders or people with disabilities in your business and you can use that information to start working on an EE Plan.
2. Start compiling a general EE Plan
Consider the likelihood of organisational growth and expansion, and analyse previous trends such as resignations, retrenchments, promotions and the like. Use this information to predict your staffing requirements for the next 12 to 24 month period – how many employees are you likely to need, at what level within the company, during this time.
You will now be able to see how it may be possible to improve diversity by recruiting and appointing future employees from the groups that are under-represented in your organisation.
3. Get your policies and procedures in order
Make sure that you have indicated a commitment to EE (and possibly even AA) in corporate policies and make sure that there are no barriers to the recruitment and advancement of women, people with disabilities or people of different races, cultural backgrounds or religious beliefs, in your recruitment policy. You may need some external help with this exercise, or you may wish to purchase a standard, off-the-shelf type procedure manual that allows you to easily customise policies according to your requirements.
Many employees are afraid that the introduction of AA or EE initiatives in their workplace will mean that they cannot be promoted in future or that they will end up losing their jobs. Make sure that you eliminate fears and rumours by openly and continuously communicating and consulting with your employees about the demographic status quo, under-representation and any possible future plans. Also make sure that you clearly display a summary of the EEA (available from various vendors and from the Government Printer) in a place where all your employees can see it.
5. Pay equal money for equal work
Take steps to ensure that you are paying the same salaries for the same jobs, regardless of the race, gender or physical/mental ability of the people performing those jobs. You can purchase salary survey information from various vendors and you can also introduce basic job grading systems in your company to ensure fair remuneration across the board. If you do want to differentiate salaries, make sure that you can justify these on the basis of objective criteria, such as paying for performance, or length of service.
Complete these easy steps and you are well on your way to complying with the EEA.
It’s Do Or Die In BEE Compliance
What this means when doing business in South Africa.
More and more, we see businesses and BEE verification firms coming under the spotlight for fraud and non-compliance. BEE ratings are viewed as a ‘hot commodity’ and many BEE services firms have popped up over the past few years to accommodate the demand.
Pressure mounts on businesses to reassess their skills development spend, youth contributions, ownership and management structures in-line with the BEE scorecard, and the Government has been particularly verbal in highlighting the need for BEE compliance.
AJ Jordaan, Sales Manager for leading BEE-aligned Skills Development training company, LFP Training says that its more than compliance – it’s a way of life for businesses today. “Over time, businesses have realised that while they are doing almost everything right, what would make or break a deal could very well be their BEE rating,”
“Businesses receive additional points for doing business with BEE-compliant companies. Enterprise & Supplier Development is key to a firm’s business strategy. With legislation changing on a regular basis, we always advise that clients do it right from the get-go,”
Related: How Do I Become B-BBEE Compliant?
A scorecard is not a target – it should be incorporated into a business’s vision and growth strategy; it is just as important as any other top-line business matter these days. “With the need for more and more guidance in the realm of BEE, more suppliers have popped up to provide strategic counsel and it’s easy to get caught up in the ‘hype’. Terminology, weightings, paperwork and implementation are daunting tasks, but with so many businesses still failing their BEE audits – even under advisory – how do we know who to trust?
“Referrals by word of mouth are always great. I also believe that businesses must ask for a company’s success rate and previous customer testimonials. More than anything, the consultant/ BEE supplier that a company chooses must understand how to truly implement BEE strategies to achieve exactly what it’s there for – to empower the previously disadvantaged and help bridge gaps in society” says AJ.
With all the hype, we forget about what its there for. “Trading in points is not the intention; the end goal is economic transformation and fair opportunities for all,” he continues. “If a company fails its BEE audit, it’s essentially failed to promote exactly what BEE is all about. Money has been wasted and no transformation has really occurred. Partnering with a credible and knowledgeable partner is therefore key.”
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: email@example.com
- 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.
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