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Labour Law

SMEs and Employment Equity

Getting your head around the Employment Equity Plan.

Denvor Phokaners

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South Africa faces many challenges regarding inequality, namely poverty, education, health care, unemployment, housing, gender issues and so on. Employment equity aims to promote fairness and to ensure that past actions responsible for such inequalities are dealt with.

It was for these reasons that the Employment Equity Act, No. 55 of 1998 (“the Act”), was established. The ultimate goal is to remove unfair discriminatory barriers of the past and to promote equity in the workplace.

The Act affects all employers and workers, with a few exceptions. All employers who employ more than 50 employees or who have a turnover in excess of the amounts specified in the Employment Equity Act are legally obligated to comply with Chapter III of the Employment Equity Act. In addition, all employers (regardless of their size and turnover) are obligated to comply with Chapter II of the Act. Employers and employees from the National Intelligence Agency, the South African National Defence Force and the South African Secret Service, are not affected by the Act.

Responsible employers

Through implementation of the Act, employers become responsible for the development of the Employment Equity Plan. It serves to promote equal opportunities in the workplace. This is done by removing unfair discrimination based on the grounds of race, gender, sexual orientation, pregnancy, marital status, family responsibility, ethnic or social origin, colour, age, disability, religious belief, political opinion, language or HIV status. For example, it would be illegal for a woman and a man doing the same job to get different salaries.

On the other hand, there is also what is called ‘fair discrimination’. This entails discrimination taking place if it forms part of an affirmative action programme, which is in line with the Act. Fair discrimination is also allowed if it is an intrinsic requirement for the job. For example, a job as a company accountant could require a degree in accounts, while a job as a French translator would require the applicant to be fluent in French.

The Act also aims to promote affirmative action. In other words, larger employers are required to take the necessary steps to improve the workplace situations of Black people (Africans, Coloureds and Indians), women and people with disabilities.

Developing the plan

So how does one go about developing the Employment Equity Plan? Development of the plan is the responsibility of a designated employer. It should take place in consultation with the workers. Once the consultation process is agreed on, the plan should be made available to the workers.

After consulting with the employees, the employer should conduct an analysis, prepare the Employment Equity Plan and report any progress regarding implementation to the Director-General.

The contents of an Employment Equity Plan should include the following:

  • objectives to be achieved during each year
  • The affirmative action measures to be implemented
  • Information on where under-representation of people from designated groups has been identified, the numerical goals, a timeframe and strategies to reach these goals
  • The timetable for each year of the plan outlining achievement of goals and objectives other than numerical goals
  • The duration of the plan (It may not be shorter than one year or longer than five years)
  • The procedures that will be used to monitor and evaluate implementation and whether reasonable progress is being made
  • The internal procedures followed to resolve any dispute about the interpretation or implementation of the plan
  • The workforce, including senior managers, responsible for monitoring and implementing the plan
  • Any other prescribed matter or measures that are consistent with the purpose of the Act

If employers fail to comply, the Department of Labour could issue compliance orders. If non-compliance continues, the Labour Court could be approached to enforce the orders. The Labour Court could also issue financial penalties ranging from R100 000 to R500 000 for first time offenders and up to R900 000 for repeated non-compliance.

Designated employers are required to report on Employment Equity by sending an Employment Equity Report to the Employment Equity Registry. This should be done by the legislative reporting deadline, which is the first working day of October.

Reports should be posted to:

Employment Equity Registry

Department of Labour

Private Bag X 117

Pretoria

0001

Tel: +27 (0)12 309 4043/4330/4423/4898/4738

Fax: +27 (0)12 309 4737/4188/4739

Reports could also be handed in at the Department’s Provincial Office or Labour Centre in an envelope clearly marked ‘Employment Equity Registry’.

Denvor Phokaners spent 15 years in business development in South Africa and abroad before launching his enterprise development consultancy, Enterprise Development Essentials.

Labour Law

Dealing With Decision – Making Deadlocks In Private Companies

Effective decision – making is an important part of running any Business or Company.

Nicolene Schoeman-Louw

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In essence, Companies are governed by the democratic principle on both Shareholder and Board level. This means that the majority rules both on Shareholder and on Board level.  What is important to note though, particularly on Shareholder level is that besides the underlying asset value particularly in Private Companies, the ability to exercise effective control over the business and its assets by being a Majority Shareholder carries considerable economic value. Conversely Minority Shareholding, although Minority Shareholders enjoy increased protection under the new Companies Act 71 of 2008 as amended, carries a lesser economic value and is often difficult to market and sell to Third Party Buyers. For this reason, Majority Shareholders are often reluctant to relinquish the effective control they hold.

The role of a Shareholder and Director are distinctly different from one another as will be investigated briefly through this article. Sound governance principles are in writer’s view key in avoiding decision – making deadlocks on both levels and further, to maintain healthy relationships between Shareholders and Board members.

The distinction between Shareholders and Directors

Shareholders own shares in the Company.  They are therefore  Investors who are key in making certain decisions. Directors on the other hand, are Members of the Board and attend to the day- to- day running of the Company. Both Board and Shareholder decisions are made by way of resolution.

Related: Solutions To Get Your Business Through Tough Times

Shareholder and Director decision- making

Shareholder votes are directly correlated to the amount of shares they own in the Company. Directors on the other hand, generally only have one vote each and resolutions are taken on majority vote.

It is important to distinguish which decisions are for the Board and which are for the Shareholders. The Memorandum of Incorporation (“MOI”) is instrumental in outlining this.

There are two types of resolutions in Shareholder meetings, ordinary and special resolutions. Generally speaking, ordinary resolutions require a 50% support and special resolutions 75%. Accordingly, more sensitive decisions are taken by special resolution. Section 65 of the Companies Act lists special resolutions for Shareholders. Examples include amending the Company’s (“MOI”), to approve the issue of shares and entering into fundamental transactions. This in addition to any matter prescribed to be considered by special resolution in the Company’s MOI.

Proposed resolutions must be sufficiently clear and accompanied by information enabling the Shareholder entitled to vote whether or not to vote in favour thereof. If this is not the case, the Companies Act prescribes that such a Director or Shareholder may request such information or explanation regarding a proposed resolution. If  it is still insufficient a Shareholder may, before the start of the meeting, “seek leave to apply” to Court for an order restraining the Company from putting the matter to the vote and requiring the Company to amend the proposed resolution to comply with the requirements.  Importantly, the above remedy cannot be applied after the meeting has taken place.

What happens in a deadlock

A deadlock is a situation, typically one involving opposing parties, in which no progress can be made. In essence this means that equal amounts of votes are both for and against a decision.

Deadlocks can be easily avoided in Shareholder’s meetings by dividing the shareholding in such a way that all combinations lead to a majority vote or casting vote. This of course does not ensure that all decisions or processes will be dispute- free, but at least avoids the clear threat of a deadlock when a Company is owned by for example two Shareholders each holding 50% of the shares.

Directors generally only have one vote each, however many Companies afford the Chairperson of the Board an additional vote or casting vote, usually exercised in cases of deadlock.

Related: When To Collaborate And When To Employ

Where deadlocks arise on Shareholder or Board level, consultation with an Independent Expert, mediation  or arbitration can aid in the breaking of a deadlock. However, where this fails, the repercussions may be devastating.  In terms of Section 81 any Director or Shareholder may apply to Court for the winding up of a Company.

When deciding on shareholding allocation it is important to consider the practical and mathematical probabilities of deadlock. The underlying reasons for deadlocks are complex considerations involving in writer’s view the essence of the human experience. The most important of these considerations, is crucially that Shareholders share the same values and vision for the Company. This will safeguard the relationship between them and ultimately may aid in avoiding potential deadlocks.

Boards should be diverse and Directors only focused on acting in the best interests of the Company.

Ideally Shareholders and Directors should not be the same individuals but be two distinct bodies serving the Company. If this is not the case though, those Companies should ensure that Shareholder- Directors understand the differences in the decision-making processes and the purpose thereof.

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Labour Law

When To Collaborate And When To Employ

To help you navigate the maze we have constructed some key questions.

Nicolene Schoeman-Louw

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Given the complexity of the labour legislation in South Africa, entrepreneurs are often reluctant to employ and rather look at other forms of agreements to achieve the same outcome. There are instances when it is more appropriate to contract in a different way, but it is important that these reasons are sound.

A number of alternatives could be plausible to consider, these include: Agency, Distribution, Independent Contractor or Supplier Agreements. To help you navigate the maze we have constructed some key questions.

1. Supplier

Question: Is this a unilateral arrangement (to some degree)? In other words, will one party supply or provide something to th other in exchange for payment?

Required Document: Clients or customers are typically engaged by agreement, usually a form of terms and conditions or perhaps even an agreement detailing credit terms. An important provision to include is the aspect of confidentiality and data protection / security. This is crucial from both a customer and supplier perspective.

Related: What Is The Legal Impact Of Acknowledgements?

2. Agency

Question: Do you want to engage multiple people or organisations to sell the goods or services you supply?

Required Document:  An agency agreement could either relate to an individual or an organisation. This means an individual or a business could represent the supplier of the goods or services and earn a commission or remuneration for actual sales. One of the advantages is that this does not create the commitment usually associated with an employment relationship, however, a number of aspects should be carefully considered or constructed including the agent’s powers of representation and some checks and balances should ideally be in place to ensure that these are not exceeded. The process of adjusting commissions in certain instances such as customer complaints or returns.

3. Distribution

Question: Do you sell and market goods? Are you concerned about multiple people or organisations selling the goods you supply, overstepping? Rather prefer that the goods be purchased and delivered to the end consumer from there?

Required Document: A distribution agreement detailing the price to be paid, passing of risk, storage and logistics. This is usually a more appropriate arrangement for a larger scale manufacture or export business. It could also be suitable (where logistics and storage would be less important) for software products. 

Related: The Differences Between A Supplier Relationship, Agency And Distributor

4. Independent Contractor

Question: Have you contracted with an organisation and require a skill you don’t have, to perform the contract only for purposes to finish the contract or project involved? There is no need for the person only working for you.

Required Document: An independent contractor agreement detailing remuneration and term being linked to the contract or project. There is a fine line between these arrangements, labour broking and employment. It is therefore crucial to understand the risks involved and to seek professional guidance when electing to proceed this way. 

Conclusion

It is best to strategically assess your risks, intentions and needs before electing which agreement to use. Contact an expert at SchoemanLaw today.

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Labour Law

An Ongoing Debate: Labour Brokers And Outsourced Labour To Keep Businesses Lean

Every business reaps the consequences of political actions in some way; coupling this with political uncertainty, slow economic growth and an underperforming Rand has brought some businesses to their knees.

Kristly McCarthy

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Creating scalable businesses in a tough economy has become particularly eminent in 2018. No stranger to uncertainty, the construction sector, for instance, further plummeted in 2017 and these results have rippled through into this year.

Every business reaps the consequences of political actions in some way; coupling this with political uncertainty, slow economic growth and an underperforming Rand has brought some businesses to their knees.

Wayne Bartlett, Contracts Director for Bartlett Construction says that more than 19 000 jobs were lost in the construction sector alone last year. With the company’s long-standing history of more than half a century in South Africa, Wayne says that we are now seeing more diversification and lean business practices than ever before.

“We are seeing established companies reinvigorating their brands and business strategies. This is not a bad thing – it helps to grow the economy in other areas and establishes more resilience and perhaps more effort by businesses today. Complacency is no longer an option and as such as property management, social housing, renewable energy projects and road infrastructure are just some of the ways that traditional construction companies have branched out,”

Discussing the role that labour brokers in the construction industry and outsourced labour the country over plays, Wayne says: “While physical labour is key in every industry, we see companies reducing their risk by outsourcing work. This creates employment opportunities, funds small businesses and nurtures fresh thinking”.

Related: SA’s Labour Laws: Key Changes And How They Will Affect You And Your Business

Speaking to the topic of mechanisation in industry, Wayne says that while this is on the rise, bricks and mortar still plays a crucial role in business. “More than ever, consumers want value. We want to touch, see and experience what we pay for”.

Skilled labour shortage in South Africa has always been an issue. “We couple this with the need to compete on price whilst factoring in labour issues, BEE policies, trade unions, various regulatory changes and labour brokers”,

In February of this year, third-party suppliers once again came into the spotlight with labour brokers arguing that removing them from the employment equation would trample the rights and protection of employees.

“Despite conflicting views, labour brokers still have a role to play in uncertain economic times, provided that they are properly regulated. This market is huge for people wishing to enter the workplace and needing a platform to do so” Wayne continues.

Wayne concludes saying: “With the YES initiative soon coming into effect, the construction industry looks to empowering and upskilling the youths both in-line with labour brokers and as individual entities.”

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