New draft Employment Equity sector targets – What does this mean for employers?

The Department of Employment and Labour has just concluded seven days of virtual consultation sessions with employers and industry stakeholders across all industry sectors to discuss the proposed Employment Equity numerical sector targets. This follows on from the announcement of the commencement of the Employment Equity Amendment Act, No. 4 of 2022 (“EE Amendment Act”) on January 1, 2025. Sector Targets are a new concept introduced in the EE Amendment Act.

The Human Alliance team attended all the consultation sessions. In summary, the following key points emerged:

• The proposed Sector Targets have increased since the drafts issued in May 2023 and February 2024.
• Despite stakeholders expressing concerns regarding the insufficient preparation time for meaningful consultation – including some stiff objections in some of the sessions – it appears that the Department will forge ahead and finalise the sector targets.
• We can expect two sets of Employment Equity Regulations to be published in the official gazette by the end of March 2025.

EMPLOYERS WITH UNDER 50 EMPLOYEES (i.e. NON-DESIGNATED EMPLOYERS)

Companies with 1-49 employees are now deemed “non-designated” employers with effect from 01 January 2025 and no longer need to comply with Chapter 3 of the Act, i.e. no longer need to submit Employment Equity reports. This is irrespective of turnover as Schedule 4 of the EE Act has been repealed and turnover is no longer a factor to determine if a company is deemed a designated employer. The exception is employers bound by a Collective Agreement and any Organ of State. These employers must continue to comply with Chapter 3 of the EE Act, as amended, irrespective of size.

How to Deregister?  Deregistration for employers in this category who had previously reported will be automatic by the Department. However, employers who had previously reported with more than 50 employees but now have less than 50 employees, will need to submit a deregistration letter to the Department by no later than 31 August 2025.

Non-designated employers can no longer voluntarily submit EE reports but must still comply with Chapter 2 of the Act which prohibits unfair discrimination.

EMPLOYERS WITH 50 OR MORE EMPLOYEES (i.e. DESIGNATED EMPLOYERS):

Key points to note for these employers are:

• All Employment Equity Plans must now comply with a standardized time frame commencing 1 September 2025.
• Where current Employment Equity plans are due to expire before 1 September 2025, the Department suggests that employers extend these plans, through proper consultation, until 31 August 2025.
• Leading up to the implementation of the new EE plans, designated employers must conduct a new workforce profile analysis by benchmarking their latest workforce profile against
  • National or Provincial Economically Active Population (EAP) statistics and
  • the applicable sector target.
• Designated employers must set their own year-on-year targets, based on their analysis and ensure that the year-on-year targets in their Plan culminate in the achievement of the sector targets in year 5, i.e. 2030.
• The reporting period to be used for Employment Equity Reports has also been standardized. Employers will be required to report their workforce profile snapshot as at 31 August 2025 when reporting at the end of the year. This is to ensure that all designated employers report on the same snapshot each year.
• The workforce movement report, i.e. recruitment, promotions and terminations must be reported on for period 01 September 2024 – 31 August 2025.
• The same periods will be carried forward each year, i.e. 01 September – 31 August

UNDERSTANDING THE SECTOR TARGETS:

• Sector targets are 5-year milestones towards reaching the EAP at each managerial level from Junior Management (including Skilled Employees) to Top Management, i.e. the upper four occupational levels.
• Sector targets are lower than the EAP statistics but are higher than the existing workforce profile representation per sector as reported by designated employers in 2024.
• If employers have already surpassed the sector targets, these employers must set targets to reach the EAP (either Provincial or National based on the employer’s selection).
  
• The 18 sector categories are broad. Sub-sector targets are not in place.
• The draft sector targets issued in May 2023 only referred to Black (African, Coloured and Indian) employees and excluded White Females. However, the Department has reverted to the terminology of ‘Designated Groups’ as set out in the EEA, which includes all females.
• The breakdown across the demographic groups is, however, not provided and needs to be calculated manually based on either Provincial or National EAP figures.

JUSTIFIABLE REASONS

When reporting online, employers will need to select a justifiable reason(s) for not achieving year-on-year numerical targets, if this is the case.

Of course, the Department may select the employer for an audit and request evidence to support the justifiable reasonable ground.

The 7 justifiable reasons are:

• Insufficient recruitment opportunities.
• Insufficient promotion opportunities.
• Insufficient available individuals from the designated groups with the relevant qualifications, skills and experience.
• CCMA awards/court orders.
• Transfer of business.
• Mergers/acquisitions and
• Impact on business economic circumstances.

EMPLOYMENT EQUITY COMPLIANCE CERTIFICATES:

Who needs a compliance certificate? Employers will require a compliance certificate if they wish to participate in government tenders or contract with any Organ of State. It may also be required by B-BBEE verification agencies as proof of compliance in future.

How to get a Compliance Certificate? Employers will be able to request a compliance certificate at the same time as submitting their Employment Equity Report (EEA2 & EEA4) using the same EE online system. Employment Equity compliance certificates will only be issued for the first time during the 2025 reporting season.

What are the criteria for the issue of a Compliance Certificate? When requesting the certificate for the first year of assessment i.e. up to 31 August 2025, employers will have to confirm that they have had no findings against them by the CCMA or Labour Court for unfair discrimination and declare that they are adhering to the minimum wage legislation for the previous 12-month period or are exempt from doing so.

For Year 2 – 4 (2026 – 2029), employers will also need to have achieved their yearly planned numerical targets or have a justifiable reason for not doing so in addition to the above-mentioned requirements in Year 1.

Likewise in Year 5 (2030), employers will need to have achieved their sector target or have a justifiable reason for not doing so.

Can non-designated employers also apply for a compliance certificate? Non-designated employers (i.e. less than 50 employees) will be able to apply for an Employment Equity compliance certificate using the same Employment Equity on-line portal. They will need to declare that they have had no findings against them by the CCMA or Labour Court for unfair discrimination and declare that they are adhering to the minimum wage legislation for the previous 12-month period.

Can the Compliance Certificate be withdrawn? The Compliance Certificate may be withdrawn at any time subject to an inspection or audit by the Department. Employers are therefore encouraged to keep a portfolio of evidence of reasons for non-conformance.

WHAT’S NEXT?

We will assist our clients to conduct a gap analysis against the sector targets and will advise regarding the planning process against the sector targets to ensure compliance.

We encourage other employers to reach out to us for support in planning and implementing strategies ahead of the upcoming EE reporting season.

Contact Human Alliance for more information.

Thea Marais – thea@humanalliance.co.za

Menet Hamel – menet@humanalliance.co.za

Nola Erasmus – nola@humanalliance.co.za

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)