South Africa’s new transformation law: What you need to know

The newly amended Employment Equity (EE) Act, which gives the employment and labour minister the authority to regulate sector-specific EE targets and compliance requirements, has the potential to have a significant impact on businesses in South Africa, according to legal experts at Cliffe Dekker Hofmeyr (CDH).

The newly revised EE Act will go into effect in September 2023 after receiving the president’s approval. The law intends to facilitate South Africa’s workplace transformation and ease company operations for small and medium-sized firms (SMEs).

The word “designated employer” is crucial to understanding the legislation changes, as it is these firms that the rules specifically target, according to CDH.

According to the existing law, a “designated employer” is defined as either an employer with 50 or more employees or a firm with fewer than 50 employees who, depending on the relevant industry, has an annual turnover that is equivalent to or over the criteria established by the EE Act.

She continued by saying that if a company fits the description of a designated employer, the EE Act must be followed. People who do not fit the definition, however, are excluded from compliance but are willing to do so voluntarily.

This designated employer definition has altered as a result of the amended bill, according to Butcher. Employers with fewer than 50 employees, regardless of their yearly turnover, will no longer be included in the designated employer definition and, as a result, will not be required to comply.

This appears to be a move by the department of labour to support the growth of small businesses and ease doing business in South Africa since they won’t have to create and implement EE plans or submit EE reports to the department, she said, amid complaints from SMEs that the current bill is quite onerous.

The fact that these businesses will not be compelled to take action to guarantee that appropriately qualified individuals from designated groups have equal employment opportunities and are represented at all occupational levels in the workplace is quite a major change, according to Butcher.

In order to identify job barriers for targeted groups, it is not necessary to analyse employment rules, practices, and processes in the workplace.

She did, however, clarify that whether or not a company is a designated employer, it is still subject to the EE Act’s restriction on unfair discrimination.

Butcher highlighted that the ability of the employment and labour minister to control sectorial EE targets and compliance requirements is the most significant shift for large companies that meet the criterion of a designated employer.

This indicates that the minister will have discretion over the EE targets for certain sectors. Although these targets are not yet known, Butcher said that designated employers must closely monitor the regulations the minister enacts since they will have a substantial practical impact on how they comply with the act.

She continued by saying that the department’s goal in carrying out these various aims is to guarantee fair representation of people from historically underrepresented groups, such as race, gender, and disability, at all levels of employment.

According to Butcher, prior to the modification, firms could determine their own objectives in accordance with the EE Act by taking into account a variety of variables such as employee turnover, organisational growth, the availability of talent, and the population that is economically active.

Now that the minister has this authority, she continued, whatever numerical goal he sets will have to be met, which means any EE plans that were initially expected to last between three and five years would be abandoned and require a significant amount of work to be redone.

Thembinkosi Mkalipi, acting deputy director-general of Labour Policy and Industrial Relations, announced that a new EE online assessment system would be developed to track the accomplishment of sector targets. The assessment will be carried out once a year.