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Employment equity: To comply or not to comply – a basic guide

Employment equity: To comply or not to comply – a basic guide

Employers often believe that the submission of the yearly report to the Department of Labour on the first working day of October guarantees them compliance with the Employment Equity Act and that they may rest assured until the next year’s submission date.

This is unfortunately not true and these employers may face fines for non-compliance with the Employment Equity Act.

Who Must Comply?

All employers must comply with Chapter 2 dealing with the prohibition of unfair discrimination. Furthermore, the Employment Equity Act 55 of 1998 (EEA) stipulates that all ‘designated employers’ must comply with Chapter 3 dealing with affirmative action. ‘Designated Employers’ are defined as:

a)    a person who employs more than 50 employees;

b)    a person who employs fewer than 50 employees but has an annual turnover which is equal of above the applicable annual turnover of a small business in terms of Schedule 4 of the EEA;

c)     a municipality;

d)    an organ of state; or

e)    an employer bound by a collective agreement which appoints it as a designated employer.

In short, every employer with more than 50 employees has to comply with the EEA. Also, even if the employer employs less than 50 employees but its annual turnover is equal or above the following thresholds for their specific sector, that employer has to comply:

Sector or sub-sectors in accordance with the Standard Industrial Classification

Total annual turnover


 R 6,00 m

Mining and Quarrying

 R 22,50 m


 R 30,00 m

Electricity, Gas and Water

 R 30,00 m


 R 15,00 m

Retail and Motor Trade and Repair Services

 R 45,00 m

Wholesale Trade, Commercial Agents and Allied Services

 R 75,00 m

Catering, Accommodation and Other Trade

 R 15,00 m

Transport, Storage and Communications

 R 30,00 m

Finance and Business Services

 R 30,00 m

Community, Social and Personal Services

 R 155,00 m


What is compliance?

Compliance in terms of the EEA requires companies to comply with the following:

  • To consult with employees as per section 16: Designated employers are required to consult with a representative trade union or alternatively with employees and/or their representatives. The mere election of a committee will therefore not suffice and proof of consultation with employees or their representatives will have to be presented to prove compliance with this section.
  • To conduct an analysis as required by section 19: The purpose of an analysis is to identify possible barriers in the workplace, policies or procedures which adversely affect people from designated groups. A company may for example identify that certain people do not have access to the internet and that more advertising needs to take place in previously disadvantaged areas such as townships in order to achieve Employment Equity targets and goals. The analysis should also include a profile of the designated employer’s profile in each occupational level to determine the degree of underrepresentation of people from designated groups in that specific level.
  • To compile an Employment Equity plan as required by section 20: The Employment Equity plan should include objectives to be achieved for each year of the plan as to achieve reasonable progress, affirmative action measures to be implemented to eliminate any identified barriers, numerical goals to achieve equitable representation etc. The plan must be implemented and progress monitored on a regular basis.
  • Submit an annual report as required by section 21: All Designated Employers must submit a report to the Director General annually on the first working day of October or by the 15th of January the following year in the case of Electronic reporting. The Labour Court may, on application to the Director General, impose a fine contemplated in schedule 1 of the Act for failure to report.
  • Assign responsibility to one or more senior managers as per section 24: Authority and means to perform all EE functions should formally be assigned in writing to the senior manager responsible for employment equity. The amendments to the EEA published in 1998 furthermore requires the senior manager appointed in terms of section 24 to have key employment equity outcomes incorporated into his/her performance contracts.
  • Inform employees as required by section 25: A copy of the EE plan should be made available to all employees and the relevant Employment equity legislation should be displayed in the workplace.

What will happen if I don’t comply?

Failure to comply with the provisions of the EEA will result in the Department of Labour issuing compliance orders, and should non compliance persists, the Labour Court will be approached to enforce such compliance orders.

The Labour Court is further entitled to issue financial penalties for such non-compliance of Sections 20, 21, 23 and 44(b), ranging from R1.5mil or 2% of the employer’s turnover for the first contravention up to R2.7mil or 10% of the employer’s turnover whichever is higher for repeated Contraventions.

Compliance with the provisions of the Employment Equity Act furthermore represents one of the five pillars for scoring an organisation against the BBBEE scorecards published by the Department of Trade and Industry. Limited or non compliance with these two Acts will result in a low BBBEE ranking which may be detrimental to the company.

Article submitted by LabourNet Eastern Cape (Pty) Ltd. Contact 041 373 2994 to book your FREE Equity compliance audit.