Changes to Employment Equity Act will cut legislative red tape for small businesses

The proposed changes to the Employment Equity Act hold a myriad of changes, both good and bad, for small businesses.

The National Council of Provinces passed the Employment Equity Amendment Bill on Tuesday, 17 May, and it is now in its final stage of promulgation waiting for the president’s signature. The bill will amend the Employment Equity Act.

First, and most importantly, is there will be less legislation to comply with for businesses employing fewer than 50 people as they will not be required to have an employment equity plan and submit reports.

Hugo Pienaar and Gabby Schafer from Cliffe Dekker Hofmeyr explained that the bill is simultaneously more onerous and less onerous, with two major changes to the definition of designated employer, while giving the minister of labour and employment the power to determine sectoral numerical targets.

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What does the bill mean for small business?

Pienaar and Schafer say the current Act determines that employers employing fewer than 50 employees (small businesses) with a total annual turnover equal to or above the applicable annual turnover in Schedule 4 of the Act, are deemed to be a designated employer, and have to comply with Chapter 3 of the Act which deals with affirmative action measures. 

This inclusion was removed in the bill, which means that Chapter 3 of the Act will no longer apply to small businesses, regardless of their turnover. These employers will not be required to have an employment equity plan and submit reports once the bill is promulgated.

Section 14 of the Act, which provides for voluntary compliance with Chapter 3, will also be repealed, Pienaar and Schafer say.  

Asma Cachalia, also from Cliffe Dekker Hofmeyr, says the bill is a mixed bag, making compliance less onerous for small businesses, but potentially opening the door for more litigation down the line relating to sectoral targets.

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Less red tape for small businesses

Small businesses will have to contend with less red tape as the bill narrows the definition of “designated employer”.

In the current Act, these employers must comply with Chapter 3 of the Act, but the amendment will delete the part of the definition of a designated employer which states “… an employer who employs fewer than 50 employees but has a total annual turnover that is equal to or above the applicable annual turnover of a small business in terms of the Schedule 4 of this Act”.

In terms of the current Employment Equity Act, a business must provide an employment equity plan that aligns with certain targets, a quite extensive process. The plan must have objectives to achieve according to a specific timeline.

Cachalia says this involves a lot of administration, something larger companies can afford to assign staff to, but it can be quite difficult and costly for smaller businesses.

“Smaller businesses already have a high regulatory burden and it is difficult for them to comply with all the employment equity requirements of the current act” “

She points out that relieving smaller businesses of the compliance burden might lead to more job creation.

”It is important to look at what the purpose of the Act is: to achieve equity in the workplace and promote equal opportunities through the elimination of unfair discrimination.”

Most of the feedback Cachalia had from small businesses reflects that they welcome the bill.