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Why should an employer comply with the EE Act

In South Africa, all designated employers must comply with the EE Act.  This begs the question: Who is designated employers?


Who is considered as designated employers for the Employment Equity Act?

The EEA states that to be a ‘designated employer’, the business must have at least 50 employees on their books. If an employer has less than 50 employees but has a turnover of more than the threshold (see below), the business will still be considered as a ‘designated employer’ (Note that this will change with the implementation of the new amendments of the EE Act).


What should ‘designated employers’ do to comply with the Employment Equity Act?

A ‘designated employer’ should do an analysis of their employee demographics and develop an Employment Equity plan to improve on areas where the business does not reflect the economic active population (EAP's).  The employer should also appoint a person from their senior management team to act as the EE Manager.   Furthermore, a fully representative EE committee must be nominated and assigned and hold regular ‘minuted’ meetings with this committee. 


The employer should develop an Employment Equity Plan, which depicts the affirmative action measures that will be taken to achieve the required demographical representation, with specific focus on the ‘designated groups’.  (‘Affirmative action’, according to the Merriam Webster Dictionary, is: “an active effort to improve the employment or educational opportunities of members of minority groups and women sought to achieve a multicultural staff through affirmative action … a similar effort to promote the rights or progress of other disadvantaged persons.) 


The ‘designated groups’, referred to in the previous paragraphs, are:

1.                   Black people (which include Indians, Coloureds and Africans)

2.                   Women, and

3.                   People with disabilities.


The persons falling into either category 1, 2 or 3 above must be:

  • South African citizens as they were born in the country or some of their ancestors are/were South African.
  • South African citizens because they were naturalised before 27 April 1994 or after 26 April 1994, or
  • Entitled to get South African citizenship through naturalisation before 27 April 1994 but where excluded based on apartheid policies.    

In addition, the employer should submit the EEA2 and EEA4 to the Department of Employment and Labour, on an annual basis.  

What are the penalties if the company fail to comply with ANY of the above?

The Employment Equity Act already contains hefty penalties for non-compliance with the EEA.  These penalties can be anywhere between R1.5 million (for first time offenders) and up to 10% of an employer’s annual turnoverdepending on the nature and frequency of the non-compliance.


Section 42 of the Employment Equity Act empowers the Director-General to assess employers’ substantive compliance with their Employment Equity obligations, as opposed to their procedural compliance (submitting the EE report on time, appointing an employment equity manager and similar formal requirements).

She noted that, in terms of section 43 of the Employment Equity Act the Director-General may issue a recommendation to the employer outlining steps the employer must take in connection with its Employment Equity plan (or the implementation thereof), or in relation to its compliance with any other provision of the Act. The Director General may also prescribe the period within which those steps must be taken.  If the employer fails to comply with this recommendation and is unable to justify its actions, the Labour Court may impose a fine on the employer.


With the above said, the Director-General is tasked with policing employers that do not comply and to prosecute those that do not heed the process to implement affirmative action meaningfully. Unfortunately, the EEA does not take into account the current economic climate relating to the scarcity in available jobs and this makes it difficult for businesses to increase their number of employees from designated groups. However, as long as the business can prove that they are doing everything possible to “normalise” the demographics of their organisation and that they have been completing the compulsory analyses, reports and plans, the DOL is unlikely to take action against the organisation. On the other hand, it is clear that prosecutions in the Labour Court and potentially bankrupting fines, can and will result if employers fail to comply.