Companies urged to review employment equity plans

Cape Town - The Department of Labour is intensifying its efforts to root out JSE listed companies that contravene the Employment Equity (EE) Act, and recent amendments will see businesses facing even harsher consequences for non-compliance, cautions Justine Combrink, head of financial reporting at Mazars.

The act was issued in 1998 to be applied by all employers who employ more than 50 employees or have an annual turnover that equals or exceeds a certain threshold. These companies must prepare and implement an employment equity plan that is valid from one to five years to “redress disparities in employment”, eliminating unfair discrimination and promoting the right to equality. Before the end of this period the employer must prepare a subsequent EE plan.

Entities employing over 150 employees are also required to issue their EE plan to the department on the first working day in October annually and biennially for those with less than 150 employees.

In addition, public entities are required to include a summary of their plan in their annual financial reports. And it was recommended that they highlighted their progress in this summary. The department of labour supplied a table that is required to be included in this report, summarising the occupational levels of the employees together with the breakdown of their nationalities and gender.

READ: 72 JSE-listed firms flagged for employment equity inspections

Combrink explains that at the time the requirement to report was issued, the SA Revenue Service (SARS) had stated its intention to look at all employment equity reports. Where these were not correct or not in compliance with the rating percentages required by the act, they would impose fines.

"Clearly this has not been correctly applied over the years, with the Department of Labour singling out the JSE Limited as one of the offenders warned to get their house in order. The department included a statement that they would be reviewing another 72 JSE-listed companies by the end of December 2017," said Combrink.

"This review will not only involve a test as to whether the plans are submitted and reported, but also an interrogation of the plans. Any companies found not to have reported correctly will be hit with fines amounting to R1.5m."

If a company is found guilty of contravening the EE Act, maximum fines imposed will be from R500 000 for a first offender and up to R900 000 for a multiple offender. This limitation of fines has now been expanded.

"The latest decision taken by the Department of Labour and announced by its chief director for statutory and advocacy services Fikiswa Mncanca, was that if a company does not have a plan, it will be subjected to a fine of R1.5m. Mncanca added that those failing to report on EE plans will also be subjected to a penalty of R1.5m," said Combrink.

"Companies that did report an EE plan, but doesn’t actually have or apply it, will possibly even be taken to criminal courts. Labour Minister Mildred Oliphant also warned that the department would proclaim section 53 of the EE Act to block non-compliant companies from doing business with the state."

SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.

Read Fin24's top stories trending on Twitter: Fin24’s top stories