Benefits and consequences of not complying with Employment Equity requirements

Employment Equity compliance – penalties and benefits

While many see the regulatory requirements to address discrepancies in the workforce as a burden, there are advantages, apart from doing what is morally right and fair.

What is required?

As discussed in previous articles, the Employment Equity (EE) Act, Act 55 of 1998, was established to address unfair discrimination and ensure equality in the workplace. The aim of the Act is to regulate how people within an organisation are managed in terms of their skills, roles and remuneration in a fair and non-discriminatory manner. An organisation’s processes around recruitment and advancement within the business also need to be managed with the Act in mind.

Organisations that employ more than 50 employees and organisations with less than 50 employees with an annual turnover exceeding the prescribed threshold, must draft and submit Employment Equity reports to the Department of Employment and Labour.

A summary of who is required to submit a return can be read here.

What happens if you do not submit the required report?

When a designated employer fails to submit an EE report without a valid reason, the Director-General may refer the employer’s non-compliance to the Labour Court to impose a fine.

The listed fines for contraventions are as follows:

Previous contravention Amount
No previous contravention The greater of R1 500 000 or 2% of turnover
One previous contravention The greater of R1 800 000 or 4% of turnover
A previous contravention within the previous 12 months or two previous contraventions within three years The greater of R2 100 000 or 6% of turnover
Three previous contraventions within three years The greater of R2 400 000 or 8% of turnover
Four previous contraventions within three years The greater of R2 700 000 or 10% of turnover

But wait! There is some good news too

Employment Equity can add enormous value to an organisation, provided it is understood and implemented correctly. This can contribute up to 25 EE points on the company’s BEE scorecard.

An additional advantage is the Employment Tax Incentive (ETI) which is aimed at encouraging employers to hire young work seekers. The tax incentive aims to stimulate the employment of young people between the ages of 18 and 29 years. It is paid to employers in the form of a claim against tax payable. Organisations qualify for a monthly incentive, depending on the salary paid, for two years. Employers who pay young employees between R2 000 and R6 000 per month will be eligible for a R1 000 tax incentive per qualifying employee where the employee was employed for 160 hours in a month. The incentive has been extended until 28 February 2029 due to the positive impact that the scheme has had on employment growth since January 2014.

Help is at hand

This is a grey area for many. Should you require more information, please send us an email, or visit our Workforce Solutions website.

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