Employment equity plays a crucial role in Broad-Based Black Economic Empowerment scoring as it falls within the five pillars that must be assessed in order to generate a B-BBEE rating.
In order to obtain a rating, companies are required to undergo a B-BBEE verification exercise. During this exercise, a verification agent and/or registered auditor verifies and validates that the score awarded to the measured entity, as a result of individual scorecard elements supplied by entity, is an indicative B-BBEE score and certification based on the principles of the B-BBEE Codes of Good Practice.
Compliance with the Employment Equity Act, 55 of 1998 is considered under the Management Control Pillar. Section 41 of the EEA requires the Minister of Labour to keep a register of designated employers that have submitted their employment equity reports. This register is made publicly available annually in April/May. Often, verification agents base an employer's compliance on their presence on the section 41 register. However, the Minister has not yet made the register available and the question arises as to whether this will affect companies embarking on their verification exercises.
While verification agents usually consider the company's name on the register as being indicative of compliance, the agents should be guided by the verification manual. The manual only requires the verification agent to:
- obtain the Employment Equity Report (completed on form EEA2) and the Income Differentials Statement (completed on form EEA4) submitted to the Department of Labour; and
- apply for confirmation in respect of the EEA2 from the Department of Labour.
No mention is made of the section 41 register. As such, companies should not be concerned that the Department of Labour's failure to timeously publish the section 41 register will impede their verification process and/or their B-BBEE rating.
Companies need only have their submitted EEA2 and EEA4 forms during the verification exercise, as well as confirmation from the Department of Labour that they have submitted these documents for the relevant reporting year.
Tiisetso Rabolao, a trainee associate in the Johannesburg office, also contributed to this client alert.