November 2013

As we enter the last quarter of the year there seems to be a great deal of energy devoted to passing legislation which will have an enormous impact on the way in which we run our businesses. We await the implementation of E-tolls with interest. We also await the market’s reaction to how the additional expense will be treated, particularly where business travel for employees and the cost of delivery or courier charges are concerned.

LEGISLATIVE CHANGES

Parliament has been very busy passing legislation which was first introduced as bills in 2010 and then were referred back to NEDLAC for refinement. The Bills were approved by NEDLAC towards the end of 2012 and have now seemingly been rushed through parliament.

The following pieces of legislation have been passed by parliament in the last six months:

1. An Amendment to the Labour Relations Act was passed by the House of Assemblies on the 20th August 2013 and the Basic Conditions of Employment Act was passed on 21st June 2013 and have been sent to the National Council of Provinces for concurrence. Final public comment was closed on the 25h September 2013. These amendments are now in the last phase before being passed into law.
2. he Amendment to the Employment Equity Act was passed on the 24 October 2013 and was approved by the National Council of Provinces on 21st November 2013. This Act which has also been in process since 2010 should be promulgated in the next few weeks. Concern has been raised with regard to the method of calculating the proposed fine for Companies that do not comply. The proposed fine is R1.5 million or a percentage of turnover up to a maximum of 10% of turnover, depending on the offence. Once the Act is gazetted we will give a detailed outline of the changes.
3. A new Act, the Employment Services Bill was passed on 31st October 2013. This is actually not new legislation as it originally formed part of the Skills Development Act, however the provisions for the registration of Private Employment Agencies and the operation of the Productivity Institute have not been transferred to the Department of Higher Education and Training and remain the responsibility of the Department of Labour. Hence the requirement to publish an Act separate from the Skills Development Act. The Employment Services Act will establish employment offices controlled by the Department of Labour which will be required to assist unemployed people to find positions. The problem with the Act is that it proposes a fine of R50 000-00 to any company who has a vacancy and does not report the vacancy to the Department of Labour. The bill is being considered by the National Council of Provinces currently.
4. Amendments to the Broad-Based Black Economic Empowerment Act were gazetted in October 2013 and are expected to be gazetted in mid-2014. This amendment seeks to clearly define fronting and proposes severe fines and possible prison sentences for people found guilty of fronting.
5. A new Bill, the Employment Tax Incentive Bill which is aimed at reducing the high youth unemployment rate. The bill which was introduced into parliament on 31st October 2013 and will allow employers in designated areas or designated industries (these have not yet been clarified) who employ South African people between the ages of 19 and 29 and who earn less than R6 000-00 per month to deduct money for every such employee from the PAYE which is owed to SARS. Unfortunately it is proposed that only employees employed after 31 October 2013 will be eligible for this incentive and the incentive will run to January 2017. Employers who terminate the employment of an older person to make way for a young person will be disqualified from claiming the incentive.
6. The Protection of Personal Information Act was passed on the 26th November 2013. This act is designed to introduce certain conditions so as to establish minimum requirements for the processing of personal information and to provide for the rights of persons regarding unsolicited electronic communications. Once the Act is promulgated it is suggested that Letters of Appointment be amended granting permission to the company to pass on personal information if it is legally required, i.e. to SARS, UIF etc. We will advise of a suitable clause in due course.
7. New BB-BEE Codes were published on the 11th October 2013 and the gazette indicates that they will be effective from 11 October 2014. The intention is that Company’s will have twelve months to transition to the new codes. A breakdown of the new codes is attached. Particular points to note are:
   1. Companies with turnovers of less than R10 Million will qualify as Exempted Micro Enterprises (previously EME’s had to have turnovers of less than R5 Million).
   2. Qualifying Small Enterprises are companies with turnovers of between R10 Million and R50 Million (previously R5 Million to R35 Million)
   3. Black owned companies (100% Black Owned) who have turnovers of less than R50 million will not be required to be measured. An affidavit confirming level of ownership and that revenue is below R50 Million will qualify the Company for a Level 1 B-BBEE recognition. If the ownership level is less than 51% – 99%) the Company will qualify for a Level 2 B-BBEE recognition.
   4. The scores required for the various levels have been adjusted as follows:
      

      Level	BEE Score Current	BEE Score 2014	BEE Recognition Level
      1	> 100	> 100	135% (e.g. R1-00 = R1.35)
      2	85 – 100	95 – 100	125% (e.g. R1-00 = R1.25)
      3	75 – 85	90 – 95	110% (e.g. R1-00 = R1.10)
      4	65 – 75	80 – 90	100% (e.g. R1-00 = R1.00)
      5	55 – 65	75 – 80	80% (e.g. R1-00 = R0.80)
      6	45 – 55	70 – 75	60% (e.g. R1-00 = R0.60)
      7	40 – 45	55 – 70	50% (e.g. R1-00 = R0.50)
      8	30 – 40	40 – 55	10% (e.g. R1-00 = R0.10)
      Not Compliant	< 30	< 40	0% (e.g. R1-00 = R0)

   5. Management Control and Employment Equity have been merged into one Element.
   6. When measuring the score for Employment Equity and Skills Development, the Annual Economically Active Population targets will be taken into account. This means that if for example in your Senior Management Category you only have Indian or Coloured Males or Females, the score will be less than if they were African Males or African Females. The gender bias remains
   7. The Skills Development Element has increased the Compliance Target for Skills Development Expenditure to 6% of payroll and has introduced a target for Learnerships, Apprenticeships and Internships.
   8. Procurement has been combined with Enterprise Development and a new category, Supplier Development has been introduced. There are also requirements with regard to recognising companies who procure from local suppliers.
   9. QSE’s who are not black owned now have the same targets as Generic Companies.
   10. Ownership, Skills Development and Enterprise and Supplier Development have been identified as Priority Elements. A large Enterprise is required to comply with all these elements and compliance is defined as a score of more than 40%. A QSE must comply with Ownership and either Skills Development or Enterprise and Supplier Development. If the Company does not comply with more than 40% in the Priority Elements, the BBBEE status level will be discounted by one level. For example, this means that if the Company scores 72%, but did not score more than 40% on Skills Development, they will only be awarded a level 7.

The cost of compliance to the new scorecard is high and the requirement for QSE’s to have Black Ownership is going to be a challenge for many smaller Companies. Rating agencies will be using the old codes for ratings which need to be done prior to October 2014. The Industry Charters remain unchanged at this stage.

If you have any questions with regard to the new codes, please contact Jane Alevizos.

Next year is going to be challenging as we adapt to the new legislation that is going to be promulgated. We will be holding a series of workshops with regard to the new legislation once they have been promulgated.

SKILLS DEVELOPMENT

We will be starting the process of finalising skills reports and collecting information for skills plans next month as the submission date for next year will be 30 April 2014 and not the usual 30 June deadline. The new spreadsheets will be sent to you in the first week of December 2013 and approval of the reports by Training and Employment Equity Committees should be finalised by the end February 2014. Some SETA’s have informed us that they will be amending their training year to run from 1 January to 31 December in future. The SETA’s that have confirmed a change in the training year are:

Merseta, FPM, W&R Seta, Inseta, Services, HW Seta, CETA, Bankseta, MICT , Cathsseta, Fasset

Their explanation for this is that it makes training easier as it then falls in line with the academic year. The SETA’s do seem to be adjusting to the changes in grants and the criteria for applying for additional grants appears to be resolved in most of the SETA’s

EMPLOYMENT EQUITY

2014 will be a reporting year for all Companies. Although the legislation is changing and all designated companies will be required to comply with the new legislation, we are not aware of any proposed change to the reporting format. There are concerns with the format for reporting of earnings and given that there will be a fine if a company is proven to be failing to pay equal pay for equal work in the new act, we do anticipate that the Department of Labour will be revising the format to obtain more relevant information.

In order to plan for the early reporting required on skills development and the need to prepare EE Reports, we suggest that Employment Equity meetings be scheduled as follows:

• Mid January to Mid-February: Approval of Annual Training Reports and preparation of Workplace Skills Plans
• March: Finalizing of Skills Submissions
• July: Review of Employment Equity Reports and Employment Equity Plans
• September: Finalizing Employment Equity Report Submissions and Finalization of Employment Equity Plans.

Please contact Tessa or your Connold Consultant to schedule dates for the meetings.

PERFORMANCE MANAGEMENT

Our alliance with Select Strategy Inc., a company based in Boston USA is growing. Their Performance Management system is Computer Based and can be adapted to any work place and allows companies to control and drive their performance management measures more effectively. If you are interested in seeing a demonstration of the system please contact Desrae or Kevin.

DOMESTIC WORKERS

It is the time of the year when the Minister of Labour gazettes the new minimum salaries for Domestic Workers. According to the Department of Statistics CPI was set at 6.6%, and the determination is CPI +1% so the increase has been set at 7.6% for the year. The new minimum rates for Domestic workers (based on a 45 hours week) are as follows:

R 9.35 per hour an increase of 7.60% over last year
R 433.35 per week an increase of 7.52% over last year
R1877.79 per month an increase of 7.54% over

We wish you a happy holiday and safe travelling if you are going away. We hope that 2014 will be a prosperous and happy year for everyone.
Desrae & staff