Tick boxes or transformation? The compliance dilemma in the wake of sectoral equity targets

21 Apr 2025

With strict new Employment Equity targets now in force, companies are scrambling to interpret, implement and even legally challenge the regulations.

South Africa’s transformation agenda entered a new phase this week as the Department of Employment and Labour’s amended Employee Equity (EE) Regulations formally took effect.

Gazetted on Tuesday, 15 April, the new regulations introduce five-year numerical targets for the top four occupational levels (junior, middle, senior and top management) across 18 sectors, ranging from finance to manufacturing.

While the government said the changes are necessary to “advance transformation and inclusivity in the South African labour market”, backlash from employer organisations has been swift.

Read more: SA’s new employment equity law calls for a more informed response

The National Employers’ Association of South Africa (Neasa), alongside business lobby group Sakeliga, has announced plans to take immediate legal action to block the regulations describing them as “unconstitutional, impossible and harmful”.

“The state is acting unconstitutionally because it makes totalitarian infringements on the freedom of businesses, owners and employees to freely associate and trade,” Neasa told Daily Maverick. “Under the guise of ‘transformation’, the EEAA [Employment Equity Amendment Act] insists on a stifling stagnation.”

Guidelines or quotas?

Neasa’s court challenge hinges on two arguments: alleged procedural flaws in how the sectoral targets were set, and the claim that the targets amount to unconstitutional racial quotas.

“The targets constitute strict hiring quotas,” Neasa said in a written response, “which create an absolute barrier to employment for non-designated groups.”

Nadeem Mahomed, director of employment at Cliffe Dekker Hofmeyr, clarified that the “designated groups” defined in the Act include black people (comprising Africans, coloured people and Indians), women and persons with disabilities, provided they are South African citizens by birth or descent.

“The category also includes black individuals who obtained citizenship through naturalisation before 27 April 1994, or after that date if they were previously excluded from naturalisation by apartheid-era policies,” Mahomed added.

Read more: BEE laws are here to stay to redress the imbalances of the past, says labour minister

Menèt Hamel, head of employment equity and skills development at HR consulting agency Human Alliance, explained that the percentage sector targets of the “designated groups” have been supplied, meaning companies must calculate their own internal targets by race and gender.

In its announcement of the new regulations, the Department of Employment and Labour stated that the regulations offer “guidelines to assist employers and employees”.

Yet the penalty for failing to align is clear: employers who don’t comply with sector targets could face fines of up to 10% of their annual turnover.

By 31 August 2025, employers are required to commence “a comprehensive workplace analysis and either draft new employment equity plans or revise existing ones in accordance with the legislative amendments and the prescribed targets”, Mahomed said.

He also noted that the official reporting window for the 2025 cycle will open on 1 September 2025 and close on 15 January 2026.

Compliance and confusion

According to Hamel, employers may struggle to apply the targets correctly, particularly when it comes to demographic breakdowns across occupational levels.

“The biggest challenge employers face is interpreting the sector targets,” Hamel said. “There is a lack of understanding regarding how to calculate the specific sector targets for African, coloured, Indian and white females across the upper four occupational levels.”

Read more: Sectoral targets under the Employment Equity Act draft regulations need more clarity – legal experts

Adding to the complexity is the dual requirement to consider both national and provincial economically active population (EAP) data. For some companies, especially those operating in multiple provinces or in sectors with underrepresentation, this makes benchmarking a logistic maze.

“Some employers might mistakenly judge their success by looking at the overall male and female target,” Hamel said. “However, the department expects each specific race and gender category to be treated as a distinct target.”

Digital tools step in

To manage the administrative burden, some employers are turning to software to help them with EE compliance. Some of these systems offer data dashboards, documentation storage and scenario modelling features that could help employers plan workforce changes over the five-year EE cycle.

“We have adopted software to assist us in analysing workforce profiles, particularly in determining the specific race and gender sector targets for designated groups,” Hamel said. “This is essential for ensuring consistent tracking and monitoring, especially given the five-year cycle we are entering.”

These systems also allow multiple team members to log in simultaneously to create internal visibility and reduce the risk of errors tied to a single HR practitioner.

“Rather than relying on a single person managing an Excel sheet, multiple users can log into the same system,” she said. “This fosters transparency and allows stakeholders to see how selections affect five-year targets.”

Digital efficacy does not, however, equal transformation.

“HR or EE managers need to guard against financial penalties while ensuring that the process does not become merely a tick-box exercise,” Hamel said. “Failing to do so risks losing the confidence of employees.”

Mahomed also highlighted that while the sectoral targets are well-suited to quantitative tools, the real legal risks will emerge from incorrect claims of non-compliance.

“Transformation in the truest sense involves addressing deeply rooted structural inequalities, fostering inclusive workplace cultures and promoting human dignity,” he said.

What this means for employers

For companies with 50 or more employees, the message is clear: get your EE house in order. Whether through consultants, software tools or internal HR processes, employers must draft new EE plans for the 2025 to 2030 cycle.

Documentation is key, especially as leadership teams may change over the five-year window.

“The HR team of today may not be the same HR team in 2030,” warned HR services company People Partners. “If documentation and systems aren’t well-managed, businesses may struggle to defend themselves during compliance reviews.”

The Department of Employment and Labour will host national EE roadshows in May and June to help stakeholders interpret the changes. Details can be found on its website.

As for the legal challenge, Neasa remains defiant. “We will oppose the EE Amendment Act and its regulations until they are reversed or otherwise rendered null and void,” it said. DM

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Business Maverick

Guidelines or quotas?

Compliance and confusion

Digital tools step in

What this means for employers