Businesses in South Africa will be punished for ignoring new employment equity laws

Businesses that fail to comply with South Africa’s new transformation laws face fines of R1.5 million or 2% of turnover, and will find themselves blocked from doing business with the state.

The Department of Employment and Labour has published South Africa’s new employment equity laws and transformation targets that businesses will have to hit over the next five years.

The laws apply to businesses that employ 50 or more people and require that their workforces reflect the country’s demographics at all levels.

To accomplish this, the department has set out specific numerical targets across 18 industries in South Africa that businesses must fill with ‘designated employees’.

These employees include black (African, Coloured and Indian), female and diabled workers.

Failure to do so could see employers face fines of up to R1.5 million or 2% of turnover and having their Employment Equity Compliance Certificates—essential for state contracts—withdrawn.

The department has allowed some flexibility with the laws, giving businesses an out if they cannot reasoably meet the targets.

Employers will not incur penalties or any form of disadvantage if they show that there are reasonable grounds for not complying with the targets.

These “justifiable reasonable grounds” for not complying with the targets include:

• Insufficient recruitment opportunities;
• Insufficient promotion opportunities;
• Insufficient target individuals from designated groups with relevant qualifications, prior learning, experience or capacity to acquire suh within a reasonable time;
• The impact of a CCMA award or court order;
• A transfer of a business;
• Mergers or acquisitions; and
• The impact of economic conditions on the business.

However, even if employers can justify exemption, they will still be on the hook for all the new administrative and compliance measures.

Legal experts at Macgregor Erasmus Attorneys, a specialist labour law and regulatory compliance firm, said the changes introduced in the new laws are wide-ranging and will necessitate substantial adjustments to internal processes by employers across sectors.

Employers must now submit demographic and occupational-level data for foreign nationals in the EEA2 form, as part of their annual EE reporting.

Workforce profiles must also now be reported as of 31 August annually, bringing consistency to compliance timelines.

Employment Equity Plans must cover the period 1 September 2025 to 31 August 2030, include annual targets, and align with sector-specific benchmarks.

“The updated regulations formalise a shift in how employment equity is regulated, especially with the introduction of sector-specific planning,” said Richard Erasmus, Director at Macgregor Erasmus Attorneys.

The firm highlighted these important reporting and submission deadlines

• 1 September 2025: New EE Plans must be in place.
• 1 September – First working day of October: Window for manual submission of EEA2 and EEA4 forms.
• 1 September 2025 – 15 January 2026: Online reporting period via the Department of Labour website.

“The timeframe is tight, and September is not far away, so it is important that employers begin preparations without delay,” Erasmus said.

Business groups welcome and fight the new laws

Various business groups have had mixed reactions to the new laws, with some welcoming the advancement in transformation goals, and others moving to shut them down.

The Black Economic Empowerment (BEE) Chamber welcomed the regulations and sector-specific numerical targets, saying it will accelerate the pace of South African workforce transformation.

Frik Boonzaaier, Human Capital Transformation Specialist at The BEE Chamber, said the flexibility offered to employers will help businesses find the space to adapt to the regulations over the coming years.

He described the regulations as an “an opportunity for businesses to lead by example, integrating diversity into their growth strategies”.

The chamber is particularly welcoming of the Certificate of Compliance being strongly linked to the Sectoral Targets for employers that want to participate in state tenders.

“This measure ensures that only businesses committed to transformation can access public contracts, a critical step for sectors like construction that rely heavily on government projects,” it said.

However, business interest group Sakeliga and the National Employers’ Association of South Africa (NEASA) regard the new laws and regulations as unconstitutional, unlawful, and harmful.

The group said they would launch legal action against the laws, including seeking an interdict against the operation of the regulations, targets and/or the act.

Sakeliga has characterised the sectoral targets as racial quotas. Quotas are unlawful in South Africa. The department has argued that the targets cannot be quotas as they are not rigid and give enough room for businesses to apply for exemption based on various grounds.

The five-year window for compliance also work against them being defined as quotas.

Regardless, Sakeliga said that the laws are “totalitarian infringements on the freedom of businesses, owners, and employees to freely associate and trade”. It added that the targets are impossible to achieve.

“The state is requiring the impossible, because it demands employment practices contrary to the reality of vast variations in skills, kinship, language, culture, geography, and just about everything else that has characterised employment throughout history,” it said.

“Never have the employees of all businesses everywhere reflected the same demographic characteristics – it is impossible.”