Employment Law
Employment Equity Act — What Small Businesses Need to Know
The Employment Equity Act has two distinct purposes, and understanding which applies to your business is the starting point.
The first purpose — prohibiting unfair discrimination — applies to every employer in South Africa from the first day of trading, regardless of size. A sole proprietor with one employee is fully bound by this.
The second purpose — affirmative action and employment equity planning — applies only to designated employers. Under the Employment Equity Amendment Act, which came into effect on 1 January 2025, the definition of "designated employer" changed materially.
The 2025 Amendment: What Changed for Small Businesses
Before 1 January 2025, a business could be classified as a designated employer either because it had 50 or more employees, or because its annual turnover exceeded the sectoral threshold for its industry. Many small businesses with relatively high turnover but few employees were caught by this turnover criterion.
The 2025 amendment removed the turnover threshold entirely. A business is now a designated employer solely based on having 50 or more employees, regardless of annual turnover. This is a meaningful change for small and medium businesses. If you have fewer than 50 employees, you are not a designated employer — no employment equity plan, no annual EE reporting, and the new sectoral numerical targets do not apply to you.
This was a deliberate policy decision to reduce administrative burden on smaller businesses and concentrate transformation obligations on larger organisations with the capacity to manage them.
If you have fewer than 50 employees: The affirmative action provisions of the EEA do not apply to you. Your obligations are limited to the non-discrimination obligation and the EEA affidavit, both described below.
If you are approaching 50 employees: The threshold is worth monitoring. The moment you employ your 50th person, designated employer status applies and a new compliance framework kicks in. Plan for this transition in advance rather than discovering it after the fact.
The Non-Discrimination Obligation — Applies to Every Employer
Every employer in South Africa, regardless of size, is prohibited from unfairly discriminating against employees or job applicants on any of the following grounds: race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language, or birth.
This prohibition applies at every stage of the employment relationship: recruitment, remuneration, terms and conditions of employment, training, promotion, transfer, demotion, discipline, and termination. It is not limited to formal employment decisions — it applies to how you treat people throughout the working relationship.
Recruitment is where small businesses most commonly get this wrong. Job advertisements, interview questions, and selection criteria must be based on legitimate job-related requirements. The following are examples of unlawful discrimination in the hiring process:
- Asking a candidate about their plans to have children or whether they are pregnant
- Asking about their religion, political views, or HIV status
- Advertising a position that specifies a particular race, gender, or age without a justifiable reason
- Using selection criteria that are not genuinely related to the requirements of the job
- Requiring a medical test that is not specifically justified for that role
Medical testing is specifically regulated. Testing employees or applicants for any medical condition — including HIV — is generally prohibited unless the Labour Court or a relevant body has determined that such testing is justifiable for the particular job or category of employees. HIV testing is specifically prohibited unless a court authorises it on the basis of the nature of the work.
Remuneration discrimination is also prohibited. Paying employees doing the same or substantially the same work differently on the basis of a listed ground — for example, paying women less than men for equivalent work — is unlawful discrimination regardless of whether it was agreed contractually.
The burden of proof matters. Under the EEA, if an employee alleges unfair discrimination and establishes facts from which it can be inferred that discrimination occurred, the burden shifts to the employer to show it did not discriminate or that the discrimination was justifiable. This means employers who cannot explain their employment decisions with documented, job-related criteria are in a difficult position.
Practical Anti-Discrimination Steps for Small Businesses
The following practices reduce exposure without requiring specialist HR infrastructure:
Job advertisements: State the requirements of the job, not the characteristics of the person you imagine doing it. "Minimum five years' experience in X" is lawful. "Young, dynamic" or "native English speaker" is not.
Interview questions: Prepare a standard set of questions focused on competence, experience, and suitability for the role. Avoid any question about personal circumstances unrelated to the job. If a question would not appear in a professional job interview, do not ask it.
Selection decisions: Document why you chose the candidate you selected. "Best fit" without documentation is not a defensible position if challenged. "Demonstrated the required skills in the assessment exercise and had directly relevant experience" is.
Remuneration: Pay people based on their role, experience, and performance — not on personal characteristics. If two people doing equivalent work are paid differently, you need a documented reason that relates to the job, not the person.
Disciplinary process: Apply discipline consistently. Disciplining one employee for conduct you have tolerated in others — particularly where the difference in treatment tracks a protected ground — is discrimination.
HIV Status: A Specific and Common Risk
HIV discrimination warrants separate attention because it is a common source of disputes and widely misunderstood.
Testing employees for HIV without a court order is unlawful, regardless of the nature of the work. Dismissing, demoting, or treating an employee unfavourably because they are HIV positive is unfair discrimination and automatically unfair dismissal. An employee's HIV status does not affect their ability to perform most jobs and cannot be treated as a basis for any adverse employment decision.
If an employee discloses their HIV status voluntarily, that information is confidential. Sharing it with other employees or managers without consent is a further breach.
The EEA Affidavit: What Small Businesses Need for Government and Corporate Work
Businesses with fewer than 50 employees are not designated employers and have no affirmative action or reporting obligations. However, when pursuing certain contracts or business relationships, you may be required to demonstrate this status formally.
Government tenders and state contracts: Employment Equity Compliance Certificates are now mandatory for all employers doing business with the state, valid for 12 months. For non-designated employers (fewer than 50 employees), the equivalent document is an EEA affidavit — a statutory declaration confirming your non-designated status. This is a simple sworn declaration, not a complex document, but it must be current and available when required.
B-BBEE supplier onboarding: Many corporate clients and procurement processes require EEA compliance confirmation as part of supplier due diligence. A current EEA affidavit satisfies this requirement for non-designated employers.
Obtaining the affidavit: The EEA affidavit is a short statutory declaration stating that your business employs fewer than 50 employees and is therefore not a designated employer. It must be signed before a Commissioner of Oaths (a notary, police officer, or other authorised person). It is valid for 12 months. Keep a signed copy on file and renew it annually if you are regularly pursuing government or corporate contracts.
The CIPC facilitates this affidavit process through BizPortal for qualifying businesses. Alternatively, any Commissioner of Oaths can commission it.
What Happens When You Cross 50 Employees
The moment you employ your 50th person, the full designated employer framework applies. This is worth planning for, because the obligations are significant:
Employment Equity Plan: You must prepare and implement an EE Plan covering the five-year period to 31 August 2030. The plan must align with the sectoral numerical targets published by the Department of Employment and Labour for your industry.
Annual reporting: You must submit EE reports (EEA2 and EEA4) annually through the Department's online portal. The deadline for online submission is 15 January each year.
Sectoral targets: Mandatory numerical targets now apply across 18 sectors, covering equitable representation of designated groups at junior, middle, senior, and top management levels. These are not rigid quotas — you can provide justifications for shortfalls — but failure to demonstrate meaningful progress creates compliance risk.
Compliance certificate: You must obtain an Employment Equity Compliance Certificate from the Department to qualify for state contracts. This certificate is issued only to employers whose EE reports are current and who are making demonstrable progress toward their targets.
Penalties: Non-compliance penalties for designated employers can reach up to 10% of annual turnover. Over 200 employers had already been referred to the Labour Court for EE violations before the 2025 amendments came into effect. Enforcement has intensified.
The practical message: if you are at 40 to 49 employees and growing, engage an HR practitioner or labour attorney to build your EE readiness before you cross the threshold. Arriving at 50 employees without a plan, a workforce analysis, or any EE infrastructure means you are immediately non-compliant.
The Things That Cannot Be Done Regardless of Size
Two specific prohibitions apply to every employer regardless of size, headcount, or designated status:
You cannot dismiss or retrench employees to meet or avoid transformation targets. The Act is explicit that employers are not permitted to terminate or retrench employees to achieve numerical targets. Doing so would be automatically unfair dismissal.
You cannot discriminate in favour of a designated group in a way that is an absolute bar to the appointment or promotion of a non-designated person. Affirmative action measures must be fair and cannot constitute absolute exclusion of candidates.
Common Mistakes Small Business Owners Make
Asking unlawful interview questions. Questions about pregnancy plans, religion, HIV status, or family circumstances are not permitted, regardless of how innocently they are intended.
Paying people differently for equivalent work based on personal characteristics. This is discrimination in remuneration and is specifically prohibited.
Not having an EEA affidavit when tendering. If you pursue government or large corporate contracts without a current affidavit, your bid may be disqualified. Get one in advance and renew it annually.
Assuming the 50-employee threshold will never apply. If you are growing, plan for designated employer status before you reach it. The compliance infrastructure takes time to build and the obligations apply immediately on crossing the threshold.
Inconsistent discipline. Treating different employees differently in discipline on the basis of a protected characteristic — even unconsciously — is discrimination. Document disciplinary decisions and apply them consistently.
Not knowing what the protected grounds are. The list is long and includes grounds that are not always intuitive — family responsibility, conscience, political opinion, and birth, among others. Review the full list and ensure your policies and practices do not create exposure on any of them.
This article provides general information about the Employment Equity Act as amended from 1 January 2025. Employment equity law is complex and evolving. Designated employers should seek specialist HR or legal assistance to build compliant EE plans and reporting systems. Nothing in this article constitutes legal advice.
Professional advice recommended
This topic involves legal, tax, or regulatory complexity that varies by individual circumstances. The information here is general guidance only. Consult a qualified professional before making decisions specific to your situation.
This article provides general information about South African business law and regulation. It is not legal, tax, or financial advice. Laws and regulations change — verify current requirements with a qualified professional or directly with the relevant authority before making decisions.