Small firms get relief as employment equity rules tighten for big business

South Africa’s employment equity framework has shifted, with new sector targets now set by the Minister of Employment and Labour, and early court challenges failing to stop them.

For employers, HR teams and hiring managers, the key question is what must change now, and what stays the same.

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Business groups challenged the Minister’s power to set numerical targets, arguing they amounted to unconstitutional quotas.

But the Supreme Court of Appeal dismissed an application for leave to appeal. Earlier attempts to block implementation also failed, and direct access to the Constitutional Court was refused.

The legal fight is not over. A separate constitutional challenge is still alive and could ultimately be decided by the Constitutional Court.

For now, the targets stand.

What has actually changed

The biggest shift is who sets employment equity targets.

Previously, designated employers set their own transformation targets, using demographic and industry data.

Now, the Minister sets those targets for each sector.

This has reduced flexibility for employers, who must align with government-set targets rather than self-determined ones.

However, the underlying legal duty has not changed: employers must still pursue workplace transformation.

Small businesses get an exemption

There is clear relief for smaller firms.

Only designated employers, those with 50 or more employees, are bound by affirmative action requirements under Chapter 3 of the Employment Equity Act.

Businesses with fewer than 50 employees are no longer affected, regardless of turnover.

They must still comply with general anti-discrimination rules, but are exempt from affirmative action obligations.

Targets are not quotas

A central point in the debate is whether the new targets function as quotas.

According to the legal interpretation presented, they do not.

Employers are not required to meet targets at all costs. There are recognised grounds for failing to meet them, including:

• - Lack of available skills
• - Business restructuring
• - Changes in workforce composition

This distinction is critical for HR teams managing compliance risk.

What employers must do now

Designated employers have a five-year period to work towards the targets.

But progress must be continuous.

Employers must:

• - Submit annual employment equity reports
• - Track progress across job categories
• - Maintain employment equity plans
• - Identify and address barriers to transformation

Annual reporting deadlines remain in place, with scrutiny expected to increase.

No dismissals allowed to meet targets

One of the biggest misconceptions is that employers may need to dismiss staff to comply.

That is incorrect.

“There is nothing in the Act… that empowers an employer to dismiss employees based on race.”

The Labour Relations Act still protects employees against unfair dismissal, including on discriminatory grounds.

More scrutiny expected from inspectors

Employers should prepare for tighter enforcement.

Historically, inspections focused on documentation — plans, committees, and reports.

That is likely to change.

Authorities are expected to increasingly assess whether employers are making meaningful progress towards targets.

Non-compliance could lead to enforcement action, including compliance orders and potential court proceedings.

What this means for hiring managers and HR

For hiring managers and HR professionals, the practical impact is clear:

• - Less discretion in setting targets
• - Greater need for structured workforce planning
• - Increased compliance risk if progress stalls

At the same time, flexibility remains through recognised justifications for missed targets.

The balance between compliance and operational reality will be central to how businesses respond in the coming years.

For more information, listen to Botes on CapeTalk’s View and News with Clarence Ford using the audio player below: