HR Risk Management – Have you quantified & mitigated the risks?

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Any company, regardless of size or shape, is exposed to risk. Risk management is an ongoing process that should be adopted throughout all company operations. The risk management process allows a company to know and understand the risk to which they are exposed and to actively plan and prepare strategies that will reduce the likelihood of the risk occurring or remove the risk altogether.

When looking at an HR department, for example Skills Development, Employment Equity and Talent Management, many risks could occur and these could vary from time to time. In order to effectively manage said risks, there are two fundamental questions that should be asked and addressed in detail:

  1. What could possibly go wrong in terms of Skills Development, Employment Equity and Talent Management in the workplace?

  2. What can the company do to eliminate or minimise the impact of the risk?

The starting point

The first step is to identify the risk and this is done by means of a risk analysis. The company should consider both internal and external influences that could impact the targeted area.

The Skills Development Levies Act applies to companies whose wage bill exceeds R 500,000.00 per annum. In order to comply; a company is required to have been registered with SARS, and to pay a skills development levy that is equal to 1% of their wage bill on a monthly basis. Companies can claim back some of these monies in the form of grants from the relevant Sector Education Training Authority (hereinafter referred to as the “SETA”). In order to claim grants a company must submit certain information to the SETA before 30 April annually.

Non-compliance could mean…

  • Conviction to a fine as a result of non-compliance with the Skills Development Levies Act;

  • Conviction to imprisonment as a result of non-compliance with the Skills Development Levies Act;

  • The inability to recover skills development levy payments as a result of not submitting a mandatory grant application prior to the due date of 30 April;

  • The rejection of discretionary grant applications by the SETA as a result of not submitting a mandatory grant application.

Internal and external factors should also be considered and Skills Development can be impacted as follows:

  • The availability, or lack thereof, of training opportunities applicable to the company’s needs as a result of the registration of the company with an incorrect SETA;

  • Loss of funding opportunities for training interventions that are applicable to the company’s needs as a result of changes in the industry’s scarce and critical skills;

  • Monetary loss by the company (tax rebates, funding from the SETA, etc) as a result of the miss-management of learnerships;

  • The availability of funds to Stakeholders as a result of the mismanagement of the National Skills Fund.

Are you a designated employer?

Employment Equity legislation applies to designated employers. Designated employers are companies who:

  • Employ 50 or more employees;

  • Employ less than 50 employees whose an annual turnover is equal to or above the threshold for the industry as stipulated in Schedule 4 of the Act;

  • Are bound by a collective agreement;

  • Are organs of state or municipalities.

The dire result of non-compliance…

  • Conviction to a minimum fine of R 1.5M or 2% of the company’s annual turnover, depending on which is greater, as a result of non-compliance with the Employment Equity Act (hereinafter referred to as “the EE Act”);

  • Receipt of a compliance order as a result of non-compliance with the Employment Equity Act;

  • A referral by an employee to the CCMA as a result of alleged unfair discrimination in the workplace;

  • The inability to consult with employees as required by Section 16 of the EE Act;

  • The inability to consult with the trade union as required by Section 16 of the EE Act;

  • The inability to effectively conduct an analysis as required by Section 19 of the EE Act;

  • The inability to effectively plan and implement an Employment Equity Plan as required by Section 20 of the EE Act;

  • The inability to report to the Director-General once a year as required by Section 21 of the EE Act;

  • The inability to draft and implement a successive Employment Equity Plan as required by Section 23 of the EE Act;

  • The appearance of income differentials or a difference in terms and conditions of employment that cannot be justified on one of the grounds according to Section 7 of the Employment Equity Regulations.

Talent management: the key

Talent Management enables the company to develop processes and systems which will drive a performance culture where employees are motivated towards the achievement of common goals which are aligned to the achievement of business goals. These processes and systems include formal job descriptions, performance appraisals, career paths, etc.

Job descriptions and performance appraisals– an absolute must

Employees who do not have job descriptions are not sure of what is expected of them. Employees who are not being measured by means of a performance appraisal are unsure of the areas they are excelling at and the areas that need improvement, impacting on overall productivity in the workplace.

Furthermore, if the job descriptions and performance appraisals are not aligned with the company goals and objectives, how will they ever be reached? There will be no coherent movement towards the achievement of the company’s goals and this could result in company having to close their doors.

Depending on the finding of the risk analysis, the areas of concern could be overwhelming. It is imperative that the risks are clearly identified and areas of concern are prioritised according to potential impact of liability.

A company can then develop strategies to address the areas of concern according to the prioritised list. Management should consider the effectiveness and cost implication of each identified strategy and align this with the organisational goals and objectives.

Once the strategies have been agreed upon, the company should put measures in place to ensure that the strategies are being implemented and monitored to determine their effectiveness. It is deemed good practice to draft and implement a risk management plan that sets out the identified risks, the strategy to be implemented to address said risk, the responsible person for the implementation and monitoring of the strategy and the formal communication process relating to the risk management plan.


The strategies should be communicated effectively to all the relevant stakeholders in order to obtain their buy-in and commitment. This can be done through workshops, seminars, one-to-one sessions, formal training, discussions, etc.

The implementation of the strategies should be monitored in order to determine the effectiveness and the relevance. This will generally be done by the HR Manager or HR Executive.

Where implementation barriers are identified, the company should consider whether or not the risk has been efficiently mitigated and whether the strategy should be adjusted.

To Conclude

Managing risks that stem from various sources can be a daunting challenge to all employers, and all employers will face risk on a frequent basis. Avoiding said risk generally yields better return on investment when compared to the amounts of effort, funding, penalties, down-time and stressors involved with managing a risk that has already had a negative effect on our businesses.

A great deal of risk is mitigated by having strong relationships with subject matter experts, actively monitoring risk-laden situations and having additional resources apply their minds to same.

To avert and mitigate risks in the HR sphere typically entails sound peace-of-mind and a financial benefit, hence why it makes sense to employers of all shapes and sizes to specifically analyse and remove risk wherever possible. As an empowering service provider in the HR sphere, LabourNet strives to assist with identification and elimination of risk as a fundamental element of all our products.

For more information on the above topic, please contact the LabourNet Helpdesk at

0861 LABNET (0861 522638).

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