Maximizing Skills Development spend as part of your B-BBEE Strategy

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Many a raised eyebrow followed the amendments to the general/generic BBBEE codes and subsequently some sector codes.

The amendments brought about a shift in focus away from the narrow based approach of doing the absolute minimum to get a B-BBBEE certificate by avoiding the critical elements such as ownership and skills development. The new focus is aimed at implementing measures with long term effect, creating gainful employment, identifying skills gaps and contributing to scarce and critical skills development, making the unemployed more employable and in so doing alleviating poverty and unemployment rates. This could not have come at a better time given the ongoing disputes in the university space.

Even though the priority ownership element was something to get used to, it was expected to a degree, because BBBEE after all drives black ownership in businesses; much of this disbelief centred on the skills development element of the codes. With the spend target being moved from 3% of your annual wage bill, to 6% on the generic scorecard, and the introduction of the EAP targets, anxiety followed. The general consensus being “surely the DTi should know that no business can afford this?”, or can it?

It is clear that B-BBBEE legislation is here to stay and as such it would be best to incorporate it into your business to have fruitful results. Any business aiming to retain its talent and move forward, would recognise that employees need to be developed and advanced in order to do this. So why not utilise the guidelines provided by the codes and legislation to the benefit of your business.

This article will focus on how to maximise your skills development spend as part of your B-BBEE strategy and minimise the ultimate bottom line cost to the business. We will consider the general generic scorecard throughout, but the same strategies may be applied, with some adjustment, to other scorecards.

SETA grants

Each business with a payroll exceeding R 500 000 annually, pays 1% of your monthly payroll in SDL, aimed at assisting the skills development process in South Africa. You are able to claim up to a maximum of 69,5% of this levy in the form of mandatory and discretionary grants, and also have access to additional grants should you submit your ATR/WSP reports on or before 30 April (or the deadline set by your applicable SETA). As part of this submission, a PIVOTAL Plan is required to be submitted. This plan should focus on Professional, Vocational, Technical and Academic Learning. In short this means that upon completion of the training course, a delegate has a certificate of competence to show for his input. These PIVOTAL training interventions are also what you require to incorporate into your B-BBEE strategy for maximum benefit.

Employers may access further funding form the SETA (through the expression of interest process) in the form of discretionary funding which either results in, or substantially contributes to the cost of PIVOTAL training planned. This cannot be accessed if the ATR and WSP was not submitted timeously.

Learnership Tax Incentives

Although these incentives were said to come to an end in September 2016, it has now been proposed that it be extended to 31 March 2022. The incentive allows an employer offering learnerships, a tax rebate of R 80 000 per learner participating in a qualification reaching up to NQF level 6, and R40 000 for qualifications equal to or higher than NQF level 7. For disabled learners, the incentive will be R 120 000 and R 100 000 respectively. The qualifying employer qualifies for 50% of the incentive upon starting and 50% upon completion of the learnership.

The B-BBEE codes require 2.5% employed and 2.5% unemployed learners (measured as a percentage of your workforce) participating in a learnership, apprenticeship or internship. The cost of running the programme, stipends/salaries paid to these participants and other legitimate costs during the programme, may be counted towards your target spend of 6% of the annual payroll. Should you make use of SETA funding to fund the learnerships, you will still gain all the relevant points for offering learnerships, however, the funding obtained from the SETA may not be counted towards the 6% spend target.

Employment Tax Incentive (ETI)

ETI aims to encourage employers to employ more young people aged 18 to 29 years. Even though some terms and conditions do apply, employers are incentivised by having to paying less PAYE without this affecting the wage of the employee. The amount will depend on the employee’s earnings should it not exceed R6000 monthly.

It may then be suggested that offering learnerships to people between the ages of 18 and 29 will be ideal for an employer hoping to keep the cost of the interventions as low as possible.

Internal Processes and Record keeping

Although the incentives mentioned above are the most significant, there are also a number of activities that may help an employer maximise the skills development spend. The amended B-BBEE codes indicate that there is a 15% cap on informal training programmes as well as legitimate training expenses respectively. This cap, as the codes state, applies to the ‘total value of skills development expenditure’, and not the 6% target as is commonly believed. This means that if your total annual skills development expenditure is R 1 000 000, you may recognise R 150 000 towards internal training and another R 150 000 towards legitimate expenses, provided that you are able to prove the expense via a thorough record keeping process (attendance registers, payslips, invoices, evidence of payments etc).

From this it is also evident that a business is able to reach their skills development target spend through only informal training, however it will require very detailed and accurate record keeping and great quantities of internal/informal training.

It is important to note however, that the BBBEE codes are a matter of interpretation by the verification agents under guidance from the DTi. Therefore, it is always recommended that you first confirm initiatives with your verification agent to ensure that they see the same substance in your activities as you do, and that it will be recognised as such upon verification.

This article is not intended to convince you that reaching your skills development target won’t cost you time, money or effort, but it is quite possible to reach targets without breaking the bank.

If the savings you are able to make through the options mentioned above does not interest you, perhaps you inner altruist would be satisfied knowing that your skills development efforts gave someone an opportunity to better themselves, develop their potential, become more employable and have the opportunity to provide for their loved ones.

For more information on how to maximise your skills development spend, please contact the LabourNet Helpdesk at 0861 LABNET (0861 522638).

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