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How to minimize Skills Development Expenditure

How to minimize Skills Development Expenditure

The Amended Construction Sector Code was published on 1 December 2017. This code has implications for entities that previously, under the Codes of Good Practice, didn’t need to make any contributions to obtain a specific level. This specifically refers to Qualifying Small Enterprises (QSEs) that qualify for automatic level 1 or 2 sworn affidavits in terms of the Codes of Good Practice.

In terms of the Codes of Good Practice, if an entity with a turnover between R10 million and R50 million have at least 51% per definition black ownership, that entity would qualify for a level 2 affidavit. Similarly, if such an entity has 100% per definition black ownership, the entity would qualify for a level 1 affidavit.

There are 2 major deviations under the Amended Construction Sector Codes.

  1. All QSE’s will need to obtain a BEE Certificate from a SANAS accredited verification agency. Even if the business entity is at least 51% black-owned they will still be required to obtain a certificate and cannot make use of an affidavit.
  2. The entity will need to comply with the sub-minimum target on the skills development element of the QSE scorecard to avoid being discounted by 1 level. The sub-minimum equates to 40% of the total points on the skills development scorecard, excluding bonus points, which amounts to 9.6 points.

Below is a breakdown of the available points:

Skills Development:

Indicator Weighting Target
1. Skills Development Expenditure on any programme specified in the Learning Programme Matrix
1.1 Skills Development Expenditure on learning programme specified in the Learning Programme Matrix for black people as a percentage of the Leviable Amount.  

 

14

 

 

1.5%

1.2 Skills Development Expenditure on learning programme specified in the Learning Programme Matrix for black management (executive, senior and middle management) as a percentage of total Skills Development Expenditure of the Measured Entity on black people  

 

7

 

 

25%

1.3 Skills Development Expenditure on learning         programmes specified in the Learning       Programme Matrix for black people with disabilities as a percentage of total Skills Development Expenditure of the Measured Entity on Black People  

 

3

 

 

3%

2. Bonus points:
2.1 The number of black people absorbed by the Measured Entity and Industry at the end of the learning programme  

1

 

100%

2.2 The number of black employees that are registered successfully as a candidate or professional with industry professional registration bodies as a percentage of all employees registered  

1

 

50%

Skills Development Total (Including Bonus Points) 26  

 

There is, however, good news for entities that would like to remain on their current levels and avoid discounting to a lower level. In terms of the second indicator on Skills Development scorecard (1.2 above), if at least 25% of the total skills development expenditure was on black executives, senior and/or middle management, 7 points would be awarded to the entity. This means the entity only requires 2.6 points on the first indicator (1.1 above) to achieve the sub-minimum. With 14 points available for a target spend of 1.5% of the annual payroll, it is advisable to spend just 0.28% of the entity’s annual payroll on accredited skills courses, while ensuring that at least 25% of the expenditure is on black executives, senior and/or middle management. This will ensure that the sub-minimum of 9.6 points is reached with minimal expenditure.

It must be noted that in order to claim any skills development points, a Workplace Skills Plan must have been developed and submitted to the relevant SETA.

ABOUT THE AUTHOR

Stephen Strydom has obtained his BCom (Law) as well as his LLB degree from the University of Pretoria. He is currently a SEESA BEE legal advisor at our Cape Town office.

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