BEE and Skills Development: The right plan does not cost you money, it saves you money

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BEE and Skills Development: The right plan does not cost you money, it saves you money

Non-compliance at your own peril

Doing business in South Africa means that compliance with Broad-Based Black Economic Empowerment (B-BBEE) legislation, is a strategically and financially significant aspect of your business.   Non-compliance with B-BBEE is a major competitive disadvantage and in these times, could very likely be the straw that breaks the camel’s back.  However, compliance with B-BBEE can also be the competitive advantage you need.

In this article, we will delve into the cost-saving mechanisms available for utilisation in order to achieve the skills development targets under B-BBEE. 

Arguably, the element of B-BBEE which is considered the most expensive for many businesses is the skills development element.  With the target spend on skills development set at 6% of annual salaries, for most industries, it can be a major increase in your cost of doing business.  However, through careful planning you can achieve a 6% recognised spend without actually spending the entire amount as cashflow.

What is the right plan?

So, what can you do to achieve your skills development targets cost-efficiently you may ask? In this article, I am not touching on the actual compliance items required by the skills and B-BBEE legislation, but instead, I am discussing how you can achieve your skills targets in a more cost-effective manner. As part of your plan to save money I would advise the following elements to feature in your strategy:

  • Specialist advice

I highly recommend that you make use of a suitably experienced skills specialist or consultant to calculate the costs and rewards for the various different strategies that you are considering.  Being better informed will enable you to make better decisions and a suitable specialist will have knowledge of all the other items being highlighted in this article. I would recommend reading my previous article on the value of experienced skills consultants for further information (add link here).

  • Learnerships, Apprenticeships and Internships

Learnerships, apprenticeships and internships are the most efficient way to make up your skills points.  They count towards achieving multiple different skills targets and award you access to a wide range of tax benefits and grants to help you finance these projects.

  • Salaries count

By implementing learnerships, apprenticeships and internships you are allowed to count those participants’ salaries as skills spend.  This is especially worthwhile when you afford your own employees the opportunity to go on a learnership, not to mention that your own staff are being developed.

  • Timing is important

It is most efficient to start training programs at the beginning of your financial year based on your lowest expected skills targets. Nearing the end of your financial year, you can then compare your actual achieved targets with your goals and implement training projects to fill these gaps precisely. If you find that you are going to overspend in a specific financial year then you should negotiate with your training provider for you to rather pay the training costs in instalments which stretches over your financial year-end date. Thus, you can move part of the overspend into your next financial year and not waste the investment.   

  • Opportunities presented in your day-to-day business

A temporary position opening up in your operations is a perfect opportunity to give a learner, apprentice, or intern the opportunity to gain work experience.   If this candidate makes a positive impression on you and you decide to employ them full-time after their studies are completed, you will earn up to 5 bonus points on the skills development scorecard of B-BBEE.

  • Tax deductions

You must ensure that you are taking full advantage of the various tax incentives provided by the government to reward businesses for sponsoring learnerships, internships and apprenticeships.   By implementing these types of training projects, you can earn back up to R120 000 in tax deductions per candidate per year.  Additionally, if you focus on providing these opportunities to the youth then there are various PAYE deductions which can be applied every month.  

  • SETA Discretionary grants

If you are in compliance with the Skills Development Act you have the opportunity to sign a MOU with your industry SETA who can potentially finance these learning interventions on your behalf.

  • Financing for businesses in distress

If your company meets certain criteria then you can apply for financial aid for stipends and or salaries of your learners, apprentices and interns for an extended amount of time.  Talk to your skills advisor to find out if you qualify for these grants.

By implementing most of the above elements in your skills strategy for any given year, you can break-even or at least bring your cost down significantly.

I do advise that you speak to an experienced advisor on the above items to ensure that you implement them for your business today.

Author: Jean Du Plessis

Contact Training Portal Online to talk to one of our experienced consultants who can assist you with implementing an effective skills development solution. Contact Jean at jean@trainingportal.co.za

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