The Unemployment Problem 

Labour market rigidity or poor labour market efficiency is detrimental to the labour absorption of the country. According to Schwab (2018), South Africa ranks 93^rd out of 137 on measures associated with labour market efficiency. South African labour legislation is to be held responsible for prolonged levels of unemployment and low absorption rates.

Another distinguished barrier to a larger labour absorption in the labour market is the levels of educational attainment and the quality of education; precisely, the mismatch between the skills of the education system and the demands of the labour market.

The B-BBEE Codes and “Absorption”

Absorption falls under the Skills Development Scorecard as indicated in paragraph 2.1.3 under Bonus Points “Number of ‘Black’ People absorbed by the Measured and Industry Entity at the end of the Internship, Learnership and Apprenticeship programme under paragraph 2.1.2.1.

IMPORTANT: The target must be 5% of the total employee headcount to obtain full points in Category B, C or D Programmes. Full Bonus Points will apply if the measured, or an industry entity, absorbs these learners at the end of the programme.

The concept of Absorption does not only apply to unemployed learners as unemployed learners are confined to Learnerships as found in the Skills Development Act, whereas the BBBEE Codes of Good Practice make allowance for recognition of all Learnerships (inclusive of employed and unemployed) as well as Internships and Apprenticeships.

Absorption recognition applies to Black People as defined who, upon completion of the Learnership, Internship or Apprenticeship, secure a permanent contract.

The following boxes thus need to be ticked for recognition of Absorption:

• A ‘Black’ Person as defined;
• Who does not have a current long-term contract of employment at the outset;
• Is completing a Learnership, Apprenticeship or Internship via the Measured Entity; and
• Upon completion secures a permanent contract with either the Measured Entity or any entity within the industry.

The requirements do not, as an example, exclude the following from Absorption Recognition:

• ‘Black’ Employees in the Measured Entity with a fixed-term contract of employment; and
• ‘Black’ Students completing an Apprenticeship or Internship

The absorption target is indeed 5% of Total Employee Headcount. The translation of this statement is two-fold as it incorporates two aspects:

• The targets for Absorption which is confirmed as 5% of total headcount; and.
• The treatment of those employed on a Learnership with permanent employment

Following consultation with SANAS, the interpretation is as follows:

•  A ‘Black’ Person who is employed and on a Learnership with an employment contract that has no date of conclusion must be counted in the 5% total headcount target for absorption. Consequently, such a person may not be absorbed, as they are already deemed employed, in which case an organisation may not claim full absorption points.
• A ‘Black’ Person who is placed on a Learnership with an employment contract that has a concluding date, for example, a 12-month contract running parallel to the Learnership would be counted in the total 5% headcount. Therefore, they would be eligible, following the conclusion of the Learnership to be absorbed. Thus they will contribute to an organisation’s Absorption claims.”

Examples:
Example A:

Company X is rated according to the 2013 Amended Codes of Good Practice and has a total headcount of 100 employees (permanent and fixed-term), with 5 Unemployed Learners (included in total headcount). It wishes to obtain full bonus points for Absorption of Learners at the end of the Learnership programme.

 In order for the entity to achieve any points for Absorption, the following criteria needs to be met:

1. Company X needed to be the Lead Employer (if hosted Learnership) and therefore employed the Learners and sponsored the Learnership programme;
2. All 5 Learners were absorbed;
3. The absorbed Learners needed to be classified as Black in terms of the definition of the B-BBEE Act and Codes;
4. The absorbed Learners needed to be permanently employed either by Company X or alternatively elsewhere with sufficient supporting documentation i.e. ID, fixed-term contract for period of Learnership programme, Permanent Employment Contract after completion;
5. The % absorbed Learners should be at least 5% of the total headcount as at date of measurement i.e. onsite verification.

 Example B:

Where Company X elects to not achieve the full 5-points (such as budgetary constraints or in-line with an overall B-BBEE strategy which does not necessitate the full score) or where it missed the 5% target due to an increased headcount at the date of measurement, the percentage absorbed will qualify for the accompanying score. In this example, the entity’s headcount increased to 200 employees at the date of measurement and it still absorbed all 5 Learners.

 In order for the entity to achieve the relevant reduced points for Absorption, the following criteria needs to be met:

1.  Same as points 1-4 above;
2.  The % Learners absorbed were 2.50% of headcount and Company X will therefore accordingly only qualify for 2.50 points.

(Floris Pelser & Associates)

 Organisations measured on a Sector Code must consider the specific requirements of the code they are measured on, subject to aligning Learnerships, Apprenticeships or Internships with statement 300. However, it is essential to note that where a Sector Code is silent on a matter, it reverts to the Amended Generic Codes.

Yet, many companies miss out on these extreme gain factors.

The Opportunity!

The target for absorption is 100% to get full points, which means that employers can earn 5 bonus points on the Skills Development Scorecard by ensuring that learners are absorbed, given the guidelines above.

“Absorption” creates an opportunity for companies to obtain bonus points on the B-BBEE Scorecard, effectively meaning that a company scoring full score on all the Skills Development Expenditure categories, can actually score 25/20!

The Unique Skills College Solution to Ensure Absorption

Skills College has developed a 2-year programme to achieve a maximum of 5 points for Absorption.

We offer an Absorption service:

• Year 1:
  Unemployed learners attend the NQF level 1 Hygiene & Cleaning learnership, which the client sponsors.
• Year 2:
  • Learners are Absorbed in Ubusha eWasha as cleaners and are paid a R3 500 per month stipend by the host company. There is an additional R400 management fee payable by the host company.
  • Cleaners receive a permanent employment contract.

 The Underlying Learning Offering

Components of the learning offering are as follows:

• Original qualification is Hygiene & Cleaning (L1) unemployed
• Face-to-face facilitation (physical) with practical phase at Ubusha
• The qualification is a 1-year qualification
• The project is run off-site, meaning it does not impact the operations of the host company.

What Value are Clients Experiencing when Implementing our Recipe?

Skills College offers the following value to clients following our recipe:

• Obtain 5 points on the BEE scorecard
• Experience Convenience – the project is run off-site, making it very cost effective
• There is no increase in headcount – in these days of retrenchments, adding headcount is a challenge. By using our recipe, there are no difficult discussions about appointments following a recent retrenchment event.
• Skills College guarantees absorption
• The client can feel good about its contribution towards solving the unemployment and absorption crises we are facing in SA, and that they are, in the true spirit of the BEE act, improving the state of employment of the unemployed youth in SA
• The client is also contributing towards the cleaning industry in SA as well as furthering the green movement in South Africa.

 Feel free to connect if you would like us to assist you with maximizing your Absorption benefits!