What is the cost of saying ‘yes’ to the YES initiative?
CITY-PRESS.NEWS24 / 01 NOVEMBER 2018 - 00.53 / ROXANNE DA MATA-GONCALVES
While there is a lot of hype around the Youth Employment Services (YES) initiative, it could be an expensive and damaging trial run for businesses that do not have a clear understanding of the legislation or the necessary support from the trade and industry department.
YES is a business-led partnership with government, labour and civil society aimed at providing one million black South Africans between the ages of 18 and 35 with jobs by 2020, through paid, quality work experience.
Image - Web
It focuses on three areas: the creation of new job opportunities in existing organisations for youth; promoting the capacity of small, medium and micro-sized enterprises; and creating these enterprises through collaboration with industry leaders.
My business has seen organisations get burnt when they attempt to adopt government initiatives without following the correct processes.
Let’s take learnerships as an example. We have seen companies put numerous learners through various courses that collectively make up a learnership, but they fail to register their programmes as learnerships.
Unfortunately, if a programme is not registered as a learnership, it won’t be recognised as one. So, the company might spend a lot of money on a programme, but if it does not register it properly, it will not accumulate points for its Broad-Based Black Economic Empowerment (B-BBEE) scorecard.
There is a danger of something similar happening when companies register for the YES initiative.
It is critical that companies have the technical expertise and knowledge they need to implement YES.
They will need to establish how to manage YES from an industrial relations perspective.
This is because they will be inviting people with no prior exposure or common work ethic into their organisations.
Importantly, organisations cannot merely consider their own risks and expectations when implementing the YES programme.
It is necessary to consider both employer and employee expectations.
Employees may expect to be absorbed by the organisation at the end of the programme whereas the organisation may be intent on nurturing its YES participants to become self-sustaining entities.
Of course, not everyone is built to run their own business, so the support and aftercare of these individuals is going to be critical.
Organisations that take the plunge and have YES initiatives running every 12 months to sustain their B-BBEE levels will need to increase their budgets in line with their increased payroll to remain on top of their skills development targets.
This may have been partially alleviated by the increased recognition of informal training from 15% to 50% of the training spend, however, the fact remains that the target of formal training is 85% of total payroll.
They then need to consider the cost of the YES initiative increasing in line with minimum wage increases, as well as determine what they are going to do for the YES candidates once their 12-month fixed-term contracts come to an end should they wish to benefit from the one to two level escalation.
Will they be absorbed or will those who form small, medium and micro-sized enterprises require additional support; would that form part of a new enterprise development strategy; and what would the impact be on budgets exactly?
I see this as opening up an entirely new market for organisations to offer services in the form of advisory boards, consulting or online support for small, medium and micro-sized enterprises.
This will hopefully be supported by the various funding initiatives aimed at giving emerging entrepreneurs a leg up.
Think carefully before registering
Exempted micro enterprises need to think carefully before registering as a YES employer for the YES initiative.
Our assumption was that exempted micro enterprises would be able to engage in the same way they did under the previous codes, which required that they go through a partial verification process.
We were wrong in our assumption. YES assessment only happens post-verification – this is the only rational way to establish whether a company has maintained its BEE level.
In addition, the trade and industry department expects exempted micro enterprises to undergo a “qualifying small enterprises” verification process.
This is counter-productive because exempted micro enterprises are going to have to meet the same sort of spend targets and still go through a discounting process because they are not black-owned or managed.
Exempted micro enterprises would have to spend a considerable amount of money (3% of net profit after tax and 3% of payroll expenditure) to be B-BBEE compliant and to participate in the programme.
After the discounting process, the best they would be able to achieve is a level five under the qualifying small enterprises verification process.
It they take one times their target in terms of the qualification criteria calculations, they would then only escalate one level.
This would take them back to level four, which is what they were in the first place. Therefore, if the purpose of engaging with YES it to increase their BEE level, then this will not work for them.
They will increase their spend, the process will be highly administrative, and they won’t attain the desired outcome i.e. an improved B-BBEE rating.
exempted micro enterprises who want to participate could consider benefiting from a free labour force supplied by large generics that take part in the programme.
Large generics, like those in the banking sector, do not have the capacity to host nor absorb thousands of new employees – so if a financial institution’s target is 3,000 employees and it is only able to take on 1,000 of them, then it will be looking for associates and suppliers to host the remaining YES employees.
YES can work
Challenges aside, the programme can work if clear practice notes are provided and there is a period of leniency for organisations to figure out how to apply it practically.
Already, the trade and industry department has been forthcoming and said absorption will not apply for the first year – so entities will be able to take on their targets and the trade and industry department will assume they have been absorbed after a year.
The trade and industry department should initially allow for an overlap with skills development for the initiative to gain full traction.
The YES initiative overlaps quite closely with skills development, but the trade and industry department’s practice notes specify that there cannot be any double counting – so learnerships, internships and apprenticeships cannot be utilised to manage the YES employees.
While both initiatives target the same task force – people between 18 and 35 years – learners will first have to complete their internships before being employed on a 12-month contract as part of YES.
I think, however, that the trade and industry department should provide a grace period that allows for costs relating to YES employees to be counted towards skills spend while the employees are placed on learnerships, internships or apprenticeships.
After all, we’re trying to reach a particular objective quickly and we need to be able to fast-track the process by educating YES participants through formal programmes, as well as offering them employment.
That said, the trade and industry department will increase the group targeted spend from 15% to 50%, but still capped at the amount of money that a company spends on skills development.
So, if a company is required to spend R4 million, but only spends R1 million, it can count 50% of its internal non-credited spend at R1 million, allowing it to claim R500 000.
Notably, this cannot be salaries, as salaries may only be recognised for employees on learnerships, apprenticeships or an internship.
Another important point to remember is that graduates cannot be used for YES.
The YES initiative is about helping people who can’t find employment because they have not received tertiary education due to personal circumstances.
Quality work experience
She expects the next phase of the YES initiative to involve the outlining or defining of what a “quality work experience” comprises.
Nothing has been defined yet. What we know is that, in terms of qualifying requirements, the company must maintain or improve its BEE level and achieve 40% sub-minimum for at least two priority elements as a qualifying small enterprise and as a generic, achieve 40% sub-minimum in all three priority elements or an average of 50% across all three elements, if it wants to be a YES employer.
It is required to register on the YES for Youth website, because proof of registration will be part of its verification process for B-BBEE.
We also know that youth taken on as YES employees must be placed in new positions and cannot be engaged to cover for attrition.
Although some aspects of the YES initiative need to be clarified or ironed out, it is a positive move to address South Africa’s dire unemployment woes.
The YES initiative will not only provide some relief to multinational corporations and other organisations without black ownership, but will also provide a labour force for small, medium and micro-sized enterprises that cannot afford it and boost job creation for the youth of South Africa.
• Roxanne da Mata-Gonçalves is the director of Strata-G Labour Solutions.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER