With South Africa’s skills shortage, the high cost of employee turnover and increasingly mobile skilled professionals, retention of top talent remains a cornerstone of organisational success.
This is even more relevant in the context of the recently gazetted Employment Equity Amendment Act, Sectoral Targets and Employment Equity Regulations. To keep their best people, South African businesses must employ multifaceted strategies, including long-term incentives, such as Employee Share Ownership Plans (ESOPs).
Retention challenges that businesses encounter include an ageing workforce, the emigration of professionals, and younger employees who increasingly seek purpose-driven work and flexibility. The job market is extremely competitive, especially in finance, IT, and engineering.
The Employment Equity Amendment Act, effective from 1 January 2025, introduces five-year sectoral targets for black people, women and people with disabilities, and makes retention more important than ever. Companies with 50 or more employees must comply with these regulations to avoid penalties and ensure business continuity.
Non-compliance can result in significant penalties and exclusion from public contracts.
Shaun Raizenberg 10 Dec 2024 This means organisations need to rethink their approach to attraction and retention, and implement a blend of strategies that resonates with their employees' needs and aspirations. Key tools that can help in achieving this goal include:
- Competitive compensation and benefits - Include retirement benefits, performance bonuses, and wellness programmes. Provide flexible work arrangements to support employees seeking work-life balance.
- Long-term incentives - Use deferred bonuses and Employee Share Ownership Plans (ESOPs) to align employee interests with the company’s success, building loyalty and motivation.
- Career development opportunities - Encourage upskilling through leadership programmes, mentorship, and tuition support, allowing employees to invest in their growth.
- Workplace culture and engagement - Promote inclusivity and recognition to improve employee satisfaction. Use engagement initiatives like regular feedback sessions and diversity strategies to create a sense of belonging.
Employee ownership as a retention tool
Employee ownership is increasingly recognised as a powerful strategy for businesses seeking to attract and retain skilled professionals and key talent. This approach has gained traction globally, and offers significant benefits for retaining employees.
Employee Share Ownership Plans (ESOPs) and Management Share Ownership Plans (MSOPs) are particularly powerful retention tools in the South African context. They allow eligible employees to acquire equity, directly or indirectly, in the company, resulting in several benefits:
- Alignment of interests: Employees become co-owners, which deepens their commitment to the company’s goals.
- Financial upside: The potential for financial gain motivates employees to stay longer.
- Retention through vesting: Ownership benefits that vest over time – common in MSOPs - encourage long-term employment.
Structuring ESOPs to support B-BBEE objectives can improve compliance and enhance competitiveness. Retaining Black talent positively impacts the Management Control B-BBEE pillar and supports meeting Employment Equity requirements.
Dhevarsha Ramjettan and Safiyya Pate 20 Nov 2024 Employee ownership doesn’t just aid retention and support B-BBEE compliance though. It also transforms organisational culture. When employees have a stake in outcomes, their goals align with those of the business. This alignment boosts engagement and productivity, with employees being more motivated and committed.
Ownership also drives innovation, leading employees to share ideas and collaborate. A culture of shared ownership lowers turnover rates and strengthens the internal knowledge base. By adopting employee ownership strategies, businesses can become more resilient and create a committed workforce that contributes to success.
The retention challenge
Amid a skills shortage, South African businesses must prioritise talent retention. This pressure is exacerbated by the Employment Equity Amendment Act, which underscores the importance of retaining historically disadvantaged talent as a moral, strategic, and legislative priority.
While short-term incentives are valuable, long-term strategies, such as career development and equity participation, provide the greatest returns. Well-structured ESOPs serve as an effective means to retain talent and create shared value. They enhance employee engagement and loyalty while delivering measurable benefits in business performance.
Retaining skilled talent won’t come from a single fix, but from a deliberate mix of strategies that reflect the complex, human side of work in the 21st century.
