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South Africa – Amendments to Labour Relations Act causing turmoil

06 July 2015

South Africa’s temporary employment service (TES) industry has been negatively impacted by the implementation of labour law amendments, with the worst effects felt by workers who have lost jobs en masse, reports iol.co.za.

TES workers are largely medium-skilled and not just unskilled workers. They are more likely to be permanent, rather than working on a limited or contractual basis.

The Commission for Conciliation, Mediation, and Arbitration (CCMA) said that increasing numbers of workers are exercising their legal right to fight unemployment, many also approaching the labour court to argue that they have been unfairly dismissed.

The recent amendments to the Labour Relations Act (LRA) stipulate that TES employees earning below ZAR 205,433.30 (USD 16,641) per year should be deemed permanent employees of the client company after working continuously for three months. 

Instead of the expected seamless conversion of such workers to permanent posts, employers have chosen to dismiss workers, as some cannot afford to absorb them, while others are simply circumventing the law.

Results of a study conducted by the Confederation of Associations in the Private Employment Sector (Capes) found that only one-in-four temporary workers were made permanent following the amendment.

Capes, which represents more than 1,200 independent staffing business and a daily average of more than 700,000 temporary workers across all major sectors, also said their research found that half of all sampled workers had their jobs terminated or had been retrenched.

The study, conducted by the University of Cape Town, found: “Negative effects were felt most strongly in manufacturing, finance, real estate and business services, and public and social services industries and the Gauteng and KwaZulu-Natal provinces.”

TES companies have not been left unscathed, with many closing down.

The initial reaction by the CCMA and all parties affected by the law was to apportion blame for the shedding of jobs on confusion over the interpretation of the amendment, with TES companies and their clients unsure about who was bound by the law to employ workers.

A test case before CCMA this week; between the Metal Workers Union (Numsa), staffing firm Assign Services, and their client Krost shelving & Racking, shed some light on the matter.

According to commissioners handling the matter, the law should be interpreted to only deem the client as employers and not the labour brokers (the local term for staffing companies), meaning workers should be offered permanent posts after three months by the companies to which they are contracted.

However, the TES companies under Capes were preparing to challenge the precedence-setting ruling at the labour court. They were unhappy with the ruling completely scrapping TES companies’ role as “employers”, which would inevitably have financial implications for the labour brokers.

A statement from Capes advised: “The arbitrator fails to deal with the practical examples, resulting in the TES no longer being the employer. This includes rights acquired against the TES such as stop order facilities. The arbitrator has failed to deal with the fact that, on his finding, TES’ could simply stop paying over union dues.”

The CCMA defended the ruling, saying it would set the record clear, empowering workers who wanted to either refer cases to the commission or approach the labour court.

For more information about the importance of TES to the South African labour market and economy, research subscribers can click here.