CWS 3.0: March 21, 2012

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Global: Strikes over Contingent Worker Usage

Given how established temporary labor provision is within developed Western economies, it is easy to forget just how controversial it can be in other parts of the world, with some unions even demanding outright abolition.

While such opposition may seem like a severe overreaction to what is a well-established and valued business practice in many countries, union opposition in other parts of the world needs to be understood in context. Temporary labor provision in many countries is still very poorly regulated, employment rights are less than basic and the pay of temporary workers in some countries is barely at subsistence levels.

Israel
Out of a total workforce of 3.2 million workers in Israel, it’s estimated 350,000 to 400,000 are contingent — or “subcontracted.” In February, the most important trade union in Israel, Histadrut, held the first general strike in five years to protest the treatment of subcontracted workers.

With the blessing of the trade union, the subcontracted workers themselves did not actively participate in the protest because current regulations do not protect them and they could be fired if they participate in a strike.

The three-day strike ended following successful negotiations between the government, represented by Finance Minister Yuval Steinitz, and the leader of Histadrut, Ofer Eini.

A major sticking point in the negotiations was defining the group of subcontracted workers whose position should be stabilized: Histadrut wanted a broad definition, while Minister Steinitz (of the right-wing Likud party) wanted to limit guaranteed improvements to certain groups of workers. The parties agreed to establish a joint committee to decide which subcontracted workers constituted “core professions,” which employers would be required to hire directly. Such “core professions” are likely to include bank tellers, factory assembly-line workers, chambermaids in hotels and messengers.

The government has agreed that employers will equalize the labor conditions of subcontracted workers and that outsourced employees working in places bound by a collective wage agreement will benefit by that agreement’s conditions — such as an extra month's salary once a year, for example.

The government also agreed that municipalities and government ministries, university administrations and other public agencies will hire outsourced workers directly when these individuals do the same job as employees directly on the payroll, following approval by the joint Histadrut-treasury committee and the nine-month initial employment period as a contract worker. While the government rejected Histadrut’s demand that thousands of cleaners and security guards working in ministries and local government and other public agencies be hired directly. However, the agreement did stipulate minimum pay for these workers and their inclusion in any pay rises awarded to public sector workers.

As a compromise, Histadrut agreed that it would not raise demands with regard to pay for outsourced workers for a period of three years.

Speaking at a joint press conference with Eini on Sunday, Steinitz said: “We understood the issue of outsourced workers deserved a historic correction.” However, the chairman of the Union of Local Authorities in Israel, Sholomo Buhbut, said local government would not be able to implement the agreement without additional public sector funding of about NIS 1 billion ($26.4 million).

South Africa
Earlier in March, South Africans marched in the streets of the nation’s major cities in a national strike called by COSATU, the powerful group of trade unions and (usually) an ally of the governing African National Congress (ANC).

The national strike was called to protest two issues. First, new highway tolls and, second, the practice of contracting out jobs through temporary-employment firms, at lower pay and with fewer benefits than permanent workers get, a practice known in South Africa as “labor broking.”

Labor broking, the hiring of workers through staffing firms, or “labor brokers,” proliferated in the 1990s when stringent new labor laws greatly increased the red tape involved in hiring and firing workers. The new laws particularly affected small and midsize businesses. According to the National Association of Bargaining Councils (NABC), there are now 979,539 labor broker workers in the country.

According to CIETT, the International Confederation of Private Employment Agencies, South Africa has the world’s highest number of temporary agency workers as a proportion of all workers (6.5 percent in 2009 — five times the penetration rate found in the U.S.).

In a published memorandum, COSATU is demanding that the government outlaw labor brokers (staffing firms), charging that they undermine the government’s policy of decent work because many of the workers they place have no security of tenure and do not receive healthcare and pension benefits. COSATU’s memorandum describes labor brokering as “human trafficking and modern day slavery” and highlighted large retail companies as some of the main “culprits”:

    • Shoprite — 35 percent full-time staff and 60 percent “flexitimers” comprised of various categories of variable time employees or casuals.
  • Pick n Pay — 44 percent full-time staff and 56 percent various categories of variable time employees or casuals supplied by the labor brokers.
  • Woolworths — 30 percent full-time staff and 70 percent casuals

A female protester told the eNews Channel that she had worked for a labor broker for 10 years, and that her salary is so low she finds it difficult to feed her children. “I am here because I am working for labor brokers for 10 years, and I have children going to school and this money is not [enough] because I can’t buy for, because I [am paid] only R300 ($40) a week in post office, so I can’t [manage],” she said.

Zwelinzima Vavi, the secretary general of COSATU, said in a fiery speech that racial apartheid was increasingly being replaced by economic apartheid. “We have fired our first warning shot,” Vavi asserted. “There are still many bullets in our chamber.”

Despite the end of apartheid, inequality is still a serious political issue in South Africa. Africans, who constitute 79.4 percent of the population, account for 41 percent of household income, whereas whites, who account for 9.2 percent of the population, receive 45 percent of household income.

While protests are not unusual in South Africa, this particular strike was notable as it came from working people, not the destitute, and their protests took place not in distant townships but in the heart of South Africa’s major cities.

In response, the South African government is proposing to regulate labor brokers to ensure that people employed by them have fair and equitable conditions of employment. In their current form, these proposals will;

  • limit the usage of labor brokers to temporary work not exceeding six months or to situations where employees work as substitutes;
  • apply the principle of joint and several liability where the employee could cite both the client and the labor broker in CCMA and/or Labor Court proceedings;
  • apply the principle of equal pay for the temporary workers for work of similar value compared with the employees of the client company.

Russia
While there has been no strike in Russia against temporary work, unions have been demanding its abolition.

Staffing Industry Analysts estimates that the Russian staffing market was worth approximately €1 billion in 2011, however, there is also a sizeable “black market” that, if included, would add an additional 30 percent to 40 percent to that figure. This black market comprises numerous small operators prepared to pay temporary workers in cash and avoid taxes and social charges. Surprisingly, many well-known companies (including U.S. and European companies) continue to make use of these illegal staffing providers.

Given the prevalence of this black market, it’s not surprising that Russian trade unions have come out in opposition to temporary staffing and there is some danger that future legislation could restrict or even prohibit the market. In November 2010, members of the Committee of the State Duma Labor and Social Policy actually initiated a bill proposing a ban on agency labor. The bill was passed in May 2011 on its first reading, but a subsequent review recommended that the bill should not be finalized until all proposals had been put forward by interested parties.

While that law is now in limbo, the government position now seems to be that the bill on agency labor should include an accreditation procedure for staffing firms, without creating barriers for companies wishing to engage in the hire of temporary workers. Adoption of a formal legislative framework for temporary staffing provision in Russia could make it much more difficult for black market providers to operate. Such a development would be a tremendous boon to the established, lawful staffing providers in this market.

Global employers need to be mindful of these developments and to recognize that the use of temporary workers in some countries is controversial and very high on the political agenda. While employers may relish the prospect of low regulation and low pay, when rolling out a contingent labor program in such markets, reputational issues should feature as one of your key considerations.

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