The amendments to South Africa’s Labour Relations Act (LRA), which now give wider protection to staff employed through Temporary Employment Services (TES) or labour brokers (the local term for staffing agencies), have been criticised for having the potential to curtail employment opportunities, reports moneyweb.co.za.

As of 1 April 2015, organisations will have to comply with new limitations on the use of fixed-term and temporary workers who earn below ZAR 205,433 (USD 17,017) per annum.

The overarching change in the Act is that workers working on the client company’s premises will be regarded as permanent employees of the client after three months – if there is no adequate reason for fixing the duration of an employment contract. These workers will also be entitled to the same benefits as permanent employees within that organisation.

These amendments relating to labour brokers are just one component of wholesale changes to the Labour Relations Act, which became effective from 1 January 2015. However, labour brokers were granted a three-month window, which lapsed on 31 March, to get their houses in order before workers gained additional rights.

Johan Botes, Director of Employment for legal firm Cliffe Dekker Hofmeyr, told Moneyweb that the changes to the Act are about protecting vulnerable workers from abusive practices: “The amendments will streamline the labour environment and change how businesses employ and manage staff in their organisation.”

The Act does not prohibit or outlaw the use of temporary services workers or labour brokers.

Mr Botes said the amendments are intended to limit the use of workers through short-term contracts.

“All industries that make use of the labour broking system will be impacted by the Act,” said Nick Robb, Partner in the employment & employee benefits practice at law firm Webber Wentzel.

This legislative move has been four years in the making by the Department of Labour, after calls by trade unions for the labour broking system to be scrapped. Labour brokers are viewed as “middlemen” by Cosatu, South Africa’s Congress of Trade Unions, who take a cut from the wages of employees who are deployed to the broker’s client.

Free Market Foundation economist Loane Sharp said labour brokers are the biggest channel for unemployed individuals to enter the labour market, but the amended Act will have a “disastrous impact on employment.”

Mr Sharp said a survey of close to 500 labour brokers, representing 90% of job placements in South Africa, revealed that changes to the Act will cost the economy jobs. To put the expected job losses into perspective, Mr Sharp explained that before 30 April this year, 254,000 jobs are expected to be lost and of this figure, 192,000 have already been lost.

“These are temporary workers who are terminated and never to be taken permanently,” he stated.

According to Statistics South Africa’s Quarterly Employment Statistics survey, the unemployment rate for the fourth quarter of last year was 24.3%. During this period, the labour force decreased by 39,000 and the number of unemployed people decreased by 242,000.

Mr Sharp expects the unemployment rate to rise to 32.1%.

He said labour brokers are seeing less employment growth in South Africa and, as a result, are expanding activities outside the country: “Labour brokers have a legitimate and valued sense that employment in South Africa will never grow and they will never be free of government scrutiny.”

There have been mixed reactions from the industry to the new Act.

Johan Kruger, Deputy General of trade union Solidarity, said that there have been enquiries from members about the impact of the new legislation and how it affects their careers: “We are of the opinion that the amendment to the Act could result in companies increasingly subcontracting services or scaling down certain activities instead of employing temporary workers.”