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South Africa – Agency workers fastest growing employment sector

01 August 2013

According to Adcorp, the largest staffing agency in South Africa, the workforce deployed by labour brokers now exceeds one million. Labour broker workers (“agency workers”) currently represent 25.3% of all temporary workers. Temporary workers in turn represent 30.7% of all formal sector workers. In other words, agency workers represent 7.8% of total employment in South Africa, according to the Adcorp employment index.  This is the highest penetration rate globally by some way.

Temporary work has remained stable during the recent economic difficulties, whereas permanent work has declined by -1.8% or 168,000 over the past year. The number of permanent jobs is still 600,000 below the peak reached before the 2009 global economic crisis. Aside from the informal sector, which has created an additional 109,000 jobs over the past year, and the public sector, which has created 181,000 jobs over the past year, agency work is the fastest-growing segment of the South African labour market.

Temporary workers appear to be more secure in their jobs than permanent workers. Since 2000, the number of temporary workers increased by 2.6 million to 4.0 million, whereas the number of permanent workers fell by 2.0 million to 8.9 million. Although temporary work is often a stepping stone into permanent work – with 28% of temps going on to permanent work within 12 months and 37% doing so within 3 years – temporary work is increasingly a standalone phenomenon, without formal linkages to permanent work.

The demographic characteristics of the agency workforce report that; 52% were never previously employed, 81% are young workers (aged 18-35), and 94% are from previously disadvantaged backgrounds. According to Adcorp, labour brokers constitute a R44 billion (USD 4.5 billion) industry in South Africa, employing around 19,500 internal staff and just over one million agency workers. In countries with similar levels of economic development to South Africa, temporary work represents between 12% and 19% of total employment. In South Africa, temporary work is proportionally larger than in other countries at 30.7%, for two main reasons:

  • Labour laws and regulations make managing an employee’s on-the-job performance exceedingly difficult in South Africa. Labour brokers, who possess specialized competencies in performance management and dismissal, are often in a better position than their clients to attain higher levels of labour productivity. Many labour brokers employ specialized professionals who can deal effectively with bargaining councils, trade unions, the CCMA and the Labour Court. This makes the use of labour brokers especially attractive to midsize employers employing between 50 and 500 people, who do not possess specialized human resource functions, which explains why so many labour brokers are small entities supplying fewer than 200 temporary workers. 
  • Collective bargaining arrangements do not always apply to temporary workers. As a result, temporary workers are not generally offered regular pay increases in the same way that permanent workers are. For a permanent worker, the only time that their remuneration is checked against the market-related remuneration for the same role, is at the point when they are recruited, thereafter their remuneration is generally linked to the cost of living and/or increments achieved by negotiation with trade unions and/or bargaining councils. For a temporary worker, by contrast, their remuneration is checked against the market-related remuneration for the role each time that their contract is rolled over. In this way, temporary employees’ remuneration is much more market-related than permanent workers’ remuneration. 

The use of labour brokers is overwhelmingly connected to peaks in demand, as confirmed by 61% of clients, and filling-in for absent employees, as reported by 48% of clients. Temporary workers are not substitutes for permanent workers: they play different roles, connected to one or other cycle in the production process, that leads to variable demand for labour. Agency workers spend less time looking for work – 90 days, compared to a staggering 806 days (two years and three months) for the average South African job seeker. In addition, agency workers have better access to on-the-job learning: last year labour brokers contributed R490 million (USD 49.7 million) to the National Skills Fund and conducted 32% of all ‘learnerships’ (a type of apprenticeship) conducted in the country.

South African labour brokers, however, are currently awaiting new temporary employment services’ legislation that could impact on how they are run and impose tighter restrictions. The vote on the new legislation has been delayed until after the parliamentary winter recess. 

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