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South Africa – Big labour brokers will find ways to circumvent labour law amendments

12 September 2013

The Labour Relations Amendment Bill was passed by the South African Parliament last month.  According to the amendment, following a period of three months temporary workers are entitled to become permanent employees. They will also receive the same pay, rights, and benefits as permanent employees. Proposed two years ago, the amendment was passed with 248 voting in favour and 81 voting against.

The new labour law amendments to labour broking are about to radically alter the rules of employment, according to Loane Sharp, a labour economist at workforce management company Adcorp. The Labour Relations Amendment Bill was passed by Parliament last month. It is currently with the national council of provinces and will almost certainly be implemented before the general election in 2014.

Speaking to the Financial Mail, Loane Sharp explained that the implications of equal remuneration and benefits for temporary staff are going to result in one of two big unintended consequences of the new regulations.

“Under the equal treatment provision of the bill, government was expecting to see a mad scramble by employers to adjust temporary staff remuneration to the same levels as full-time staff and offer them equal benefits. This is not going to happen. Everything will be reduced to the lowest common denominator: the temporary worker,” Mr Sharp stated.

“Assisted by their labour brokers, employers are preparing to reduce the remuneration of permanent staff to the same level as temporary staff. Permanent staff are also in danger of losing benefits; such as medical aids and pension funds.” 

He continued: “It will be easy for employers to implement the permanent employee changes. All employers have to do is consult with employees on the proposed changes. If employees don’t like it, they have only one choice: resign. Employment is a voluntary arrangement on both sides.”

“The second unintended consequence of the new labour regulations relates to a [section of the statute that explicitly states that] a temporary worker will after three months with a company be able to cite either the labour broker or its client for unfair labour practice. This provision is easily circumvented. The end result will be no change from the current situation where only a labour broker can be cited in an unfair labour practice hearing.”

“There are two ways to ensure employers won’t be cited. The first is for the labour brokers to indemnify clients against adverse awards that may be made by the commission for conciliation, mediation & arbitration (CCMA) or the labour court. The second method to circumvent the provision is made possible by the ability to insert a third legal entity between the labour broker and its client. All that will be required is that the third entity has direct control over the work of temporary staff.”

“If there is one thing that the government has succeeded in doing it is to drive the small ‘bakkie brigade’ labour broking firms out of the market. Only the big labour broking firms have the financial resources and sophisticated legal teams required to indemnify clients under the [aforementioned statute],” Mr Sharp added.

“Almost 1,300 small labour broking firms have already closed up shop since 2000 and more will follow. The primary beneficiaries are Adcorp and the other big labour broking companies. Adcorp already has a 12% market share and expects this to rise to about 30% after the labour law amendments come into force.”

“Big labour broking companies effectively designed the labour regulations amendments. ~they ran a sophisticated lobby campaign through Capes (Confederation of Associations in the Private Employment Sector). Capes is a member of Business Unity SA, which represented business during the negotiations on labour law change at the national Economic Development & Labour Council (Nedlac).

“Temporary workers represent about a third of the employed labour force. This is up from only 10% in 2000. Breaking the number down, 8.9 million people are in permanent positions, 2.95 million are directly employed by companies in temporary positions and just over 1 million are employed through labour brokers,” Mr Sharp concluded.   

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