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South Africa – The impact of the new labour law

22 November 2013

The most significant review of labour legislation in over forty years is under way in South Africa. Industry expert, John Botha, discussed the impending legislation and the realistic impact on businesses.

Mr Botha stated: “It’s done. The new labour legislation is on its way – like it or not. What matters now is how you interpret and manage it. As they say, the sun shines on the righteous and the unrighteous.”

“The bills introduce major changes to the following Acts: The Labour Relations Act (LRA), the Employment Equity Act (EEA) and the Basic Conditions of Employment Act (BCEA). Along with this there is an additional new law called the Employment Services Bill (ESB). They’re due for promulgation in the first quarter of 2014, which doesn’t give anyone a huge amount of time to get ready.”

“If companies do not approach the legislation with clear understanding, sustainable business strategy, innovation and a reputable Temporary Employment Services (TES) partner, it could result in decreased economic growth, greater pressure on profitability, a decline in job creation, and generate steps which ultimately, and perhaps unintentionally, increase inequality.”

“As not all labour consultants were party to the Nedlac (the National Economic Development and Labour Council) process and negotiations, it leaves a gap for the misinterpretation of certain amendments which may prejudicially impact the human capital strategy of businesses and undermine their sustainability.”

“Unfortunately, this contingent of bad advice is quite large – businesses need to make sure they are informed in order to make the correct decisions and to ensure that they retain their flexibility in uncertain and often volatile trading and labour markets.”

“Two concerns remain top of mind for all of us impacted by the changing legislation – the future rights of businesses to use flexible assignees from labour brokers; and second, is the concept of equal pay for work of equal value – which falls under the equal treatment banner.”

“The first myth is that TES cannot play a role after three months. The reality is, nothing could be further from the truth - they can be used virtually as much as they were in the past. However, going forward, the new legislation does require labour broking clients to be sure that they are partnering with the right labour brokers – those that are financially stable, have excellent IT systems to manage compliance and risk and have the capacity to deliver against the amendment statutory requirements. By utilising the services of reputable labour brokers; businesses will, inter alia, benefit materially from improved Preferential Procurement scores, lower compliance costs and flexible salary costs aligned to revenue.”

“The second myth is that temporary workers must be paid the same as their permanent counterparts. The truth is that everyone can’t earn the same salary and benefits. If you are employing people with different skills, length of service, and years of experience – these, along with others, serve as legitimate reasons for salaries and benefits to differ. These are over and above performance considerations - everyone is not equal, and the law recognises that. You need to ensure you have justifiable systems in place to ensure you have the ability to objectively differentiate. A labour broker who is truly a strategic partner will work through these options with you.”

“My recommendation for any business, operating in South Africa, and using flexible labour or labour brokers is to start your understanding somewhere – get an assessment of where you currently stand – from a reputable partner. Adcorp is such a TES and has characteristics such as good technology, thought leaders and strong balance sheets and systems.”

“If South Africa wants to compete on a global stage, it must behave globally. Similar amendments to labour legislation have already been made in the EU, UK, Switzerland, Germany and Holland, some more than five years ago and a number of trends have emerged in these markets:”

“If South Africa’s labour force (on both sides of the legislative fence) is to grow and prosper, it must be cognisant of international trends and local perspectives. South Africa’s economy at the moment is distinguished by low economic growth, and high rates of unemployment. Poor human capital acquisition and development practices will just exacerbate these challenges,” Mr Botha concluded.

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