Labour Law Amendments: Devastating for Business, the Workforce and the SA Economy

By: Mpho Maseko of APSO

The newly amended Labour Relations Act (effective 1 January 2015) will have a devastating impact not only on the national recruitment and staffing industry but also on the economy and the country’s unemployment rate – which the act itself seeks to relieve – if they continue to be interpreted by some stakeholders in a narrow light.

This is according to KC Makhubele, Vice President of the Federation of African Professional Staffing Organisations (APSO), who notes that the amendments to the act have caused uncertainty in the market and has been highlighted as likely to cost the country 254 000 jobs in an article published by Business Day on Monday, 30 March.

He says, “The interpretation of and uncertainty surrounding these amendments has already resulted in the folding of a number of small to medium sized recruitment companies – a number of which are Black-owned – and as a result, goes against government’s intention to support and grow Black business.”

Makhubele notes that this major impact to the already strained job market has been revealed in APSO’s interaction with its over 800 members.

“Many of these members’ clients have, instead of permanently contracting their temporary workers, identified the need to down-scale.”Labour Law

In compliance with the Labour Relations Amendment Act, No 6 of 2014 (LRAA) – which aims to streamline the country’s labour environment and protect vulnerable workers – South African businesses are required to adjust the way in which they have traditionally employed and managed staff in their organisations.

Makhubele says, “Although the amendments strive to protect these temporary workers though permanent employment, the outcome has been to the contrary and has seen companies reassessing their workforce altogether and downscaling activities.”

In Summary, the amendment of section 198A or the ‘deeming clause’ notes: Employees Employed By A Temporary Employment Service (TES): Employees who earn below the Basic Conditions of Employment Act 75 of 1997 (BCEA) threshold (presently an amount of R205 433.30) and who are not performing temporary services will be deemed to be the employees of the client and not the TES, will be deemed to be indefinite employees and may not be treated less favourably than employees of the client. Effective from 1 April 2015, this section (sec 198) will apply to employees procured for or provided to a client by a TES before the commencement of the amendment act (1 January 2015).

APSO Director of Legal Compliance and Operations, Attie Botes says, “Some institutions and legal entities appear to interpret the amendment to mean that assignees, or temporary workers, transfer permanently to the client after the three month period. We do not believe that this is the correct interpretation and if it is, will amplify serious issues which we have already seen arise in the atypical job market since talk of the act began.”

“This interpretation – which we challenge being set as a precedent – is likely to act as a disincentive for employers who have utilised TES to upscale their workforce if and when needed. The act has already had unintended consequences on the market and the ‘deemed provision’ has resulted in the loss of a number of temporary jobs,” he adds.

Makhubele explains that APSO’s interpretation of the amendment is that while the client of the TES is ‘deemed’ to be the employer for purposes of the LRA, this does not mean that the employee transfers into the permanent books of the client.

The importance of the TES sector and atypical employment has been recognised widely across the world, for example, by the International Labour Organisation (ILO).

The European Union, in collaboration with the confederation of trade unions across Europe, also legitimised the TES industry across 28 countries, strengthening the regulatory framework relating to worker benefits.

Makhubele says, “Our ultimate concern in terms of the amendment is that in an attempt to ensure permanent employment for temporary workers, the opposite is likely to occur as companies who require temporary or project-based staff, simply cannot afford to hire this workforce on a permanent basis.”

“This can easily lead to both businesses closing their doors as they are unable to take on large projects, as well as temporary workers, who would have been on-boarded for the particular project, sitting without any work opportunity at all,” he adds.

With this backdrop, Makhubele notes that the significant TES economic contribution can also not be ignored.

He says, “The temporary employment industry generates more than R40 billion each year – resulting in additional revenue for government in the form of taxes and VAT. The industry also directly employs approximately 20 000 people and – on average – one million temporary workers each day.”

Makhubele notes that although it is perceived that temporary employees struggle to find permanent work, approximately 30% of these workers secure permanent employment within 12 months of ‘temping’, increasing to 40% after three years of contract or temporary work.

He says, “There is truly far too much at stake if these laws continue to be interpreted as they currently are, placing the industry under severe uncertainty and confusion.”

“We are of the opinion that this will also result in companies continuing to outsource and thereby scaling down employment of temporary employees,” he concludes.

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