Research and Policy Brief: Practical Ramifications of the Government's Four Labour Bills - 22nd March 2011.

The Government’s New Growth Path envisages the creation of 5m new jobs by 2020. Instead, however, the four labour bills approved by the Cabinet in December 2010 are likely to put an end to the millions of atypical or temporary jobs that have proliferated in the past decade, largely in response to already rigid labour laws.
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You are here: Home Reports & Publications Research & Policy Brief Research and Policy Brief: Practical Ramifications of the Government's Four Labour Bills - 22nd March 2011.

Research and Policy Brief: Practical Ramifications of the Government's Four Labour Bills - 22nd March 2011.

The Government’s New Growth Path envisages the creation of 5m new jobs by 2020. Instead, however, the four labour bills approved by the Cabinet in December 2010 are likely to put an end to the millions of atypical or temporary jobs that have proliferated in the past decade, largely in response to already rigid labour laws.

Ever since the Polokwane conference in December 2007, the Congress of South African Trade Unions (Cosatu) has been pushing for an end to the atypical jobs (3.89m of them in 2010 alone) that undermine its power in the workplace.  However, instead of acknowledging its real concerns, it has dressed up its demand as a humanitarian call for the banning of the labour brokers allegedly responsible for ‘human trafficking’, ‘slavery’, and the like.

 

The four labour bills recently approved by the Cabinet – the Labour Relations Amendment Bill (LRA bill), the Basic Conditions of Employment Amendment Bill (BCEA bill), the Employment Equity Amendment Bill (EE bill), and the Employment Services Bill (ESB) – are intended to meet Cosatu’s demands for an end to casual work. They are also supposed to bring about an upsurge in permanent employment, so helping to meet the Government’s job-creation goals.

 

However, while atypical employment will clearly be curtailed, any significant increase in permanent jobs is most unlikely to occur – especially given the cost to business of the bills. The full practical ramifications of the bills are difficult to identify but can be illustrated to some extent by the hypothetical example of the ABC Construction Company (ABC).

 

Assume ABC currently provides work for 200 people. Of these, 60 are permanent employees, 100 are temporary staff working on fixed-term contracts for the duration of ABC’s current two-year building contract (the construction of a small shopping centre), and 40 (the youths) are first-time job seekers assigned to ABC by a labour broker. Under current law, the 40 youths are the employees of the labour broker which, together with the ABC company, is jointly and severally liable to them for any breach of the Basic Conditions of Employment Act, a relevant bargaining council agreement, or a sectoral determination laying down wages and working conditions.

 

Should the bills take effect in their current form:

-           The 40 youths will become the employees of ABC, [LRA bill, BCEA bill, EE bill] which must register them for tax, UIF, and workmen’s compensation and assume all the other obligations of employers in relation to them;

-          The 100 fixed-term employees, plus the 40 youths, must all be employed permanently unless ABC can ‘establish a justification’ for their fixed-term contracts; [LRA bill]

-          Assuming ABC is able to provide such a justification (on the basis of criteria the state has yet to clarify), the company must ensure that all 140 receive the same or similar benefits as its permanent employees. [BCEA bill] Since it is currently the norm to accord pensions and medical aid cover to permanent staff but not to temporary employees, these benefits (or their monetary value) will have to be extended to 140 more people. These additional employment costs may be difficult to pass on to clients, perhaps putting the survival of ABC in question;

-          ABC will be responsible, together with any electrical or plumbing firm to which it has sub-contracted parts of the main building contract, for any unfair labour practice (a failure to pay overtime, for instance) perpetrated by that electrical or plumbing firm in relation to its own staff, even though such individuals are not employees of ABC itself; [LRA bill]

-          if ABC, under pressure to meet contract deadlines, allows its staff to skip statutory rest periods or do more overtime than is sanctioned by the Basic Conditions of Employment Act, this will constitute a criminal offence for which minimum penalties are a fine of

R10 000, a prison term of 12 months, or both. Since these are minima, actual penalties could be higher; [BCEA bill]

-          ABC must notify the Department of Labour of any vacancies it might have or job appointments it might make, adding to its compliance burdens; [ESB]

-          If ABC has not made ‘reasonable progress’ towards a senior management team that is demographically representative (87% black, 46% female, and 2% disabled), it could face fines of up to 2% of turnover for a first ‘offence’, rising to a maximum of 10% of turnover for a fifth contravention within three years; [EE bill]

-          In arguing that its progress has been ‘reasonable’, ABC will no longer be able to rely on skills shortages, similarly slow progress by other employers, or financial constraints, as these defences will fall away; [EE bill]

-          If ABC is based in the Western Cape, where the Coloured share of the economically active population is 55% and the African share stands at 29%, the company will no longer be able to use regional demographics in setting its employment equity targets but will have to use national ones instead. [EE bill] Yet the new national targets will be almost impossible to attain, for the coloured share of the workforce will have to be reduced (on pain of the bill’s new turnover-based fines) to 11%, while the African share will have to be increased to 74%: more than double the entire African population in the Western Cape;

-          If ABC, across race or gender lines, provides different pay for work that is ‘substantially the same’, this could amount to unfair discrimination, irrespective (on the current wording of the bill) of salient differences in experience and productivity. Penalties will again range from 2% of turnover for a first offence to 10% of turnover for a fifth; [EE Bill]

-          if ABC needs to bring in a foreign national with specialist engineering skills for some aspects of the work, it will have to comply not only with the Immigration Act but also with a number of conflicting new requirements under the Employment Services Bill. Among other things, ABC will not be able to employ a foreign national unless it has first used the Labour Department’s labour employment centres to find suitable local staff and has explained to the department why it cannot appoint South Africans ‘with relevant profiles’. [ESB]

 Not surprisingly, the Department of Labour’s own regulatory impact analysis has cautioned that the bills might:

-          make it more difficult for first-time jobseekers to enter the labour market;

-          worsen unemployment;

-          increase the costs of doing business; and

-           introduce fines so high as to put firms out of business and lower economic growth. 

 

Thus far, however, the department has ignored these warnings.

 

-          -   Anthea Jeffery

IRR TV

Ever since the Polokwane conference in December 2007, the Congress of South African Trade Unions (Cosatu) has been pushing for an end to the atypical jobs (3.89m of them in 2010 alone) that undermine its power in the workplace.  However, instead of acknowledging its real concerns, it has dressed up its demand as a humanitarian call for the banning of the labour brokers allegedly responsible for ‘human trafficking’, ‘slavery’, and the like.

 

The four labour bills recently approved by the Cabinet – the Labour Relations Amendment Bill (LRA bill), the Basic Conditions of Employment Amendment Bill (BCEA bill), the Employment Equity Amendment Bill (EE bill), and the Employment Services Bill (ESB) – are intended to meet Cosatu’s demands for an end to casual work. They are also supposed to bring about an upsurge in permanent employment, so helping to meet the Government’s job-creation goals.

 

However, while atypical employment will clearly be curtailed, any significant increase in permanent jobs is most unlikely to occur – especially given the cost to business of the bills. The full practical ramifications of the bills are difficult to identify but can be illustrated to some extent by the hypothetical example of the ABC Construction Company (ABC).

 

Assume ABC currently provides work for 200 people. Of these, 60 are permanent employees, 100 are temporary staff working on fixed-term contracts for the duration of ABC’s current two-year building contract (the construction of a small shopping centre), and 40 (the youths) are first-time job seekers assigned to ABC by a labour broker. Under current law, the 40 youths are the employees of the labour broker which, together with the ABC company, is jointly and severally liable to them for any breach of the Basic Conditions of Employment Act, a relevant bargaining council agreement, or a sectoral determination laying down wages and working conditions.

 

Should the bills take effect in their current form:

-           The 40 youths will become the employees of ABC, [LRA bill, BCEA bill, EE bill] which must register them for tax, UIF, and workmen’s compensation and assume all the other obligations of employers in relation to them;

-          The 100 fixed-term employees, plus the 40 youths, must all be employed permanently unless ABC can ‘establish a justification’ for their fixed-term contracts; [LRA bill]

-          Assuming ABC is able to provide such a justification (on the basis of criteria the state has yet to clarify), the company must ensure that all 140 receive the same or similar benefits as its permanent employees. [BCEA bill] Since it is currently the norm to accord pensions and medical aid cover to permanent staff but not to temporary employees, these benefits (or their monetary value) will have to be extended to 140 more people. These additional employment costs may be difficult to pass on to clients, perhaps putting the survival of ABC in question;

-          ABC will be responsible, together with any electrical or plumbing firm to which it has sub-contracted parts of the main building contract, for any unfair labour practice (a failure to pay overtime, for instance) perpetrated by that electrical or plumbing firm in relation to its own staff, even though such individuals are not employees of ABC itself; [LRA bill]

-          if ABC, under pressure to meet contract deadlines, allows its staff to skip statutory rest periods or do more overtime than is sanctioned by the Basic Conditions of Employment Act, this will constitute a criminal offence for which minimum penalties are a fine of

R10 000, a prison term of 12 months, or both. Since these are minima, actual penalties could be higher; [BCEA bill]

-          ABC must notify the Department of Labour of any vacancies it might have or job appointments it might make, adding to its compliance burdens; [ESB]

-          If ABC has not made ‘reasonable progress’ towards a senior management team that is demographically representative (87% black, 46% female, and 2% disabled), it could face fines of up to 2% of turnover for a first ‘offence’, rising to a maximum of 10% of turnover for a fifth contravention within three years; [EE bill]

-          In arguing that its progress has been ‘reasonable’, ABC will no longer be able to rely on skills shortages, similarly slow progress by other employers, or financial constraints, as these defences will fall away; [EE bill]

-          If ABC is based in the Western Cape, where the Coloured share of the economically active population is 55% and the African share stands at 29%, the company will no longer be able to use regional demographics in setting its employment equity targets but will have to use national ones instead. [EE bill] Yet the new national targets will be almost impossible to attain, for the coloured share of the workforce will have to be reduced (on pain of the bill’s new turnover-based fines) to 11%, while the African share will have to be increased to 74%: more than double the entire African population in the Western Cape;

-          If ABC, across race or gender lines, provides different pay for work that is ‘substantially the same’, this could amount to unfair discrimination, irrespective (on the current wording of the bill) of salient differences in experience and productivity. Penalties will again range from 2% of turnover for a first offence to 10% of turnover for a fifth; [EE Bill]

-          if ABC needs to bring in a foreign national with specialist engineering skills for some aspects of the work, it will have to comply not only with the Immigration Act but also with a number of conflicting new requirements under the Employment Services Bill. Among other things, ABC will not be able to employ a foreign national unless it has first used the Labour Department’s labour employment centres to find suitable local staff and has explained to the department why it cannot appoint South Africans ‘with relevant profiles’. [ESB]

 Not surprisingly, the Department of Labour’s own regulatory impact analysis has cautioned that the bills might:

-          make it more difficult for first-time jobseekers to enter the labour market;

-          worsen unemployment;

-          increase the costs of doing business; and

-           introduce fines so high as to put firms out of business and lower economic growth. 

 

Thus far, however, the department has ignored these warnings.

 

-          -   Anthea Jeffery

Free Society Project