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New Labour Relations Act: help or hindrance to employment?

Provisions made to the labour broking system now effective.

The amendments to the Labour Relations Act (LRA), which now give wider protection to staff employed through Temporary Employment Services or labour brokers, have been criticised for having the potential to curtail employment opportunities.

As of April 1, organisations will have to comply with new employment obligations which place limitations on the use of fixed-term (or temporary) contract employees who earn below R205 433.30 per annum.

The overarching change in the Act is that employees placed to work in the premises of the client of the labour broker will be regarded as a permanent employee of the client after three months – if there is no adequate reason for fixing the duration of an employment contract. These employees will also be entitled to the same benefits as permanent employees within that organisation.

These amendments relating to labour brokers are just one component of wholesale changes to the Labour Relations Act, which became effective from January 1. However, labour brokers were granted a three-month window period, which lapsed on March 31, to get their houses in order before employees gained additional rights.

Labour broker employees whose contracts predate January 1, will be afforded the opportunity to claim employment with the labour broker’s client – unless their work is temporary.

Director in the employment practice at Cliffe Dekker Hofmeyr, Johan Botes, says the changes to the Act are about protecting vulnerable employees from abusive practices.

“The amendments will streamline the labour environment and change how businesses employ and manage staff in their organisation,” Botes told Moneyweb.

The Act does not prohibit or outlaw the use of temporary services workers or using labour brokers. Botes says the amendments are intended to limit the use of employees through short-term contracts.

All industries which make use of the labour broking system will be impacted by the Act, says Nick Robb, partner in the employment & employee benefits practice within the commercial business unit at Webber Wentzel.

Threat to employment?

This legislative move has been four years in the making by the Department of Labour, after calls by trade unions for the labour broking system to be scrapped.

Labour brokers are viewed as “middlemen” by Cosatu, who take a cut from the wages of employees who are deployed to the broker’s client.

More regulation to the labour broking market is seen as creating a hostile environment for the industry.

Free Market Foundation economist Loane Sharp says labour brokers are the biggest channel for unemployed individuals to enter the labour market, but the amended Act will have a “disastrous impact on employment.”

Sharp says a survey of close to 500 labour brokers which represent 90% of job placements in South Africa, revealed that changes to the Act will cost the economy jobs.

To put the expected job losses into perspective, Sharp says before April 30, 254 000 jobs are expected to be lost and of this figure, 192 000 “have already been lost”. “These are temporary workers who are terminated and never to be taken permanently.”

According to Statistics South Africa’s Quarterly Employment Statistics survey, the unemployment rate for the fourth quarter is sitting at 24.3%. During this period, the labour force decreased by 39 000 and the number of unemployed people decreased by 242 000. Sharp expects the unemployment rate to rise to 32.1%.

He says labour brokers are seeing less employment growth in South Africa and, as a result, are expanding activities outside the country. “Labour brokers have a legitimate and valued sense that employment in South Africa will never grow and they will never be free of government scrutiny,” Sharp adds.

Response from industry

There have been mixed reactions to the new Act. Solidarity deputy general Johan Kruger says there have been enquiries from its members about the impact of the new legislation and how it affects their careers.

“We are of the opinion that the amendment to the Act could result in companies increasingly subcontracting services or scaling down certain activities instead of employing temporary workers,” says Kruger.

Botes says most industries have conducted a full review of their staffing needs. “They have been assessing, if they have temporary staff, whether they need them. And the amendments will make these organisations constantly review their staffing needs,” he says.

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