Contracting problems?

There have been several controversies surrounding contractual labour in recent years, with many calling for an end to the practice. Would it be a better or worse situation if that was the case?

“Labour broking is tantamount to slavery, as it amounts to the trading of human beings as commodities,” says the Congress of South African Trade Unions (COSATU) in its 2009 address to the Portfolio Committee on Labour. One would have to ask, though, is it on to something? Or is it completely wrong?

The practise of labour broking and contract labour has long been the subject of much consternation among labour unions; the workers themselves, who are in most instances desperate to get any type of work they can; the labour brokers, who see this as an opportunity to create a business for themselves; and the government, that has failed to create the job opportunities promised for years. It’s certainly a multi-faceted issue, by no means clear cut or black and white.

According to Stats SA, in the third quarter of 2012, South Africa’s unemployment rate stood at 25,5 percent, meaning approximately 4,7 million persons were looking for work at the time. Perhaps more worryingly, the youth (15-34 years old) accounts for the highest proportion (70,9 percent) of the unemployed. The unemployment rate in this sector is 36,1 percent, with 31,4 percent (3,3 million) not in employment, education or training.

Compared to the other BRICS nations (Brazil, Russia, India, China and South Africa), South Africa has the highest unemployment rate (Brazil with 4,7 percent as at December 2011; Russia on 6,4 percent as at January 2012; India at 9,8 percent as at 2011 and China with 4,1 percent as at September 2010, according to The World Factbook).

It’s clear then that South Africa has a large problem and a long way to go in truly getting the nation economically active and able to support itself; 4,7 million is a lot of people. Jobs are desperately needed, but is contract labour the way to alleviate unemployment?

The study by the Confederation of South African Workers Unions (Consawu), entitled A Descriptive Study of the Social Impact of Temporary Contractual Labour in South Africa, notes a growing trend in the casualisation of work. It states, “whereas there had been 1 076 labour brokers in 2000 there were 3 114 in 2006. The reality is that on any given day, nine percent of the workforce is engaged in temporary work.”

COSATU and its affiliates the Food and Allied Workers Union (FAWU); the National Education, Health and Allied Workers Union (NEHAWU); the National Union of Mineworkers (NUM); the National Union of Metalworkers of South Africa (NUMSA); the South African Commercial, Catering and Allied Workers Union (SACCAWU); and the South African Transport and Allied Workers Union (SATAWU) are of the opinion that labour brokers simply act as intermediaries to access jobs that already exist, which in many cases could have been permanent jobs. The unions say that replacement of normal jobs through labour broking or “other equally insecure forms of atypical employment, effectively displaces and destroys decent jobs, especially taking into account the substitution of insecure contractual relations and downgrading of wage and employment terms.”

They go on to say that labour broking allows the true employer to delegate its obligations of compliance to workers’ rights, with significant emphasis placed on the commercial rationale of using labour brokers as a way of lowering costs, commonly achieved by reducing wages and excluding employment benefits.

“The question that then arises is who is really bearing the burden of this cost-cutting exercise? In the first instance workers are the ones who involuntarily bear this responsibility, and who then, as a result of their economic vulnerability, are forced to turn to the public social system for housing, health care, social grants and other social benefits. Ultimately this amounts to commercial entities (namely both labour brokers and their clients) being subsidised by the public sector,” the unions state. “In relation to the labour market specifically, it is important to take note of the progressive de-skilling of workers, especially as a result of the short-term and irregular nature of the contracts associated with labour broking and other forms of atypical labour,” they continue.

Over the years, such calls against the practice of labour broking have prompted government to review laws around labour relations and conditions of employment. After a long period beginning in 2010, amendments to the Labour Relations Act (LRA) and the Basic Conditions of Employment Act (BCEA) were submitted to the Portfolio Committee on Labour in March 2012.

As it stood then, possibly the most anticipated amendment to the LRA aims to regulate rather than ban the practice of labour broking. According to the South African Labour Guide, which quotes Anastasia Vatalidis and Bradley Workman-Davies of Werksmans Attorneys on the matter, labour brokers will in future have to be registered in accordance with the applicable legislation. This will ensure the labour broker and the client will be jointly and severally liable in the event that the labour broker contravenes a collective agreement.

Another amendment is that an employee employed by a labour broker, earning below the threshold prescribed in the BCEA and assigned to a client for more than six months could be deemed to be the employee of the client. They will then need to be employed on terms which are no less favourable than those applicable to the client’s other similar employees. “This amendment, if introduced into law, may have the effect of indirectly banning the practice of labour broking,” Vatalidis and Workman-Davies say.

But, the Minister will categorise certain types of work as temporary services and employees performing such work through labour brokers, will not be deemed to be the employees of the client.

An employer will also be required to provide its fixed-term employees with the same opportunities to apply for vacancies, as permanent employees.

Of course, this is just a broad look at the issues and proposed solutions, but there have been concerns that not all the inconsistencies and unfair practises resulting from previous legislation have been addressed. However, by the end of 2012 it was reported that more than 500 labour brokers had closed their doors as a result of the new proposed amendments.

The unions might get much of what they bargained for – but in a country where one in four people is looking for work, can the practise of regulated labour broking be such a bad thing?