-presented by- Capes Delegation

-presented by-

Capes Delegation

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Labour Law Review 2012 – Position Paper

Executive Summary

• The Confederation of Associations in the Private Employment Sector

(CAPES) is an umbrella body, formed in 2002, when the need for a

unified voice for the South African staffing industry became

apparent. CAPES, a federation, was created specifically to act as the

lobbying organisation for the four primary staffing associations, who

represent thousands of SME staffing businesses, and several of

South Africa’s largest corporate staffing companies. CAPES, as a

member of Business Unity South Africa (BUSA), has been at the

forefront of the NEDLAC negotiations in respect to the staffing

industry (since 2006) and extensively during the current broad

labour law review.

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CAPES in a Nutshell

• Represents more than 1 200 independent staffing businesses across

all major sectors through the 4 major staffing industry associations

• Represents in excess of 15 000 employees

• Through its largest member association, APSO, is affiliated to the

International Confederation of Private Employment Agencies (CIETT)

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Introduction

• The current proposed labour law review, rather than driving the

national job creation plans, is likely to achieve the opposite.

Countless research and expert opinions, including that of Professor

Paul Benjamin, Government’s legal drafter, as expressed in the

Regulatory Impact Assessment (RIA) commissioned in mid 2010,

conclude that the proposed amendments will lead to massive job

losses and stymie any attempt at creating large volumes of new

jobs.

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Introduction

• Recent research, conducted by the Boston Consulting Group (BCG),

commissioned by the International Confederation of Private

Employment Agencies (CIETT) proves that countries with well-

regulated temporary employment services (TES) sector, have fared

better during the economic downturn and these research findings

have been included throughout this paper.

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Critical for South Africa

• ILO concurs that job creation, not legislation amendment, is more

critical for SA

• In an article “ The International Labour Organisation has lauded

South Africa’s decision to set job creation targets but is concerned

that the country remains internationally uncompetitive, particularly

against the Asian countries against which it competes with in terms

of labour” written by Alistair Anderson and published on 24 January

2011, Vic Van Vuuren, the ILO’s South African director, said the

organisation wanted companies to make a social pact with the

government and labour to implement methods with measurable job

targets and not to focus on energy-sapping legislation.

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Enforcement is the Real Issue

• South Africa is recognised to have some of the most rigid labour

legislation in the world

• 2011 World Employment Forum ranks South Africa 138th (out of 139

countries) in both Flexibility of Wage Determination and

Cooperation in labour-employer relations

• We also rank worst, 139th, in respect to Hiring and Firing Practices

• This clearly points to the condition that enforcement is essential

and that our existing regulations are already more than adequate in

this economic climate.

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• The real issue however is in relation to compliance and

enforcement. Currently, those companies who operate outside of

the legislation, are not being investigated and punished and there is

no real effective deterrent for non-compliance. The RIA report

clearly indicated that lack of enforcement is a key problem in the

current labour market. It further explains that increasing legislative

compliance will only serve to exacerbate the problem unless

significant resources are employed within the Government

departments responsible for implementation and enforcement.

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• Extensive research, conducted by the Boston Consulting Group,

proves that over-regulation of any labour market – established or

emerging – leads to a direct increase in the number of non-

compliant “unregulated market” operators and a decrease in

employment in the formal sector where the highest levels of

compliance exist.

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A Snapshot of the South African PrEA Sector

• Introduced 5.4 million people to the world of work since 2000

• Gateway to the world of work: Profile of work seekers/candidates:

• Never previously employed: 57%

• Youth aged 18-35: 83%

• Previously disadvantaged: 93%

• 1 million people deployed (via TES) on a daily basis

• National geographic spread (job opportunities in all provinces)

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A Snapshot of the South African PrEA Sector

• Of those initially employed as a temp, each year significant

numbers gain permanent employment:

• 30% within 1 year

• One of the largest contributors to skills development – R415 million

paid over in skills levies

• 17, 400 registered learnerships facilitated (30% of SETA total)

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Snapshot of South African Statistics

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Rankings based on Global Competitiveness Index (GCI) 2011/2012, in which 142 countries were surveyed and ranked.

• 41% below the age of 19• Illegal immigrants estimated to be 6m but could

be as high as 8m

• However, 60% of working age South Africans are unemployed.

• Quality of education system: 10th worst globally• Math/Science education: 5th worst• Grade 6: literacy 28%, numeracy 30%

Population of 50.5m

Unemployment rate of 23.9%

Poor quality of primary

education

Overview

• South Africa continues to undergo significant changes in its political

and economic outlook

- Regulatory and policy uncertainty in key sectors of the economy

- Continued high turnover of executives and/or board members at

key public sector and regulatory bodies

- Vulnerability of macroeconomic environment to shocks

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Unemployment & Regulatory Constraints

• “The rate of job creation will need to increase by nearly ten times if

it is to meet the Government’s job creation targets… Over the last

decade total employment increased by only 624 000. The

Government has set a target of creating 5 million new jobs between

2010 and 2020”

Source: South African Institute of Race Relations, 23 Jan 2012

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SA Factories in Trouble Again:PMI Drops Below 50

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• Manufacturing activity fell to its lowest level in 10 months during

June 2012, a key survey showed yesterday, suggesting that the

economy’s second-biggest sector may be contracting.

• Manufacturing accounts for about 15% of overall output and formal

jobs in the economy, and was the main driver of growth during the

first quarter.

Conditions & Restrictions Faced by Temporary Work Agencies

• Over and above the International Labour Organisation’s Convention

181 on the TES sector, a recent directive 2008/104/EC on

Temporary Agency Work calls upon Member States to review

national restrictions imposed on temporary agency work and lift the

unjustified restrictions.

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Source: Eurociett 2011 Edition

Temping trends around the world

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UNITED STATES OF AMERICAMaximum length of temporary work assignment

Thanks to low levels of regulation and there being no requirement to provide healthcare and other benefits, temporary workers give American employers the flexibility to quickly hire and lay-off workers and therefore the confidence to grow or simply take chances on growth.

BELGIUMMaximum length of temporary work assignment

• Maximum lengths of assignments are established according to the different reasons for use of temporary agency work services up to 12 months and beyond.

BULGARIAMaximum length of temporary work assignment

• The ILO Convention 181 has been ratified. There are no restrictions to the provision of temporary agency work services and no discriminatory measures linked to labour contracts. There are also no other discriminatory measures applied to temporary agency work.

CZECH REPUBLICMaximum length of temporary work assignment

• A temporary work agency may assign an employee to the same user for a maximum of 12 consecutive calendar months. This restriction does not apply where the employee requests a longer period of the work being done is as a replacement for an employee of the user is on maternity leave.

DENMARKMaximum length of temporary work assignment

• No maximum length is required, Temporary work agencies need a special certificate to make placements for truck drivers in trucks with more than 3.5 tons capacity, and drivers for vehicles for more than 9 persons.


List of conditions and restrictions faced by temporary work agencies

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ESTONIAMaximum length of temporary work assignment

• There is currently no specific legislative act dealing with temporary agency work in Estonia. All general employer’s obligations rising from legislation in Estonia apply also to temporary work agencies.

FINLANDMaximum length of temporary work assignment

• Restrictions on the length of assignments and reasons for use are in several cases based on collective labour agreement. There are, however, no restrictions on the number of temporary contracts for the same worker as long as there is a relevant reason for a temporary contract.

FRANCEMaximum length of temporary work assignment

• Temporary increase in the activity of the user company- Temporary increase of level of activity (18 months)- Exceptional demands linked to exports (6 to 24 months)- Urgent work to be done linked to safety reasons (9 months)- Temporary casual work (18 months)• Temporary employment• Recruitment of unemployed people with professional and social problems (18 months)• Additional vocational training (18 months)

GERMANYMaximum length of temporary work assignment

• The CLA of the steel industry requires agency work companies to apply the principle of equal treatment for workers assigned in the steel sector.

• Some company CLAs contain restrictions regarding the number of temporary agency workers that can be assigned at the user company as well as provisions on the wages of the temporary agency worker.

GREECEMaximum length of temporary work assignment

• Maximum length of assignment 36 months (modified by December 2010).• A waiting period of 45 calendar days is applied if the maximum length has been exhausted

without any break.

List of conditions and restrictions faced by temporary work agencies

HUNGARYMaximum length of temporary work assignment

• Temporary agency workers can be employed both on the basis of an open-ended or fixed-term contact.

• Prohibition to covert an earlier normal employment relationship into a temporary employment agency contract.

• Rights granted by the labour code or other legal regulations may not be restricted or denied. However, exceptions are foreseen with regards to the termination of employment, successive fixed-term contracts, further training and some other issues. All these exceptions aim at increasing the flexibility of the employer

IRELANDMaximum length of temporary work assignment

• There are no other restrictions for temporary work agencies in Ireland, except for the normal regulations linked to a business activity (e.g. Related to tax, social security, labour law, health and safety)

ITALY Maximum length of temporary work assignment

• While the first assignment is not submitted to a maximum length, it cannot be renewed more than six times, for a maximum length – of the renewals – of 36 months.

UNITED KINGDOMMaximum length of temporary work assignment

• Although regulated through the 1973 Employment Agencies Act and the 2003 Conduct Regulations update, there are no unjustified restrictions or obstacles for temporary work companies in the UK.

• Temporary work agencies have to comply with all normal regulations linked to the business activity (e.g. related to tax, social security, labour law, health and safety etc.)

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Burning Issues• The legal terminology used in “deemed” in section 198 is legally confusing. Section 198 in

the main text clarifies the meaning to joint and several liability in terms of the Labour

Relations Act.

• This committee resolved that the current regulation would be joint and several liability on

dismissal after a period.

• Prof Benjamin’s 2009 proposal on atypical and the Government 2010 Regulatory Impact

Assessment do so too.

• Equal treatment for atypical is very problematic and will lead to a race to the bottom.

• Phase in periods are needed if equal treatment is proceeded with.

• That period should be at least 12 months as is evidenced by the comparative of countries

around the world.

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PRESENTATION TO THE PORTFOLIO COMMITTEE ON LABOUR BY

MR JOHANNES MANGOEJANE – HR DIRECTOR AND SHAREHOLDER OF

AUTOMOTIVE LEATHER COMPANY. (ALC).

Presentation to the Portfolio Committee

• Lack of a structured regulatory impact assessment of the proposed changes

to the Labour Relations Act (LRA) and the Basic Conditions of Employment

Act (BCEA) has left a number of claims and statements made by organised

labour unchallenged and in certain quarters accepted as facts. I would like to

address some of these claims.

1)Banning labour brokers and restricting flexible employment relationships will

not have a negative impact on job creation.

• ALC is a South African automotive component manufacturer based in Rosslyn

we supply leading German car manufacturers in Germany. The company has

been in existence for 22 years and has created 900 employment

opportunities at our two plants in Pretoria.


• In January we opened a third plant in Bulgaria where an additional 500

workers are employed.

• While we are proud of our latest achievement, the shareholders and directors

of ALC are at the same time sad and disappointed that the 500 jobs were not

created in South Africa, and that the additional export earnings are also lost to

our country.

• To replace these jobs, requires substantial direct foreign investment. Currently

BMW South Africa is spending R2.3 billion on the expansion of production at

its Rosslyn plant, which will bring 600 new jobs. This is an example of how

expensive it is to create decent manufacturing jobs.


• We compete with two other multinational companies in RSA for export business to

Germany. They are able to move production to any of more than a dozen countries

were they have existing plants, including Morocco, should they wish to keep it in

Africa. We are aware that high levels of workplace conflict, which is likely to be

aggravated by the proposed deeming stipulations, could result in the loss of an

additional 800 employment opportunities to Morocco.

2)Labour Brokers do not create jobs.

• Job creation is a team effort. In our case the use of contracted labour through

brokers is part of our business model. Other members of the team are Bargaining

Councils, organised labour and government. Without a flexible workforce South

Africa as a country cannot compete in the international automotive industry.


• On this team Bargaining Councils and organised labour need to ensure that

the minimum wages, conditions of employment and benefits applicable in

Councils are adhered to. In addition should employers make use of brokers

they are already jointly liable and it is in their own interest to ensure

compliance of the brokers.

• In May this year Minister Rob Davies announced a R5.75 billion plan to boost

the manufacturing sector, because the contribution of manufacturing to GDP

had declined from 21% in 1977 to 14.6% today. Mr Davies said that over the

same period comparable countries like Korea and Malaysia had grown their

manufacturing contribution as a percentage of GDP respectively by 29.7% and

37% of GDP. We submit that the different levels of flexibility in the labour

markets of the countries contributed to the vastly different achievements.


3)Labour Brokers exploit workers and provide no benefits.

• Should this happen within Bargaining Council regulated sectors, it is the

result of a lack of enforcement of current regulations or corruption.

Since the use of labour brokers is part of our business model we check

that they comply with the minimum wages and benefits prescribed by

the Bargaining Councils. The brokers we use and many of their

competitors, comply fully and in fact provide additional benefits not

required by BC regulations.

• Labour brokers are also active in skills development. In conjunction with

our broker we have recently completed a learnership programme with 40

employees.


• Organised labour is in fact disingenuous by propagating this myth on an

unqualified basis. Trade unions actively monitor compliance in respect of both

permanent and contract labour in workplaces.

• I would also like the address the deeming proposal, which kicks in after 6

months, against the backdrop of job creation in manufacturing for the export

market. The South African market is too small to sustain a meaningful

manufacturing base, which supplies purely to the domestic market. SA

manufacturers therefor need to compete internationally and that means being

able to adjust rapidly to changes in the international markets.


• This is especially true of the automotive industry which the RSA government

has identified as a key growth sector. The target is for RSA to produce 1.2

million vehicles by 2020. If we are serious about creating decent work in this

sector we need more flexibility not less. In the case of France for example

they allow temporary employment relationships to remain in place for 18 to 24

months in businesses engaged in exports.

• Sadly our legislation encourages South African manufacturers to invest in

other economies in an effort to compete internationally.

THANK YOU

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Documents

-presented by- Capes Delegation