Benchmarking Study of Models of Training Lay-off and Retrenchment Mitigation Schemes

1. Benchmarking Study of Models of Training Lay-off and Retrenchment Mitigation Schemes Prof Hoosen Rasool 15 February 2018

2. Metal Industry Employment 2008 Metal Industry Employment 2017 Job Cuts - 90 000 480 000 390 000 Business Closures - 1 800

3. International Evidence

4. “…while a great deal of emphasis is placed on the need for job creation, insufficient attention is placed on retention of existing jobs and preventing workers currently employed from becoming unemployed and impoverished because of job losses. Where job loss is unavoidable, more effort should be placed on the application of survival mechanisms and enhancing employability, thus contributing to alleviating poverty” Commission for Conciliation, Mediation and Arbitration (CCMA)

5. International Evidence • Combining unemployment cash benefits (such as UIF) and re-employment programmes is most effective means to protect the unemployed • Countries offering retrenched workers services such as job search, counselling, job fairs, assistance with CV, information and matching services much more successful with finding employment than just cash pay-outs • Most successful schemes offer programmes to encourage the insured unemployed workers to upgrade their skills beyond end of UIF benefit period • International Labour Organisation (ILO)

6. Difference between Unemployment Insurance and Employment Insurance Scheme

7. Difference between UIF and EIS JOB SEARCH – no support UIF - DoL JOB SEARCH CASH BENEFITS OTHER COUNRIES EIS - ONE DEPT Integrated Package for all Retrenched Workers UIF Multiple Depts Disintegrated Package for all Retrenched Workers COUNSELLING TLS – Many Depts TRAINING COUNSELLING – no support RECRUITMENT RECRUITMENT – no support

8. Training Layoff Schemes - Problems

9. UIF (SA) • UIF benefits decoupled from the Training Layoff Scheme (stand alone). • TLS precluded from SETA service level agreement targets and NSDS. • Restricted to companies voluntarily participate in TLS – insignificant fraction. • Ineligible to all retrenched workers (overwhelming majority • excluded from TLS).

10. Situation in South Africa 8 275 million employees contributing to UIF R122 billion Participating in Training Layoff Scheme

11. Research Methods

12. Training Layoff Scheme - Strengths • Job retention scheme - workers are employed, forego their normal wage, receive a training allowance • Helps distressed businesses an opportunity to turn the business around • Supports enterprise productivity and competitiveness • Employment contract is intact

13. Legal: TLSlacks legislation backing – lack of commitment from public entities to support TLS. • Training Layoff Scheme - Problems • Design Flaws:It is amulti-party structure comprising the CCMA, UIF, NSF and SETAs. This renders the Scheme cumbersome, slow and difficult to implement. • Administration:The Scheme is viewed as excessively bureaucratic, complicated and difficult to access. • SETA Issues:The Scheme is not part of the service level agreement between the SETA and the DHET. • Institutional Capacity:The Scheme has no precedent in South Africa. • Small Business:To date, there has been little participation in the Scheme by small businesses. Yet, small-scale

14. Metal Industry (since Inception) Participating Metal Companies 18 Participating Metal Workers 4 843 Wage Component by NSF / UIF R163 018 335.27 Wage Component by NSF / UIF R163 018 335.27 Training Component by merSETA R55 122 755.56 Cancellations due to Liquidations 7 Number of affected Workers due to Liquidations 3310

15. ADVISORY AWARDS ISSUED BY THE CCMA (2014 TO 2016)

16. BUSINESS IN DISTRESS (2014 TO 2016)

17. MALAYSIA

18. SOUTH KOREA

19. SWEDEN • Offer transition services and other activities to prioritised groups, such as the long-term unemployed (unemployed for more than 300 days). Those workers who still have not found a new job after the unemployment benefit period is over, or are not eligible to unemployment benefits enter a third stage. • This stage is referred to as the Job and Development Guarantee, implying that they receive a reduced income support, which is provided by the social insurance office and are subject to intensified labour market programmes.

20. RECOMMENDATIONS • We need an Employment Insurance Scheme with an integrated package of unemployment and employment support with universal coverage for all retrenched workers managed by the Department of Labour. EIS should offer the following: • UIF cash benefits • Job search support • Training allowance • Job seeking benefits • Career counselling

21. RECOMMENDATIONS Refinement: TLS should be coupled with UIF. Legal backing: TLS should be enshrined in legislation as a compulsory legal requirement. Design: TLS should be reviewed to expedite delivery. M&E and impact: governed by government-wide performance M&E system. Limited accessibility: Universal coverage for all retrenched workers. Appropriate training interventions: Need for criteria to determine appropriate training for displaced workers.