The South African Labour Market and the Proposed Labour Law Amendments

1. The South African Labour Market and the Proposed Labour Law Amendments Select Committee on Labour and Public Enterprises Presenters: L. Mahlangu and R. Barreto Parliament Research Unit 13 April 2011

2. Overview Part 1 - The South African labour Market Part 2 - The Proposed Labour Law Amendments Part 3 - Discussion and Questions

3. The purpose of this presentation is to provide members with a summary of the views expressed by certain writers and the proposed labour law amendments as they are currently drafted. This presentation contains ideas and extracts of articles and papers written by authors acknowledged in the references attached to the back of the presentation. Clarification

4. Part 1 The South African labour Market

5. Contextual Background Structure of the labour market in South Africa originated from the oppression nature of the colonial era and apartheid era Characterised by forced employment, unpaid labour, discriminatory ways (race) Segregated system of education (illiteracy levels) creating undersupply of certain categories of skilled and professional labour Resulted in poverty, income inequality, unemployment, high labour costs and low productivity Weak government policies in addressing the unemployment problem (from RDP, GEAR and other initiatives such as AsgiSA) These characteristics have placed market regulation high on the agenda of pertinent policy issues in South Africa

6. Labour market labels Models of labour market segmentation revolve around the identification of two or more distinct sectors. • “Primary” vs. “secondary” sectors.Dickens and Lang (1986) use the labels “primary” and “secondary” to distinguish between high-paying unionized jobs and lower-paying non-unionized jobs. • “Insiders” vs. “outsiders.”Knight and Yueh (2004) distinguish between “insiders” (urban dwellers) and “outsiders” (rural-to-urban migrants) in China. They find evidence that “insiders” positions remain protected against competition from “outsiders.” • “Good” vs. “bad” jobs.Avirgan et al. (2005) Use the labels “good” and “bad” jobs to distinguish between formal work and informal work in a number of developing countries, noting that earnings are consistently lower and working hours longer in the informal sector. • “Upper-tier” vs. “easy entry” jobs. Fields (2004) distinguishes between rationed “upper-tier” activities and almost unlimited “easy entry” activities, which cut across both the formal and informal sectors.

7. Challenges in the labour market • Dual labour market model have challenged the notion of the informal sector as a free entry sector of last resort • The existence of two or more sectors with different wage setting mechanisms, with limited upward mobility for workers in the “less productive” sectors • Institutional barriers to mobility (wage settings coupled with skills) • Geographical barriers (poor infrastructure connecting urban and rural areas) • Legal barriers (such as weak enforcement of property rights • Barriers due to discrimination based on ethnicity, race or gender (may make it difficult for the poor to participate in sectoral growth)

8. The labour market in reality is a segmented market. Labour mobility between these markets is limited. Demographic factors (population growth rate vs. absorption rate, migrant labour) Changes in the pattern of demand and output (HIV/AIDS) Restrictions on labour mobility High capital intensity of production (tax incentives, international competition) Complexities in the labour market • A engineer who, while visiting China, came across a large • crew of men building a dam with picks and shovels. • When the engineer pointed out to the supervisor that the • job could be completed in a few days, rather than many months, • if the men were given motorized earthmoving equipment, • The supervisor replied: such equipment would destroy • many jobs • Oh, the engineer responded, • “I thought you were interested in building a dam. • If it’s more jobs you want, why don’t you have your men • use spoons instead of shovels.”

9. Policies against structural unemployment Education and Training (Gvnt Fiscus) Training and retraining programmes Changes in tax structure (tax incentives) Wage subsidies Restrictions on labour union power Promotion of SMMEs Strengthening the informal sector Restructuring agricultural sector and land use (e.g. Israeli Kibbutz system) Public works programme (EPWP) Direct State employment (Poor white problem of 1930s/40s)

10. Challenges/Trade offs

11. Unemployment explained • Various types of unemployment • Narrow/official and Broad/Expanded definition of Unemployment General population Discouraged job seekers Active job seeker Broad Employed Narrow

12. GEAR-ing into Joblessness Source Haroon Bhorat

13. Unemployment by age distribution Source Haroon Bhorat

14. Unemployment by education level Source Haroon Bhorat

15. Unemployment by age and Education

16. Apartheid Schooling system Source Haroon Bhorat

17. Triangular Employment (TES) 2 3 Instructs and supervises the employee Conduit of labour supply/administers the employment relationship 1 Supply of labour

18. Some Questions for Consideration Do insecure property rights, or other institutional weaknesses, discourage people from moving or seeking more productive employment? Do workers lack sufficient skills or qualification to transition into higher earning opportunities? Do the poor suffer from a deficit of information about job openings? Do significant infrastructure problems prevent easy movement? Are legal and/or informal norms skewed against women, youth and/or ethnic minorities in the workplace? Do particular groups suffer from work-related exploitation or violence?

19. Part 2 The Proposed Labour Law Amendments

20. INTRODUCTION • The current proposed amendments to the labour laws in South Africa have their origins in the growing “casualisation” of work that has become a feature of the South African labour market over the past decade. The 2009 election manifesto of the ruling party gave urgency to the task of introducing amendments by noting the following: • “In order to avoid exploitation of workers and ensure decent work for all workers as well as to protect the employment relationship, introduce laws to regulate contract work, subcontracting and out-sourcing, address the problem of labour broking and prohibit certain abusive practices. Provisions will be introduced to facilitate unionisation of workers and conclusion of sectoral collective agreements to cover vulnerable workers in these different legal relationships and ensure the right to permanent employment for affected workers. Procurement policies and public incentives will include requirements to promote decent work.”

21. INTRODUCTION • Amendments to: • The Labour Relations Act (“LRA”); • The Basic Conditions of Employment Act (“BCEA”); and • Employment Equity Act (“EEA”) • Amendments have been effected to these acts to achieve the following: • To bring them in line with labour law developments; • To improve the functioning of the Commission for Conciliation Mediation and Arbitration (CCMA), and; • To fulfil South Africa’s obligations as a member state of the International Labour Organisation (ILO). • In addition to the amendments to existing labour legislation, the Employment Services Bill was published. • The significance of the Employment Services Bill lies in the legal framework that it provides for the operation of employment services in South Africa.

22. LABOUR RELATIONS AMENDMENT BILL The explanatory memorandum to the Labour Relations Amendment Bill, 2010 States that the Bill seeks to address the concerns raised in the ruling party’s election manifesto which has committed the Government to: • avoid the exploitation of workers; • ensure decent work for all workers; and • prohibit certain abusive practices.

23. LABOUR RELATIONS AMENDMENT BILL The major areas of amendment in the bill: • Regulating contract work: A proposed amendment aims to stop the practice of repeated contracting for short-term periods. The onus will be on employers to justify the use of short-term or fixed term contracts, in place of contracting employees on a permanent basis. • Addressing the problem of labour broking: The Labour Relations Amendment Bill proposes to repeal section 198 that deals with Temporary Employment Services in the Labour Relations Act (no 66 of 1995). The Department is introducing a new Employment Services Bill which will address both Private and Public Employment Services.

24. LABOUR RELATIONS AMENDMENT BILL • Defining the employer and employee: The Bill introduces a new definition of employer and employee to give greater certainty to the employment relationship. As a result of the new definition of employer, no temporary employment service will be able to be the employer of workers that it places in work. • Commission for Conciliation Mediation and Arbitration (CCMA): The bill proposes a range of amendments to the provisions that deal with the CCMA to facilitate dispute resolution and enhance the efficiency of the CCMA’s operations.

25. LABOUR RELATIONS AMENDMENT BILL Some more proposed changes to the LRA: • One amendment would make it easier for employees who have the benefit of compensation awards from CCMA arbitrators to get a Writ of Execution if they are not paid the compensation that is due. • A provision that compels the CCMA to arbitrate a dispute even where there is a private arbitration clause if the employee is required to contribute to any part of the cost of the arbitration. • The CCMA is given the power to intervene in disputes where it is in the public interest to do so, by appointing a commissioner to attempt conciliation even if a previous attempt at conciliation has already failed. Significantly the proposal in the Bill is that where this occurs, the right to strike (or lock-out) is suspended for the duration of this further attempt at intervention.

26. LABOUR RELATIONS AMENDMENT BILL • The Bill proposes substantial changes to the jurisdiction of the Labour Court which are aimed very simply at giving the Labour Court exclusive jurisdiction (to the exclusion of other civil courts) in all employment related disputes. • Another significant new provision precludes employees earning above a specified threshold (to be determined by the Minister) from referring unfair dismissal and unfair labour practice disputes to the CCMA. • A further change makes con/arb (where arbitration commences immediately after conciliation) the normal process that will be followed in the CCMA and eliminates the present position where either party can object to con/arb without providing any reason for doing so.

27. THE BASIC CONDITIONS OF EMPLOYMENT AMENDMENT BILL The Explanatory memorandum on the Basic Conditions of Employment Amendment Bill, 2010 States that the objectives of the Bill are to: • Address Government’s commitment to avoid exploitation of workers; • Ensure decent work; • Protect the employment relationship; • Introduce laws to regulate contract work, sub-contracting and outsourcing; • Address the problem of labour broking; • Prohibit certain abusive practices; and • Effect certain consequential amendments as a result of the insertion of new definitions and to effect certain corrections.

28. The major areas of amendment in the bill: Changes to the power of the Minister: Amendments are proposed to give the Minister the power to prescribe thresholds of representativeness of a trade union to have the organisational rights of access to employer premises. This is intended to apply to situations where unionisation is difficult but where a more flexible threshold may facilitate unionisation within a sector or area. THE BASIC CONDITIONS OF EMPLOYMENT AMENDMENT BILL

29. THE BASIC CONDITIONS OF EMPLOYMENT AMENDMENT BILL Increases to actual wages: Further amendments in this regard propose that the Minister could set increases to actual wages instead of minimum wages for vulnerable workers in sectoral determinations Labour tenants: A proposed enabling provision in the Basic Conditions of Employment Act will provide the Minister with the power to determine the conditions of labour tenants.

30. THE BASIC CONDITIONS OF EMPLOYMENT AMENDMENT BILL Child labour: Amendments are proposed to align the Basic Conditions of Employment Act with South Africa’s international law obligations in terms of the International Labour Organisation Convention (No. 182) on the Worst Forms of Child Labour. Strengthening the power of the inspectorate: Contraventions of certain provisions in monitoring and enforcement of the Act are criminalised which will enhance the effectiveness of the inspectorate. The Bill further seeks to impose heavy penalties for offences and contraventions of the provisions of the Act as well as increased prison terms for employers that do not comply.

31. THE BASIC CONDITIONS OF EMPLOYMENT AMENDMENT BILL Some more changes: • A new provision requires employers to contribute benefits of similar or equal value to employees employed on fixed term contractsas the benefits afforded to permanent employees. This change will focus fresh attention on what is meant by a "benefit“. • Another new provision prohibits employers from requiring payment from employees, or requiring employees to purchase goods from the employer or a person nominated by the employer. • The Bill introduces similar provisions to those in the Labour Relations Amendment Bill conferring exclusive jurisdictionon the Labour Court for all employment claims and deleting references to labour brokers.

32. THE EMPLOYMENT EQUITY AMENDMENT BILL • The Explanatory memorandum on the Employment Equity Amendment Bill, 2010 states that its purpose is to: • Effect amendments to the Employment Equity Act, 1998 (Act No. 55 of 1998); • To ensure compliance with South Africa’s obligations in terms of international standards; • Promote the prevention of unfair discrimination in the workplace;

33. THE EMPLOYMENT EQUITY AMENDMENT BILL • Ensure that the Act gives effect to fundamental Constitutional rights including the right to equality, the right to fair labour practices and protection from unfair discrimination; • Increase fines for non-compliance with the Act; • Align the provisions of the Act with the Promotion of Administration and Prevention of Unfair Discrimination Act, 2000 (Act No. 4 of 2000); and • Effect certain consequential amendments and textual corrections.

34. THE EMPLOYMENT EQUITY AMENDMENT BILL The major areas of amendment in the bill: • Equal pay for work of equal value: A new clause is introduced which seeks to prohibit abusive practices by ensuring that employees who work for the same employer receive the same pay as other employees doing the same or substantially the same work. This amendment is necessary to ensure compliance with the International Labour Organisation’s conventions that deal with discrimination, namely Convention 100 Equal Remuneration Convention and Convention 111 Discrimination (Employment and Occupation) Convention.

35. THE EMPLOYMENT EQUITY AMENDMENT BILL • Strengthening enforcement and compliance: To strengthen the enforcement mechanisms of the Act, amendments are proposed which empower the Director General to impose fines on non-complying employers as a percentage of the annual turnover of the company, at two percent for first contraventions, escalating to a maximum of ten percent for repeated contraventions

36. THE EMPLOYMENT EQUITY AMENDMENT BILL Some more changes: • The Bill introduces a new and potentially very significant form of unfair discrimination– committed by an employer who applies different terms and conditions of employment to employees who perform the same or substantially the same work, or work of equal value. • Another significant change is the apparent intention to tighten up the obligations on employers to achieve demographic representation in the workforce. The Bill seeks to achieve this by eliminating certain of the considerations previously required to be taken into account in determining levels of compliance with obligations under the Act.

37. THE EMPLOYMENT EQUITY AMENDMENT BILL • In assessing whether or not a designated employer is implementing employment equity in compliance with the provisions of the Act, the Director General will no longer be required to take into account : • the demographic profile of the "national and regional" economically active population, • the pool of suitably qualified people from designated groups from which the employer may reasonable be expected to promote or appoint employees, • economic and financial factors relevant to the sector in which the employer operates, and • present and anticipated economic and financial circumstances of the employer.

38. THE EMPLOYMENT EQUITY AMENDMENT BILL • On the face of it the elimination of these considerations appears intended to assert more forcefully the aspiration for a workforce that is representative of the national demographics of the population as a whole. But the question of compliance with the Act remains ultimately to be determined by the Labour Court • In considering whether or not to impose such a fine the Labour Court may take into account, among other considerations, reasonable steps taken by an employer to: • train suitably qualified people from within the designated groups, • implement its employment equity plan, and • appoint and promote suitably qualified people from designated groups.

39. THE EMPLOYMENT SERVICES BILL The memorandum on the objects of the Employment Services Bill • States that the Bill will contribute to the Government’s objectives for “More jobs, decent work and sustainable livelihoods”. • The Bill repositions employment services to play a major role in employment promotion and employment preservation and will assist employers and workers to adjust to changing labour market conditions.

40. THE EMPLOYMENT SERVICES BILL • That the strategic objectives will be achieved through institutional arrangements that the Department will further establish to provide free services to citizens such as: • registration of job seekers; • registration of placement opportunities; • matching services; • referral to training; and • careers information.

41. THE EMPLOYMENT SERVICES BILL The major areas of amendment in the bill: • Legal status for Employment Services: The Bill seeks to provide a legal status for Employment Services after the transfer of the Skills Development functions to the Department of Higher Education and Training (DHET). The Bill also provides a legal status for the Sheltered Employment Factories administered by the Department and Productivity SA.

42. THE EMPLOYMENT SERVICES BILL • Role and function of public employment services: The Bill defines the role and core functions of public employment services including governance arrangements via an Employment Services Board. 

43. THE EMPLOYMENT SERVICES BILL The role of public employment services include: • Decent work schemes to promote youth employment; • Promotion of employment of people with disabilities; • Employment promotion schemes to respond to economic recession, company closures and pending retrenchments or lay-offs; • Regulation of employment of foreign workers.

44. THE EMPLOYMENT SERVICES BILL • The public employment servicesprovide certain services free of charge, which aim to match work seekers with available work opportunities. This requires work seekers to register, and employers to register job vacancies and other placement opportunities. • The public employment services would also provide advice to workers on access to social security benefits and provide other specialised services to assist the youth, new entrants into the labour market, disabled persons, and members of rural communities to find access to work.

45. THE EMPLOYMENT SERVICES BILL Private Employment Agencies: • Provision is made for the registration and licensing of Private Employment Agencies for placement and their regulation by the Department. The Bill makes it a criminal offenceto operate without a licence. • It appears that this public services may in effect compete with existing private sector businesses in this area. • The Bill then proceeds, it appears, to restrict the activities of private employment agencies to certain limited activities that are typical of what are presently known as recruitment agencies: matching work seekers to job opportunities, referring workers to employers, and providing career information and similar services.

46. THE EMPLOYMENT SERVICES BILL • The Bill establishes the Employment Services Boardwith functions to oversee the public employment services established by the Act and to implement and oversee various related strategies and regulatory matters. • It also regulates Productivity South Africa, a body previously established by the Skills Development Act, whose functions are to promote a culture of productivity in the workplace and to implement and oversee related strategies and regulatory matters.

47. THE EMPLOYMENT SERVICES BILL • The Bill seeks to elevate opportunities for citizens over those of foreign workersby requiring employers to make use of the public employment service before employing foreign nationals, and to submit reasons to the Director General as to why citizens with suitable profiles referred to them by the department could not be employed instead of foreign nationals. • Employers engaged in sectors designated by the Minister for this purpose will be required to notify the Department of any vacancy or new position in their establishment within 14 working days after the position has become vacant or was created, and to notify the Director General of the filling of any vacancy within 14 days.

48. Part 3 DISCUSSION AND QUESTIONS

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