REPORT
Adco
orp Emplo
oyment Ind
dex, May 2014
Release date
e: Tuesday, 10
1 June 2014
4
Salientt features
Adcorp Employment Index
110
105
100
95
90
85
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
80
2003

2002

2001

2000

e permanent work
The South African employyment remains dishearteening, primaarily because
4,184 duringg May). Employment in non-permane
n
ent work, ho
owever,
continues to decline (by 54
waas sharply up
p. Informal employment
e
t grew by 8,591, temporary work grrew by 27,25
50 and
agency work grew
g
by 4,5
555 during the
t month. Overall, thee knock-on effect of deeclining
peermanent wo
ork and risingg non-permaanent work reesulted in a total
t
loss of 26,934 jobs..
Siggnificant job losses weree observed in
n manufactu
uring (3,000), financial seervices (5,00
00) and
traansport and communicat
c
tions (5,000). Only the pu
ublic sector created
c
jobs during the month,
m
am
mounting to 4,000
4
in goveernment and
d 4,000 in staate-owned enterprises.
e
Am
mong occupaations, only professional
p
occupationss (profession
nals and man
nagement) created
c
job
bs during thee month (17,,000).
This month, we
w explore the
t likely co
onsequencess of changess to the Lab
bour Relations and
Em
mployment Equity acts.
Wee conclude that, despite recent legislation
l
s
several
facto
ors in the current eco
onomic
lan
ndscape will see the rise of temporarry employmeent services.
Adcorp Employment Index (2005=100)

Source: Adcorp
p (2014)
1
REPORT
Anaalysis: Usee of temporary worrkers conttinues to grow,
g
desspite legislation
e of the anom
malies of the past few years is that teemporary em
mployment co
ontinues to grow,
g
despitte legislation that
One
is intended either to reducee the use of tempory wo
orkers or raisse the employment costt of temporaary workers. (For
addiitional inform
mation on the
t legislativve changes, please referr to April’s Adcorp
A
Emp
ployment Ind
dex.) In Adco
orp’s
dataabases for th
he past 17 months
m
sincee January 201
13, the num
mber of blue--collar tempo
orary workers has witneessed
an increase from
m 65,256 to 69,732 – an
n increase off 6.9%. Betw
ween April an
nd May, thee number inccreased by 5,254
5
workers (or 6.3%
% month-on
n-month, to say nothingg about the annualised increase thaat this repreesents of 73..6%).
White-collar tem
mps, by contrast, shrankk 5.6% sincee January 20
013 and white-collar pe
ermanent wo
orkers shran
nk by
7.5%
% in month-o
on-month terms between
n April and May
M alone.
The case againstt permanentt work is cleaar to establissh and is besst illustrated by a chart which
w
is mon
nitored close
ely at
Adco
orp, namely the percenttage deviatio
on from tren
nd of our permanent reccruitment bu
usinesses. Ass may be see
en in
the figure,
f
perm
manent work measured in
n this way is close to the all-time low reached in September
S
2
2009
during what
w
is no
ow called thee ‘Great Rece
ession’.
Figure. Permanentt Recruitmen
nt: Deviation
n from Linearr Trend (1997-2014)
Percentage deviation from trend (%)
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
Percentage deviation from lineaar trend
Source: Adcorp
A
Holdingss (2014)
Whyy does there appear to be
b a structurral shift in the labour maarket whereb
by mostly blu
ue-collar perrmanent worrkers
are being outso
ourced to em
mployment aagencies such as Adcorp
p? The first part
p
of the answer
a
is th
hat South African
firms are utilisin
ng temporaryy blue-collar workers in their
t
expansion strategiees in the restt of Africa. Work
W
occurring in
Africca outside So
outh Africa now
n accountts for 9.5% of Adcorp’s headcount an
nd this figure
e is growing sharply,
s
by 126%
1
overr the past three
2
The second partt of the answ
wer is that South
S
Africaan manufacturing firms are
a continuing to outsource their entryleve
elREPORT
positions, w
which they are
a still allow
wed to do un
nder the new
w labour law
ws. Of these manufacturiing firms, 65
5% of
emp
ploy less than 50 people
e and 45% employ
e
less than
t
five peeople. , the latter accoun
nting for jusst 12% (or 1 in 8
workers) of the private secto
or workforcee.
ntry-level blu
ue-collar wo
orkforces do not consist of a mix off permanentt and tempo
orary
The third answeer is that en
workers, which allows comp
panies to deefer or ignorre the new ‘‘equal pay fo
or work of equal
e
value’ provision in
n the
Emp
ployment Equ
uity Act, as there
t
are no permanent worker
w
comparisons for equal pay pu
urposes.
How
wever, the caase for outso
ourcing a blue-collar wo
orkforce is growing in atttractivenesss, not only in
n manufactu
uring,
but throughout the econom
my. Temps no
ow account for 992,306 workers or 9.8% of the entire privaate sector fo
ormal
workforce and 2
25.4% of the
e national teemporary workforce. In some secto
ors, such as manufacturing, the figu
ure is
subsstantially higgher (around
d 33.6% of the manufacturing workforce), butt temporary work in general – wheether
thro
ough agenciees or not – is a growingg phenomen
non, with 3,901,254 workers repressenting 31.1% of the offficial
sector workforcee.
The case for tem
mporary stafffing, particularly blue-colllar workers,, is strong, co
onsisting of the
t followingg dimensionss:

The mo
odern econo
omy. In a global econo
omy, sales aare highly unpredictablee. Companiees win and lose
contractts under fierrcely compettitive conditions. South Africa
A
is parrticularly vuln
nerable to competitors from
f
low-wagge countries such as Brazzil, China and
d India. When sales are highly
h
unpred
dictable, it iss impossible for a
firm to ccarry a fixed,, permanentt staff complement – it needs to varyy its labour fo
orce in real ttime to matcch its
volume of sales an
nd productio
on. Temporaary staff alllow for thiss level of fle
exibility. In addition to this,
seasonality has beco
ome ever mo
ore pronoun
nced in todayy’s modern economy. Cyycles are no longer just local
but glob
bal. Economic conditionss in the major developeed (consumin
ng/importingg) countries have a dram
matic
effect on
n local produ
uction and saales conditio
ons. Bearing this in mind,, temporary staff allow for
f a high levvel of
flexibility, particularly in the manufacturing, mining, constructio
on and tran
nsport secto
ors which make
m
significant use of flexible staff.

Outsourrcing non-core activities.. A companyy’s workforcee was once considered
c
a key comparrative advanttage.
Today’s economic climate seees more and more com
mpanies vieewing their labour forcces as non--core
compon
nents of their business model.
m
This iss particularlyy true at the lower end of
o the skills spectrum,
s
w
where
the labo
our market is highly competitive.
c
There is, however,
h
also a trend to outsourrcing high-skkilled
occupations too, including info
ormation tecchnology, leggal services,, financial back-offices,
b
and so on. The
outsourccing of high--skilled profeessionals is not being drriven by com
mpanies alon
ne, but also by professio
onals
themselves, who seeek greater degrees
d
of work-life
w
balance and working
w
optio
ons such as flexible worrking
hours, ttime off, sabbaticals, and the like. These tem
mporary worrkers – who
o prefer to call themse
elves
‘contracctors’ or ‘lifesstyle workerrs’– are drivin
ng a new patttern of work that will grradually perccolate downw
ward
through the ranks of organisatio
ons. This is driving the usse of temporrary workerss, particularlyy those managed
through agencies, which
w
assumee total respo
onsibility forr the human capital valu
ue chain from
m recruitmen
nt to
payroll aand performance management.
3

Flexible office hourss. Where, on
nce, businesses kept office hours that suited theeir workers – i.e. Mondaay to
Friday
fr
rom
8.00am
to
5.00pm
– more and more businesses are be
eing organise
ed around th
heir customeers –
REPORT
i.e. weekend operations, early opening
o
and late closing, as well as sttaffing at higgher levels during peak hours
h
such as lunch-timess and near closing times. More an
nd more bu
usinesses are
e also facin
ng fixed-duraation
projectss, with annuity income proving to be
e a challengee for compan
nies. These fiixed-term co
ontracts are ideal
for flexib
ble workers, with their use growing as
a a result.

Restrictiive labour la
aws. There iss no doubt th
hat restrictivve labour law
ws in South Africa
A
have eencouraged firms
f
to applyy innovative methods and
d clever com
mmercial con
ntracting to engage
e
workkers. There are many variants
on the o
outsourcing theme:
t
companies can employ
e
temp
porary workeers themselvves (the ‘direect’ model); they
can employ temporary workerrs through dedicated
d
em
mployment agencies (th
he so-called ‘agency’ model
m
known aas Temporarry Employmeent Services in the Labou
ur Relations Act); compaanies can inssert various legal
structures between themselvess and the employees (including thee so-called ‘Managed Service
S
Proviider”
model th
hat has provved incrediblyy popular in developed countries);
c
among other methods.
The upshot of tthe analysis is that bluee-collar temporary stafffing, particullarly through
h employmeent agenciess will
w strongly in
nto the futurre. Permanen
nt employmeent is in outrright decline, and our mo
odelling sugggests
conttinue to grow
thatt permanent employmen
nt will only grow
g
sufficien
ntly to absorrb school-leaavers when economic
e
growth rises to
o 4%
of more
m
per annum, and will
w only grow
w sufficientlyy to reintegrrate informaal sector wo
orkers into th
he formal seector
whe
en economicc growth rises above 8%
% per annum
m – neitherr of which iss in prospecct for at leaast several years
y
Tem
mporary stafffing (particularly the ‘agency’ model) is likely to
o grow irresp
pective of th
he rate of ecconomic gro
owth:
therre are good reasons,
r
as listed above,, why blue-co
ollar workers are being outsourced
o
i growing numbers. Adccorp,
in
with
h a strong preesence in So
outh Africa an
nd a market--leading pressence in the rest of Africaa,
Add
ditional Data
D
ployment byy Type
Emp
Type
e
Uno
official sectorr
Officcial sector
Tyypical (permaanent, full-time)
Attypical (temp
porary, part--time)
- of which aggencies
Totaal
* An
nnualized
Emp
ployment
Maay 2014
6,,499,803
12,,541,583
8,,640,329
3,,901,254
992,306
19,,041,386
Percentage
P
c
change
vs.
A 2014*
Apr
1.59
-2.57
-7.48
8.44
5.53
-1.15
ployment byy Sector
Emp
Secttor
Employm
ment Percen
ntage
May 201
14
changge vs.
4
Mining
REPORT
Man
nufacturing
Electricity, gas and water sup
pply
Construction
Who
olesale and rretail trade
Tran
nsport, storage and comm
munication
Financial intermediation, inssurance, etc.
Com
mmunity, soccial and perso
onal servicess
* An
nnualized
(000s))
2
217
1,2
247
109
4
470
1,7
721
5
533
1,6
625
2,7
783
Apr 20
014*
-1
10.96
-2.88
1
11.11
-2.55
-0.70
-1
11.15
-3.68
1.73
ployment byy Occupation
n
Emp
Employmeent Percentage
May 2014
changee vs.
Apr 20
014*
(000s)
Legislators, senio
or officials and managerss
1,1
134
8.53
Proffessionals
8
801
13.64
Tech
hnical and asssociate proffessionals
1,6
629
-2.21
Clerks
1,4
492
-1.61
Servvice workers and shop an
nd market saales workers
1,8
840
-0.65
Skilled agriculturral and fishery workers
92
13.19
Crafft and related
d trades worrkers
1,3
315
-6.35
Plan
nt and machine operators and assemblers
9
945
-15.05
Elem
mentary occu
upation
2,2
279
-2.63
Dom
mestic workeers
8
801
-3.00
* An
nnualized
Occu
upation
Disclaimer
n, analysis, opinions
o
and
d materials presented in
i this report are proviided to you for informaation
The information
purp
poses only. TThis report may
m not be reproduced in whole or in part witho
out attributin
ng the source to Adcorp.. The
information and
d opinions expressed
e
in this report have been compiled fro
om sources believed to be reliable,, but
neither Adcorp, nor any of its
i directors,, officers, contractors or employees accepts liability for any loss arising from
f
the use hereof or makes any represeentation as to its accurracy and co
ompleteness.. Informatio
on, opinions and
estim
mates contained in this report refleect a judgmeent at its origginal date of publication
n and are su
ubject to chaange.
Adco
orp is not aggreeing to nor required to update research com
mmentary an
nd data. Therefore, inforrmation mayy not
refleect events occcurring afteer the date of publication
n. Adcorp maay issue otheer reports th
hat are inconsistent with,, and
reacch different conclusionss from, the information
n presented in this repo
ort. Those reports
r
refleect the diffeerent
assu
umptions, vieews and anaalytical methods of the analysts
a
who
o prepared th
hem. Adcorp
p shall not bee responsible for
any inaccurate in
nformation and
a shall nott be held ressponsible forr decisions made
m
as a ressult thereof. Adcorp doess not
makke any repreesentations to
t any party, and we shall have no liability inclu
uding claimss for damagees of any naature
whaatsoever. Ad
dcorp, its subsidiary and associated companies and entities and their
t
emplo
oyees, direcctors,
5
conttractors and agents shall not be responsible for any claims arising out of or in conn
nection with the informaation
conttained
in
this
s
publication
n.
REPORT
6