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
1
Overview
Part 1 -
Part 2 Part 3 -
The South African labour
Market
The Proposed Labour Law
Amendments
Discussion and Questions
2
Clarification
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.
3
Part 1
The South African labour Market
4
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
5
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.
6
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)
7
Complexities in the labour market
who,market
while visiting
China,iscame
across a large
• A engineer
The labour
in reality
a segmented
market. Labour
crew
of menbetween
building a these
dam with
picks and
mobility
markets
is shovels.
limited.
• When
Demographic
(population
growth
rate
the engineerfactors
pointed out
to the supervisor
that
thevs. absorption
labour)
jobrate,
couldmigrant
be completed
in a few days, rather than many months,
men were
motorized
equipment,
• if the
Changes
in given
the pattern
of earthmoving
demand and
output (HIV/AIDS)
• The
Restrictions
on labour
supervisor replied:
such mobility
equipment would destroy
• many
Highjobs
capital intensity of production (tax incentives,
international competition)
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.”
8
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)
9
Challenges/Trade offs
Tax incentive, subsidies
• Gvnt expenditure and
create vested interests
• May be abused and only
benefit the employer
Population growth
Built in demographic momentum
SMMEs
Unqualified and Indiscriminate deregulation
AA and BBBEE
May create new forms of restrictions on occupational
mobility and employment opportunities
Land reforms
May distort the whole sector if not done carefully
lessening output, opportunities and employment
EPWP
In some cases may not achieve the desired goal, however
are effective
Direct State employment
Budget constraints if State becomes Employer of last
resort
10
Unemployment explained
• Various types of unemployment
• Narrow/official and Broad/Expanded definition of Unemployment
General population
Discouraged job seekers
Active job seeker
Broad
Narrow
Employed
11
GEAR-ing into Joblessness
45.0
40.0
40.6
41.8
41.8
41.0
38.8
35.0
34.3
Percent
30.0
30.8
25.0
29.4
30.4
28.2
26.2
25.4
26.7
20.0
15.0
17.6
10.0
5.0
0.0
1995
2000
2001
Broad Unemployment
2002
2003
2004
Narrow Unemployment
2005
12
Source Haroon Bhorat
Unemployment by age distribution
1200
No. of Ue
1000
800
1995
2005
600
400
200
0
15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63
Age
13
Source Haroon Bhorat
Unemployment by education level
60%
50%
40%
30%
20%
10%
0%
Up to grade 11
Matric
1995
Tertiary
2005
% Change
All
14
Source Haroon Bhorat
No. of Ue
Unemployment by age and Education
1200
60%
1000
50%
800
40%
1995
2005
600
30%
400
20%
200
10%
0
0%
15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63
Age
Up to grade 11
Matric
1995
Tertiary
2005
All
% Change
15
Apartheid Schooling system
Variable/Former
Department
High School Pass Rate
African
White
48.39
95.14
31.04
23.72
0.20
0.92
Pupil-Teacher Ratio
Schools with User
Fees
16
Triangular Employment (TES)
Conduit of labour
supply/administers
the employment
relationship
2
3
Instructs and
supervises the
employee
1
Supply of labour
17
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?
18
Part 2
The Proposed Labour Law
Amendments
19
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 outsourcing, 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
20
include requirements to promote decent work.”
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.
21
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.
22
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.
23
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.
24
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.
25
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.
26
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.
27
THE BASIC CONDITIONS OF EMPLOYMENT
AMENDMENT BILL
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.
28
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.
29
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.
30
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 contracts as 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 jurisdiction on the Labour Court for
all employment claims and deleting references to labour brokers.
31
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;
32
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.
33
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.
34
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
35
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.
36
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.
37
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.
38
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.
39
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.
40
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.
41
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.
42
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.
43
THE EMPLOYMENT SERVICES BILL
• The public employment services provide 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.
44
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 offence to 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.
45
THE EMPLOYMENT SERVICES BILL
• The Bill establishes the Employment Services Board with
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.
46
THE EMPLOYMENT SERVICES BILL
• The Bill seeks to elevate opportunities for citizens over those
of foreign workers by 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.
47
Part 3
DISCUSSION AND QUESTIONS
48
REFERENCES
Bhorat, H. (n.d). Unemployment in South Africa Descriptors & Determinants. International Dispute
Resolution Agencies’Conference, Mount Nelson Hotel, Cape Town, 22-25th October
Brand, J. (2011) Proposed Amendments to the labour Laws. Bowman Gilfillan Newsletter. Johannesburg.
Brand, J. (2011) Labour Relations Amendment Bill. Bowman Gilfillan Newsletter. Johannesburg.
Brand, J. (2011) The Basic Conditions of Employment Amendment Bill. Bowman Gilfillan Newsletter.
Johannesburg.
Brand, J. (2011) The Employment Equity Amendment Bill. Bowman Gilfillan Newsletter. Johannesburg.
Brand, J. (2011) Employment Services Bill. Bowman Gilfillan Newsletter. Johannesburg.
Frederick C v N Fourie & Philippe Burger. How to Think & Reason in Macroeconomics : 3rd
Edition. Juta Publishing (UCT Press)
Hull, K., (2009). Understanding the Relationship between Economic Growth, Employment and Poverty
Reduction. Promoting Pro-Poor Growth: Employment. OECD, 2009
Minister of Labour, (2010) Labour law reforms introduced [Internet], the skills portal. Available from:
http://www.skillsportal.co.za/page/human-resource/labour-law/159904-Labour-law-reforms-introduced
[Accessed 25 March 2011].
Memorandum on the objects of the Employment Services Bill (Government Gazette No. 33873). Pretoria.
Government Printer.
Explanatory memorandum to the Labour Relations Amendment Bill, 2010 (Government Gazette No. 33873)
Pretoria. Government Printer.
Explanatory memorandum on the Basic Conditions of Employment Amendment Bill, 2010 (Government Gazette
No. 33873) Pretoria. Government Printer.
Explanatory memorandum on the Employment Equity Amendment Bill, 2010 (Government Gazette No. 33873)
Pretoria. Government Printer.
49