Employment Services Bill aims an arrow at the heart of labour broking

Posted 19 June 2013 Written by Ciaran Ryan
Category Labour

The proposed Employment Services Bill aims an arrow at the heart of the labour broking industry, and is intended to get the government more involved in the recruitment business.

Labour broking has long been the bane of the trade union movement, since it allows companies to hire workers who are not union members. Many employers prefer this because it means less likelihood of strikes, less time wasted on negotiating over pay and conditions, and greater productivity. The employment and labour law responsibility falls to the labour broker, not the company, so workers can be dismissed with relative ease. But in a country with at least a third of the labour force out of work, many are happy with this arrangement. Labour brokers allow those without employment to find temporary work, even if the tenure is uncertain. Neither the government nor the unions think this is a good idea.

On 17 December 2010 the Minister of Labour published four bills in the Government Gazette aimed at bringing extensive reforms to the Labour Relations Act, the Basic Conditions of Employment Act and the Employment Equity Act. In addition a fourth Bill, the Employment Services Bill, was introduced.

The aim of Employment Services Bill is to keep a record of job seekers and record of vacancies in private enterprise with a view to placing them in positions.

Take a look at who the government consulted in drafting this piece of legislation: “The Department of Labour conducted a review of its programmes to determine their effectiveness and to make appropriate adjustments, with the assistance of the International Labour Organisation (ILO). A comparative study was also conducted across Ministries of Labour/Labour and Social Affairs/Labour and
Employment with similar characteristics and in countries having similar economic conditions with South Africa.”

Okay, we’re in relatively safe hands then: the ILO, the Department of Labour, Social Affairs and other departments think we need this nanny-state interference to prevent the private sector from messing with the labour market. 

What countries are we comparing ourselves to? Brazil? Canada? Malaysia? Where is the input from labour brokers, recruitment agents, and employers who do not form part of the corporate-labour aristocracy?

You won’t find it here. Perhaps we should compare ourselves with Nigeria, where strikes are banned in its free port zones. Or Ghana, where the army has been called in to get strikers back to work. We've previously covered how bad laws with unintended consequences get made. This is what you get when you consult the ILO and the Department of Labour, rather than small and medium-sized businesses and recruitment agents.

Some believe the bill’s intention is to outlaw labour broking altogether, since this is how many companies side-step trade unions (labour tenure under the broking system is supposedly fragile). One wonders how the drafters passed this through Constitutional muster, particularly the right to freedom of association and work, notwithstanding the bill’s nod to fair labour practices as specified in Section 23 of the Bill of Rights. Fair labour practices sounds innocent enough, but it is a Statist construct that results in job losses over the long run since it belies the fact that labour, like other inputs, derives its price from supply and demand. Where you have a surplus of labour, prices drop, regardless of whether or not this fits the Marxist view of the world (which must be enforced under threat of punishment). Labour brokers are a free market response to State interference in the work place,and their labour rates more acurately reflect what the market is prepared to pay for labour. This is why they must be outlawed.   

It's hard not to see how this bill will do anything but squeeze more air from the lungs of the asphyxiated labour market. 

Section 5 of the bill seeks to match work seekers with job opportunities, as well as register work seekers and job vacancies. This is especially surprising, since this function is already carried out quite capably by private sector recruitment agencies.

Anyone working in the recruitment sector knows what it is like to sift through hundreds of CVs and interview scores of candidates before placing them in the right job. It is not clear how this bill will make this task any easier, unless to overload recruitment agents with unsuitable candidates and then harass them when they do not appoint the "right" person. Don't laugh, it's in the bill.

Section 8 will make it more difficult to employ foreign nationals in SA, since the minister is empowered to issue regulations requiring employers to ensure that no SA national is available to fill the post. Even if a foreign national is employed, the company may then be required to prepare a skills transfer plan so that the foreign national can eventually work his way out of a job.

According to Anastasia Vatalidis, employment practice head at Werksmans, the bill gives the minister powers to create strategies to deal with employment in times of recession, when job losses are occurring, and to create regulations around how to manage lay-offs in in the work place.

The bill also establishes Productivity South Africa as a new board “to promote employment growth and productivity.”

For the first time in SA every employer will have to advise the minister of all positions that become vacant and new jobs created. Once the minister receives notification of this, he can potentially forward candidates’ details to employers for vetting. Companies that fail to notify the minister when positions are filled face a minimum fine of R10,000.

Private employment agencies are broadly defined in terms of the new bill, which applies to anybody who is a labour broker or an employment agency. Such companies must be registered with the Department of Labour and be granted a licence. If you apply for a licence and are refused by the Department, you can appeal to the Labour Court.

Those companies that are granted a licence can then collect information from candidates. This information must be stored both electronically and on a manual register for five years. However, companies may not retain any ID documents or qualification certificates received from candidates. Those that do so are liable to criminal prosecution and a fine.

Those involved in the provision of temporary employment services must also register with the Department of Labour, though it is unclear how this section of the bill will operate in practice.

Long-term implications: Vatalidis says the bill cannot be look at in isolation, and must be viewed in conjunction with other labour legislation such as the Labour Relations Act and Employment Equity Act. “(The minister’s) intention is to address potential labour exploitation in labour broking. The minister is using various pieces of legislation to create a bigger picture.  The minister wants to eliminate the use of labour brokers to provide cheap labour. The Employment Equity Act is expecting labour brokers and their clients to have similar terms and conditions of employment for the employees employed permanently by the client and the employees placed by the client by the labour broker.”

To this list of consequences I would add: job losses and more companies leaving the country. This is the time to be reforming labour law to make it easier to employ workers, not more difficult. 

Oh, and by the way, a new board will be created under the proposed act, which will advise the minister on strategic issues such as what should be done for job creation and skills development when there is recession, what regulations to implement, how to deal with lay-offs and ways to increase employment in the private and public sectors.

Here are the highlights of the bill, provided by Bowman Gilfillan:
  • The stated purposes of this Bill are to promote the employment of citizens, to improve access to the labour market for work seekers, to provide opportunities for new entrants to the labour market to gain work experience, to improve employment prospects for persons with disabilities, to improve employment prospects of work seekers and employees facing retrenchment, to facilitate access by work seekers to training, and to promote employment growth and workplace productivity. 
  • The Bill establishes what are referred to as public employment services, to be provided 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. It appears that this public service may in effect compete with existing private sector businesses in this area, and may be partially funded by licence fees payable by private sector businesses. 
  • 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. 
  • Whether or not they contemplate employing a foreign national, 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., 
  • The Bill also seeks to regulate, and to provide a licensing system, for what are referred to as "private employment agencies". The definition of these agencies is so broad that it would certainly encompass the typical business of a labour broker, and that of a recruitment agent. The precise parameters of the definition are, however, difficult to discern. 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. 
  • The Bill provides a licensing system for agencies of this kind, and makes it a criminal offence to operate without a licence. 
  • One interpretation of these provisions is that they effectively abolish labour broking. It is, however, highly questionable whether this could be achieved without expressly saying so, by inference only, and having regard to the different and entirely new definitional concepts introduced in the statute. That the banning of labour broking is what was intended may be signalled by the proposed deletion of sections dealing with temporary employment services (the statutory description of what are commonly referred to as labour brokers) from each of the LRA and BCEA. But, as pointed out earlier, if those provisions are repealed without successfully banning labour brokers outright, the effect might be the total deregulation of labour broking - a result that its seems unlikely that anyone intends. 
  • 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.

Read the bill here:


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