Labour Brokerage in South Africa: public hearings

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Labour

24 August 2009
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The main split in thinking at the public hearings revolved around the regulation of labour brokers versus the outright ban of labour brokers. The recent Namibian court ruling to ban labour brokerage was noted. The impact of the ban and its pertinence to the South African labour market was discussed.

RSV Ltd Consulting Engineers and Project Managers represented the interests of the highly skilled/scarce skills sector of the labour market. They submitted that labour brokers were an effective mechanism to source the right people for large, complex engineering and construction projects. The use of labour brokers also provided the necessary flexibility to match skilled individuals to fixed term projects. They felt that regulation of the sector was the ideal solution and were not in favour of an outright ban on labour brokerage.

Staff at a Click Labour Brokers briefed members on a software/Internet based solution for monitoring and regulating the activities of labour brokers. It was their position that labour brokers should be seen as employers to the fullest extent and should comply with legislation accordingly. The system was aimed at providing government with a tool to track and control labour brokers with a view to reducing the exploitation of workers. The system would be an ideal tool to allow workers and client companies to be informed and involved. The system was also designed to address the administrative complexity of temporary employment services. Staff at a Click proposed regulation of the sector, rather than an outright ban. They were of the opinion that workers would not be able to get access to employment or be able to sustain employment without the services of a labour broker. They believed that direct employment would lead to worse exploitation of workers as companies would be able to drive wages down in a surplus labour market. Committee members queried the practicality of a computer based system when dealing with unskilled workers and smaller labour brokerages. The cost of implementing this system was also questioned.

South African Union of Municipal Workers (SAMWU) called for the outright abolition of labour brokerage. They explained the circumstances under which labour brokerage originated and how it had evolved to its present form. The problematic parts of Section 198 of the Labour Relations Act were outlined and the negative impact of the use of labour brokers on the municipal sector. SAMWU did not believe that any form of regulation would overcome the fundamental problems in the system.

In a deviation from the programme and common practice, the Chairperson opened the floor to all in attendance and allowed them to comment and ask questions.

Members sought clarity on determining a satisfactory definition of ‘employer’ and ‘work place’ where temporary employment services were used and who was responsible (client company or labour broker) for providing for worker safety, benefits, skills development and compensation in the event of workplace injuries. There were questions on dispute resolution, how payment was determined and the extent of statutory compliance with labour legislation and employment equity amongst labour brokers.

The Association of Personnel Service Organisations (APSO) argued that
the commonly-held perceptions that labour brokers were exploitative should not be allowed to tarnish the entire industry. APSO acknowledged that there were non-compliant parties within the industry but stressed that with the establishment of co-regulating bodies such as the proposed Private Employment Agencies Board, the great work done by APSO could be extended to cover all parties operating within the labour recruitment industry and ensure that any non-compliant parties were brought in line or eliminated from operating. The banning of this industry would be debilitating to the local economy.

The Deaf Federation of South Africa stated their opposition towards the practice and highlighted several examples where the industry exploited ordinary workers.

Solidarity said that an outright ban of labour brokering was not a feasible option given the present economic circumstances. In Namibia there had been many job losses after labour brokering had been done away with. In South Africa, this would have a negative impact on economic growth and productivity as well as increase levels of poverty.

The Confederation of South African Workers Unions listed examples of how workers were exploited by labour brokers. Most workers employed through labour brokers could not provide adequately for their families. Workers also found it difficult to assert their rights in court processes. Consawu called for a minimum wage of R4 000 across all sectors.

The National Certified Fishing and Allied Workers Union (NCFAWU) submission said that the labour brokering industry did very little training of workers as employers expected these workers to carry out their duties without the necessity for prior training. Once applicants were placed within a position there was no employer-employee relationship.

The Landelani Recruitment Group stated that pointed out that the Temporary Employment Services (TES) industry contributed more to the economy than agriculture, hunting, fishing, water, electricity and gas. The industry employed between 500 000 and 1 million people. The misconduct of certain labour brokers tarnished everyone in the industry. The industry had created an entry point for those traditionally outside the labour market, such as women, the previously unemployed, youth, school-leavers and the aged. Landelani called for the registration and regulation of all TES companies as well as deregistration for non-compliance. If the industry were to scrapped there would be an immediate loss of 40 jobs in their company alone.

Members of the Committee listened to presentations by various members of the Temporary Employment Services (TES) sector. Industry representatives spoke of why they felt the TES industry should not be done away with (either partly or completely), furnishing statistics on the number of previously unemployed people they had assisted in finding work. Labour brokers spoke of how the profit margin in the industry stood, on average, at a mere 3.8%. They also said that a less flexible labour market would stymie foreign investment and lead to massive job losses and, ultimately, be harmful to the country’s economy.

Members of the Committee voiced their dissatisfaction at these representatives not providing adequate answers to questions posed to them, such as whether the labour broker served as the employer or not and how labour brokering was beneficial to the country. Many members equated the industry and its practices to slavery and human trafficking. All representatives of worker organisations, with the exception of Solidarity, called for an outright ban on labour brokering.

Meeting report

RSV Ltd Consulting Engineers and Project Managers
Mr Doug Armstrong, Human Resources Executive: RSV Ltd, spoke labour market needs in relation to consulting engineers and project managers. They argued in favour of the use of labour brokers as they supplied them with people with scarce skills. He submitted that their particular business, of large scale construction and fixed term engineering projects, would be unable to operate without a flexible workforce and therefore they needed access to a labour broker.

Labour brokers had access to large databases and could provide the right people with the required skills at short notice. This flexibility was necessary in their business, as people were constantly moving between projects and companies. When a project was concluded, the brokers would ensure that the person was hired into a new job almost immediately. It was also useful to be able to cost exactly and move teams around.

He was aware of the duality in the market between unskilled persons and highly skilled persons. He stated that he was empowered to speak only for the highly skilled, particularly individuals with scarce skills.

He commented that the Namibian example (Namibia had recently abolished labour brokers) was not comparable to the situation in South Africa, as the Namibian economy was much smaller. He suggested that instead of an outright ban on labour brokerage, additional controls should be added in regulation of the existing labour brokerage sector.

Discussion
Ms M Rantsolase (ANC) asked what labour brokers did better than conventional employers. She asked who the employer was at the end of the day and queried how the relationship with the labour brokers was structured.

Ms N Mnisi (ANC) asked if the workers’ basic labour rights were protected, such as their right to union membership and collective bargaining. In his experience the labour rights of workers were not protected under labour brokers. Ms Mnisi noted the skills debate and pointed out that, in her experience, labour brokers employed primarily unskilled workers.

Mr Armstrong responded that there was a misconception as to the professionalism of labour brokers. His business employed highly skilled individuals and used labour brokers to do this. These individuals did not generally care which company they worked for and were more concerned with working on interesting and prestigious projects. He noted the competition in the sector for work on the Gautrain project as an example of this. He acknowledged the duality of the market in that there was both an unskilled sector and a highly skilled sector of the market. He reiterated that he was not able to speak for the lower end of the market.

Ms Rantsolase asked if people earned according to the sectoral determination and if labour brokers adhered to the Basic Conditions of Employment Act in order to protect employees from abuses.

Mr Armstrong responded that the labour brokers negotiated the fee with the employers. The fee was then discussed with the individual. Highly skilled people were capable of negotiating their fee and labour brokers could advise on what the going rates were for the particular level of skill and job description. His company had agreements with the labour brokers that stipulated compliance with the relevant legislation.

Mr I Ollis (DA) stated that he was not of the opinion that labour brokers should be disbanded. That being said, he was against the exploitation of workers. He stated that the procedure for dispute resolution was quite clear in conventional employment but became complicated in the case of labour brokers. He asked how disputes were handled in Mr Armstrong’s business.

Mr Armstrong responded that, in the event of a disciplinary issue, the company would contact the labour brokers. It was the labour broker’s duty to conduct investigations, hold disciplinary hearings, exact sanction and do whatever else was necessary. The client (company) may get involved as well.

Ms Mnisi noted the call for additional regulations. He expressed the view that labour brokers were nothing but a form of slavery and should be done away with. Instead South Africa should retain the agency structure and leave the employment relationship between the employer and employee.

Mr Armstrong replied that he was not suggesting new regulations. The Department of Labour (DoL) should be given powers to check that labour brokers were operating properly. An outright ban amounted to throwing out the baby with the bathwater. One had to apply one’s mind to the specific circumstances.

Mr Ollis asked what the mechanism was for dispute resolution. The rules on this were clear in conventional businesses. There were separate negotiations on the terms and conditions of contracts and performance. Project managers were empowered to deal with performance issues on the job. He asked who had the authority to discipline employees: the company or the labour brokers?

Mr Armstrong responded that incidents were reported to the project manager or the labour brokers. According to his understanding, only the labour brokers as the employer may discipline the employee. The company had a role in the investigation and to ensure that it was fair. The ultimate responsibility rested with the labour broker.

Ms Rantsolase referred to the difficulties unskilled workers faced and the resulting exploitation by labour brokers. She also asked how payment was determined.

Mr Armstrong replied that he agreed on the distinction between the skilled and unskilled and how the two groups differed in their ability to negotiate and protect their own rights. He reiterated that he was only qualified to speak for skilled workers in accordance with his experience. Regarding fees, he stated that the labour brokers sent a number of suitable CVs to the company and they would accordingly interview the candidate. Once the company agreed on a candidate, they would contact the labour broker. The labour brokers would then negotiate with the company about a remuneration package. Once they agreed, the labour broker would communicate the package to the individual.

Mr E Nyekemba (ANC) asked who the primary employer was. He asked if it was the company's responsibility to conduct investigations into disciplinary issues and then give the findings to the labour brokers to conduct the hearings.

Mr Nyekemba asked if the agreement concluded between the individual and the labour brokers was a service agreement and if there was a clause stating that the labour broker would take the person back if the company was no longer satisfied.

The Chairperson felt that Mr Armstrong was saying that people were happy with labour brokers. The research and her own experience showed that this was a master and slave relationship. She asked why a middleman was necessary.

Mr Armstrong responded that because of legislative considerations, particularly tax arrangements, skilled people found it difficult to operate as independent contractors. The flexibility element was important, as labour brokers were able to find these people jobs as their current job was about to come to an end. Tax evasion was a potential result of forcing skilled people to operate as independent contractors in the domestic and global tax environment.

In conclusion, Mr Armstrong acknowledged that there was exploitation of workers in general. He said that it was easy to get emotional but the Committee needed to consider the broader spectrum of options.

Staff at a Click – Labour Brokers
Mr Stefan Botha, Managing Director: Staff at a Click, reported that his business had been in the industry for ten years and felt that there was tremendous complexity. They were generally concerned with the broad negative labelling of labour brokers. Labour brokers addressed the need for flexibility in the labour industry. Staff at a Click submitted that the solution to the problems with labour brokerage lay in a system to monitor and measure the activity of labour brokers. The presentation focussed on the core issue of being profit driven versus having to bear administration input costs. The fewer cost inputs they had, the more profit they could make. The most important input in the labour industry was administration and labour brokers tended not to spend money on administration and if they did not have a system, the temporary employment market was headed for problems.

The wage challenge arose from the fact that the companies sat back and waited for the labour brokers to provide the best offer and this normally resulted in a tremendously low wage for the workers. Accordingly Staff at a Click would rather have a more involved client/company, in terms of what they were willing to offer for a position up front. There should be a definite wage rate for specific categories of work. The problems around measurement of time and calculating payment would not fall away if labour brokers were banned. If this were not done properly, payment to the employee would be wrong. Companies were also profit driven and the exploitation of workers might continue, even in the absence of labour brokers. An audit of whether labour brokers were compliant with legislation was quite difficult if one did not have a system.

Mr J Ruiters, Staff at a Click, felt that labour brokers were used to circumvent employment equity targets and a regulated system would provide the information needed to regulate compliance with employment equity. Their submission sought to provide a platform for enforcing statutory compliance for labour brokers.

Mr Botha remarked that the reason labour brokers did not provide benefits was that they were not the employer to the fullest extent of the law. On the other side the employing company would not provide benefits to a worker because of the temporary nature of the employment. Furthermore it would be virtually impossible to obtain the services of an insurance company in such a temporary employment situation. They would not be able to determine the risk involved to be able to issue a premium. If there was not a system in place that monitored and measured the activity of labour brokers none of the issues raised, such as decent work opportunities, wages, benefits and sustainability of work could not be addressed. The areas where control was needed were recruitment, employee contracts, rate of pay, health and safety of workers, hours/wage administration, client responsibility and statutory compliance. Specifically with rates of pay, it was their philosophy that companies should define rates of pay and labour brokers would provide a quotation based on that. Their proposed Staff Data Management (SDM) solution would be Internet based. The companies, workers, labour brokers and government would have access to information on what was happening in the industry. The SDM system was presented in relation to two flow diagrams, the first outlining the process from the company’s side and the other outlining the process to be followed by the labour broker. Staff at a Click proposed regulation of the sector, rather than an outright ban. Leaving workers to seek employment independently would not be good solution.

Discussion
Ms W Newhoudt-Druchen (ANC) asked who the employer was (in the case of Staff at a Click) when there was a dispute and who went to the Commission for Conciliation, Mediation and Arbitration (CCMA).

Mr Botha replied that they were the employer to the fullest capacity. They believed that there should be a definite process and that provision should be made for such a process before the employee is dismissed.

Mr Ollis asked if they proposed the SDM system should be used by the DoL. He noted that the addition of more software would be costly. He also pointed out that unskilled workers would not be able to use the system and would have difficulty trusting the system. Who would smaller labour brokers use this system?

Mr Botha responded that even small labour brokers needed a system to ensure that there were correct payments and statutory compliance. Perhaps they would not use the exact software system proposed in the presentation but a system was necessary. This was an opportunity to level the playing field as employees could participate in the system. This would assist in reducing employees’ exposure to exploitation.

Mr N Gona (ANC) referred to the statement that the industry was profit driven. He asked how much was charged by labour brokers in percentage terms.

Mr Botha replied that there was need to set the rules to which the companies must adhere and publish these rules and enforce these. The labour broker should have definite rates for the cost of salaries and an admin fee could be added, in terms of the operational requirements of their economic/work sector, e.g. production, transport, construction. This fee could range from 4% to 20% in his sector – production and road freight.

Mr Gona wondered how labour brokers could act as employees and be compliant with labour legislation. He also thought the practice of labour brokerage could retard the process of employment equity and transformation.

Mr Botha queried the reason labour brokers could not participate in employment equity. He pointed out that this could not be done without a system and controls in place. He was of the opinion that labour brokers should be the employer to the fullest extent and should be subject to statutory compliance. They had a workers forum to allow workers to report any problems. None of these problems could be addressed if there was no system in place to provide control.

Mr Nyekemba queried the validity of calling a labour brokerage a business. He wondered what their means of production was. Referring to Staff at a Click, he asked what their 4 200 employees did to assist them in conducting business.  He felt that the client/company was the only party that had a workplace. He further queried the point at which a company became a customer. He premised his views on the definition of a workplace in the Labour Relations Act (LRA).

Mr Botha responded that what defined an employee and employer had always been unclear, in the case of labour brokers. He saw himself as an employer to the fullest extent. The high rate of unemployment meant that potential existed for even more exploitation of workers if they were left to seek work independently. Employers would be able to drive down payment and would be able to do this because desperate work seekers would be willing to accept low wages

Mr A Louw (DA) pointed to the statement that the DoL did not have sufficient control of labour brokers and asked what methodology should be used to close the gaps.

Mr Botha responded that the system in use should be one where everyone (labour brokers and companies) was regulated. It should be able to identify labour brokers who were out of line immediately. There should be more control within the sector.

Mr W Madisha (COPE) pointed out that employers were called upon to address the skills shortages among their workers. He asked how skills development applied to labour brokers.

Mr Botha responded that employers were generally reluctant to get involved in employee skills development. This was a good opportunity for the DoL to get involved in skills development of workers generally. This would empower workers to secure permanent employment while also benefitting from the experience gained working for labour brokers.

Mr Madisha asked what the labour broker’s role was in the event of the employee being injured.

Mr Botha replied that the client/company accepted the rate offered by the labour brokers and were happy not to pay benefits. In an economy with a surplus of labour, this was likely to continue.

Mr E Mtshali (ANC) asked what the problem was in dealing directly with the work seeker. In his opinion, labour brokers should be done away with.

Mr Botha replied that companies were also profit driven. Excluding labour brokers was not a guarantee that people would be able to secure a job at a decent rate in a surplus labour market. It was their position that this should be regulated. They proposed that profit should be managed according to set rules about what employees should earn. There should be definite rates for specific job descriptions. The value this approach added was a reduction in exploitation.

Mr M Gona (ANC) asked what the definition of an employer was in terms of the LRA and felt that the suggestion of more controls would overstretch the DoL.

Mr Botha replied that labour brokers found work for people, sustained their employment and ensured that they were treated fairly - that was what he considered his economic activity. The value his suggestions would add was to add control to the sector and enable the DoL to know what was happening and have control over the sector. If this was not done, the government would lose the opportunity to have control and current problems would multiply if people were left to their own devices in a market with a surplus of labour.

Mr V Phillips, a member of the public, stated that Section 198 of the LRA had been part of legislation since 1995. Read together with Section 1(c) and Section 4 of the LRA (as amended), he deduced that Mr Botha's proposal amounted to a replacement of Section 198, which was designed to give specific protection to employees. Mr Botha had made reference to workers forums and had not spoken on extending the rights provided for in Section 1(c) and Section 4 to workers. His research had shown that the labour brokerage industry in the Western Cape employed 500 000 people, generating R 26 billion and catered mostly to black males. He found the suggestion that DoL lacked capacity to police the laws (that they suggested needed further regulation) was ludicrous. He felt that they had presented an alternative to legislation. This was a question of the rule of law and there neither the state, nor the employer should be excluded.

Mr Botha replied that they did not suggest new legislation but suggested that a system should be in place to regulate the current laws applicable in order to gain control and ensure that workers were not exploited.

Mr Louw called a point of order and asked if the Committee should allow uninvited members of the public to pose questions. Given the length of the programme, he was concerned about time management if this was allowed. Furthermore, this was not agreed upon by the Committee prior to the meeting. Many invited people were scheduled to submit their views to the Committee from the business and labour spheres.

Mr Gona responded that this was a matter of immense public interest and the Fourth Parliament did not pay lip service to public participation in the process of making laws. He added that they should be driven by gathering information, rather than by time. He submitted that the Chairperson was correct in following this process.

Ms Rantsolase supported Mr Gona and the Chairperson. The people who had come had written letters and made time be at the meeting. Those who had not submitted written submissions though the official channels should be heard, as this was a public matter. She appealed to invited guests to exercise patience to promote an understanding of the issues. Parliament represented the nation and participation was of paramount importance.

Mr Ollis replied that all of the invited people on the agenda were the public. They had written to and called Parliament. They had travelled great distances to be there. The programme was already an hour behind. His comments and call for order were not an attempt to shut down the debate and the Democratic Alliance would respectfully request that additional days be added to the programme in order to finish all the submissions. He felt that the people asking questions now were not officially invited to present a submission to Parliament. This was a forum for the Members to ask questions and for members of the public to present their submissions. All members of the public had an opportunity to contact Parliament for a chance to speak. If this were to continue they would not finish listening in time to the invited members of public.

The Chairperson replied that this was not a show, exclusively for Members of Parliament. They should allow people to speak. If they had to continue until eight o' clock, that was what they would do. No extra days would be added. Those who had come to present would stay if they were really interested in hearing other views. This was what she understood by the term "public participation". Whether on the agenda or not, they would not suppress people's comments. She ruled that they would continue accepting all comments from the public.

Mr M Sambatha asked if Staff at a Click would continue paying workers salaries when there was no client in need of them.

Mr Botha replied that within the 64 companies which made up their client base, they could ensure sustainable employment much more than a person could independently - "standing at the gate of one company"

A member of the public asked if it was not correct that much of the blame was placed on the companies, rather than the labour brokers.

Mr Sambatha asked what constituted the best price to the client.

Mr Botha replied that it was based on this issue that Staff at a Click suggested that companies should be involved in setting rates and that there should be a transparent fixed system - where a specific rate was matched to a specific job description. This rate would be the bare minimum and could be higher. The broker would then add a fee based on their operational requirements.

Mr Sambatha asked if employees were allowed to take action against the labour broker while in the workplace of the company. He queried the preference for labour brokers over the use of employment agencies.

A member of the public commented on the problem of abuse of workers by labour brokers. He asked what the problem was with companies employing workers directly and providing benefits directly to workers. He also commented on the large percentage of his wage that had been taken by the labour broker in his past jobs and how little he had been paid comparatively.

A member of the public representing labour brokers pointed out that they were restrained by competition amongst labour brokers and this was driven by companies seeking lower labour costs.

Mr Botha responded that he worked with the gentleman's concerns daily. He felt that his submission offered the solution. The banning of labour brokers would hand workers back to the companies. He thought it likely that workers would be exploited by companies. The system he had suggested would equalise the situation amongst labour brokers, as they would be able to charge only an administration fee on set rates for workers. He felt that labour brokers should be involved in workers' health and safety and participate in employment equity.  He was concerned that an outright ban would lead to more examples of exploitation. His business had successful participation from unions in protecting the workers rights. He concluded that people were not stock and could not be treated as such. There should be fixed rules which should be adhered to. The system should be implemented according to all relevant legislation. He was proud to be an employer in this sector and noted that his business was not that big because he had walked away from exploitative transactions.

The Chairperson stated that all present should not forget that some companies had deliberately retrenched workers using low profit as an excuse. Instead they chose to use labour brokers to escape statutory compliance and reduce costs. She felt that labour brokers and companies' preference for them were a way of eroding workers' rights.

South African Union of Municipal Workers (SAMWU)
Mr Roger Ronnie, General Secretary: South African Municipal Workers Union (SAMWU) discussed the conditions that created the phenomenon of labour brokerage. SAMWU attributed the emergence of labour brokerage to the 20th century capitalist economy.  Changes at the macroeconomic level by the 1970s, caused an economic crisis with rapidly dropping profit levels. This brought about changes in the form of decentralisation of production (smaller factories, cross border production and trade), under very difficult circumstances for workers. It then became apparent that labour brokerage needed to be regulated, giving rise to Convention 181 of the International Labour Organisation (ILO) that stipulated the conditions and controls for government to protect workers. South Africa did not appear to have been adopted Convention 181. Accordingly, South Africa’s international legal obligations were not as strong even though it was a member of the ILO. South African legislation did recognise that temporary employment services were the employer in Section 198 of the LRA

The constitutional problem with Section 198 of the Labour Relations Act (Temporary Employment Services) was that it directly infringed on the rights of workers. The specific rights they felt were infringed were the collective bargaining right, the right to join a trade union and the right to fair labour practice. Labour brokerage was not in the interests of workers and was merely a way to create a more profitable system. The benefits accrued only to the employers/companies and the only reason labour brokerage existed was to provide labour to an employer at a lower cost than if they had employed directly. This was possible because workers did not have collective bargaining rights and workers could not secure this because they could not secure organisational rights, necessary to engage in collective bargaining. Workers were trapped in a vicious cycle. Workers could not engage in union activity because they were placed at different companies and could not assemble nor organise themselves. Experience had proven that as soon as these workers joined a union, they were threatened or dismissed. He referred to a Constitutional Court ruling in favour of the National Education, Health and Allied Workers Union (NEHAWU) that stated that ‘fair labour practice’ could be defined as the right to security of employment and the right not to be unfairly dismissed. None of these conditions applied in a labour broker’s arrangement.

Mr Ronnie read from two employment contracts to illustrate the impact labour brokerage had on the municipal sector. People signed such contracts in times of desperation. He noted the exploitative aspects of this. He reported that there had been a drop in employment in the municipal sector and the use of labour brokers was acknowledged as the cause. SAMWU therefore called for an outright ban of labour brokerage and did not believe that any form of regulation would overcome the fundamental problems in the system.
They cautioned against attempts to regulate labour brokers as it was also responsible for generating industrial unrest among workers when temporary employees made the other workers feel threatened. The Namibian court decision was appropriate. He added that the Committee should also look into outsourced and casual labour.

Discussion
Mr Ollis remarked that all of the problems outlined by SAMWU could be addressed through regulations instead of an outright ban. He felt labour brokers existed for reasons other than exacting lower wages. He referred to the RSV Ltd submission that stated that it was effective for finding skilled individuals for large engineering projects. There were also cases where the only type of employment available was temporary. The Committee did not want to see exploitation and called into question the bona fides of unions, as the call to abolish labour brokerage could be a smokescreen for recruiting more union members.

Mr Ollis noted that, excluding labour brokers, all short-term work still contradicted the constitutional points made. He asked if it was SAMWU's position that all short-term work was unconstitutional. Referring to a comment made on the Namibian decision to abolish labour brokerage, he stated that research had shown that Namibia had lost up to a third of employment due to the decision.

Mr Ronnie replied that he remained unconvinced that every problem he had highlighted, could be corrected through legislation. He felt the solution was the removal of Section 198 from the LRA. The capitalist profit-based system was inherently irrational and government would not be able to regulate this. People would find a loophole. The issue of employment could be solved by directly employing workers on a short-term basis. The statutory terms and conditions should apply and workers should have access to collective bargaining, union membership and fair labour practice. He felt that scarce skills could be found by recruitment agencies and there was no need for third party intervention.

Mr Nyekemba referred to the infringement of constitutional right the submission had noted and asked what defined an employer and a workplace and what happened to employees in the event of a dispute. 

Mr Ronnie replied that the problem originated with Section 198 of the LRA. As the labour broker was defined as the employer, one could not cite the company in a dispute. The labour broker must be cited in these proceedings and labour broker often did not conduct investigations and simply dismissed workers at the behest of the client company.

Mr Nyekemba pointed out that some workers had received training in order to work on the Gautrain project. He felt that Mr Ollis was incorrect in drawing a link between the need for labour brokerage and the need for skilled individuals.

Mr Louw stated that it was unfortunate that the proceedings had been approached with preconceived notions. When there was a problem with micro-lending, the National Credit Act (NCA) was developed. This was a case where South Africa was rescued by the legislative process. The call for the abolition of labour brokerage seemed one sided. The Committee needed to apply their minds. He agreed that they should not support exploitation but there was a need to put systems in place. This was what happened with the NCA. This approach should be applied to labour brokerage. If labour brokers did not comply after controls were in place, they would have to be closed down. He felt that the hearings were intended to help the Committee make an informed decision.

Mr Gona responded that there were no preconceived ideas. It was his intention to find a solution to the problem.

A member of the public noted that if the same standards were applied to unions, many unions would be found guilty of contravention and mismanagement of members’ dues. He wondered if this could amount to a call to ban unions.

A member of the public noted that many of the statements made were emotional and the claims were not easy to substantiate. He asked if workers were forced to seek employment through labour brokers.

Mr Ronnie responded that it was clear that workers were not forced to seek employment through labour brokers. As companies had a preference for engaging labour brokers, the only way for an unemployed worker to find work was through a labour broker.

Mr Gona queried the point at which a second broker might be introduced.

Mr Ronnie stated that companies could switch between labour brokers with ease. They were able to cancel the contract on 24 hours notice. The company would then switch to another labour broker at a lower rate. Consequently workers, desperate for the job, would continue work at the lower rate.

A member of the public replied that he inferred form the response that, without labour brokers, many people would be without jobs. He pointed out that his organisation (labour brokers) participated in collective bargaining and saw it as an essential process.

Mr Ronnie responded that people needed to be employed directly by companies. Labour brokers involvement did not take away from the points he had made in support of an outright ban. This was not a case of a few errant companies. It was a systemic problem and it was critical that labour brokers be banned outright.

Mr Gona asked if such contracts superseded the Basic Conditions of Employment Act, other labour legislation and collective bargaining agreements.

Mr Gona asked what happened to workers in the event of occupational injuries and diseases, especially those that had a long latency.

Mr Ronnie replied that the labour broker was usually responsible for this. This was complicated because different parts of the labour legislation dealt with injuries differently. It was a reality the companies often did not provide the correct safety equipment and clothing to the workers and poor workers often had to buy the safety clothing and equipment from the labour brokers.

Mr Gona asked for more information on the Namibian experience.

Mr Ronnie replied that the full Namibian judgement would be provided to members.

A member of the public stated his view that labour brokers oppressed people and could not be called employers. They did not help people and labour brokerage should be banned outright. He added that this issue mostly affected black males and agreed with the views submitted by Mr Ronnie.

A member of the public noted that the labour brokerage industry employed many people on a permanent basis. He asked how SAMWU would suggest that full time employees of labour brokerages were re-employed if labour brokers were banned. There was good and bad in temporary employment services and it was important to draw the distinction.

A member of the public recounted his experience after being injured at work in 2008. Despite many requests, he had still not received assistance from his union. He expressed the opinion that some union officials were as bad as labour brokers.

The Chairperson asked to what union he belonged.

He responded that he belonged to NUMSA – National Union of Metal Workers in South Africa.

Mr Phillips felt that untruths and misconceptions were being presented, related to the legislation. Section 23 of the Constitution stated that workers may participate in unions. He stated that the Namibian ruling was an adequately justified, considered ruling made by Justices of the Namibian court. The assertion that there had been job losses of 33% was patently false and the conclusion that the ruling had resulted in wholesale unemployment was ludicrous. People should be put in direct employment. Section 213 and Section 198 created a legislative incongruity and Section 198 created male fides and felt that this should have the obvious consequence of banning labour brokers. No amount of eloquence could make for the fact that Section 198 was incongruous with the Constitution and should accordingly be struck off the statute books.

A member of the public, representing labour brokers, agreed that 33% was on the high side. Their own research found that the real number of job losses in Namibia was closer to 10%. However this still meant that there had been job losses. Given the need for employment creation in South Africa, the Committee needed to look at the impact of an outright ban of labour brokerage.

Ms Rantsolase referred to the very important concept of a decent job and asked how the submissions would help government created decent jobs for South Africans. She asked the presenter to clarify who the employer was in cases where labour brokers were used. Until this could be clarified, she thought they would simply be talking in circles.

Ms Rantsolase asked what criteria were used for determining salaries and what legislation was applied here.

Mr Rantsolase noted that labour brokers did not provide workers with benefits, like medical aid, pensions and workers compensation. She felt that none of the presenters had addressed this conclusively.

Ms Rantsolase pointed out that none of the labour brokers had explained how they implemented skills development and complied with the employment equity legislation.

A member of the public, representing labour brokers, commented on their endeavours to develop the skills of their workers. They had specifically taken 53 street children through training over the past three years and they were now qualified mechanics. It was easy to say the industry did not participate in skills development and employment equity. 95% of their people had provident funds and medical aid. It was unfair to use one or two labour brokers as a representation of the industry.  She felt that the problem was caused by the way the tenders were laid out, assigning 90% consideration to price. She proposed changing the formula to 50% price, 40% compliance and 10% employment equity. The Committee should look more closely at the companies using labour brokers.

A Member of the Public responded that this had not been his experience. He felt that labour brokers never created skills for any worker, nor did he believe that labour brokers were providing benefits to workers. He concluded that the only way to get benefits was to find permanent employment.

The Chairperson stated that the questions would be answered after the lunch break.

Afternoon and Evening session
Association of Personnel Service Organisations (APSO) Submission
Mr Suraj Maharaj, President: APSO, said that APSO had a membership base of more than 860 individual companies, which represented more than 1 000 offices across South Africa. Though the scope of membership was vast, the majority of APSO members were small- and medium-sized enterprises. APSO members operated across a broad spectrum of the labour recruitment industry (permanent placement, ad response handling, temporary employment services and outsourcing). It held regular Annual General Meetings to ensure good corporate governance. APSO recognised the importance of flexibility in the functioning of labour markets and the role played by private employment agencies in a well-functioning labour market.

APSO supported professionalisation and continued professional development, regulation and registration of all players within the labour recruitment industry, social security and retirement reform, decent work, engagement with Labour, Government, the public and business. APSO had actively participated in the Nedlac process’s inception and directly engaged with the Department of Labour in the drafting of the amendments of the Labour Relations Act and the Basic Conditions of Employment Act. APSO remained committed to engaging with Labour and Government in the ongoing debate around the protection of vulnerable employees.

In terms of legislative adequacy, APSO was confident that sufficient legislation existed within the industry and that current attempts to alter this legislation would merely serve to over-regulate the compliant and not achieve in bringing the non-compliant into the fold. APSO fully supported the move towards greater regulation, but believed that this should be achieved through better enforcement and co-regulation and not by creating debilitating legislation that could become a stumbling block for direct foreign investment and job creation.

In terms of enforcement, the Department of Labour was the principal government institution responsible for the registration and regulation of private employment agencies. The reality was that it did not have adequate resources to conduct this role. APSO was more than willing to take up this task. APSO enforced compliance on its members in the following ways: All members were required to meet stringent entry criteria before being assigned membership; all potential members were visited to ensure compliance and that the required operational standards were in place; all members were bound by the APSO code of professional and ethical practice; APSO investigated all complaints lodged by clients, candidates and other parties. APSO worked tirelessly to ensure compliance by educating corporate South Africa. At present, APSO only had the right to remove all companies found guilty of ethical and professional misconduct from the organisation; it did not stop the non-compliant companies from practising within the industry. APSO believed that the establishment of a formal public-private partnership could assist in more effective enforcement of existing laws and eliminate the need to create additional burdensome legislation.

APSO has worked closely with the Confederation of Associations in the Private Employment Sector (Capes) to develop a co-regulation model which would assist in more effectively policing the existing legislation within the industry. The private employment agencies board had been formally proposed by Capes at Nedlac and continued to be APSO’s recommendation in terms of more effectively registering and regulating all parties operating within the industry. APSO supported the principle of freedom of association which had been entrenched in its code of ethical and professional practice.

APSO fully supported the initiative to support workers, particularly those who were most vulnerable. APSO regularly published articles educating work-seekers on their rights, which appeared in various newspapers across South Africa. Representatives of the association regularly participated in discussions, conferences and events to educate workers on their rights in order to uplift the image of the labour recruitment industry. APSO actively engaged with government, labour and business in achieving the goals of decent work as espoused by the ILO. For the past few years, APSO had invited members of labour and government to participate in panel discussions. This served to develop a relationship and educated its members. APSO was also engaged with unions like Fedusa in looking at the development a memorandum of understanding. APSO believed in bringing all associations within the employment recruitment sector together to ensure compliance and greater levels of professionalism. APSO was the driving force behind the creation of an Employment Service Certification Institute (Esci). The role of Esci was to professionalise the labour recruitment industry and its individual practitioners to ensure effective self-regulation, drive continual professional development and ensure fair and decent treatment for candidates. Esci had been established on global best practice standards and would ensure that non- or under-qualified practitioners were not tolerated.

He said that commonly-held perceptions that labour brokers were exploitative should not be allowed to tarnish the entire industry. APSO acknowledged that there were non-compliant parties within the industry but stressed that with the establishment of co-regulating bodies such as the proposed Private Employment Agencies Board, the great work done by APSO could be extended to cover all parties operating within the labour recruitment industry and ensure that any non-compliant parties were brought in line or eliminated from operating. The banning of this industry would be debilitating to the local economy.

Discussion
Mr A Mpontshane (IFP) asked for clarity around who it was that created jobs. Was it the labour brokers or the businesses that utilised the labour brokers to source labour?

Mr Maharaj replied that it was a partnership between the brokers, the businesses that utilised them and government. Section 198 of the Labour Relations Act made it clear who the employer was.

Ms A Rantsolase (ANC) asked how labour brokering was benefiting government and protecting the South African community.

Mr I Ollis (DA) asked whether APSO had any suggestions for preventing poorly educated work-seekers from being exploited.

Mr Loane Sharpe from Business Unity South Africa (BUSA) said that, on average, for every R100 that the labour broker charged their client, R78.80 went to the candidate (in cash or benefits); R8.60 was paid to the candidate indirectly in the form of training; R3.80 remained for the labour broker. 3.8% was not a high profit margin and dealt with the question of exploitation. There was a misunderstanding about what the industry did. Labour brokers did not create jobs, the economy did. The labour broker’s primary duty was not job creation but rather job facilitation.

Mr Mpontshane asked why labour brokers did not employ workers directly. Who was the employer?

Mr Govender, from a company which is an APSO member, said that there were some misconceptions. The rights of the worker were not removed, in terms of the benefits. The industry had many contracts with Government. The problem within some of these government departments was ignorance around minimum wages in certain sectors. Tenders were therefore usually awarded to the cheapest company.  He said that in the industry there were a number of companies that exploited workers and these should be dealt with by regulatory bodies such as APSO. Still, there was a good compliance rate within the industry.

A Samwu representative said that according to research conducted into APSO, compliance levels were relatively low. Regarding the 3.8% profit margin, he said that the point of exploitation came in when the rate was set between the labour broker and the business utilising their services. Temporary employment was a misnomer. Jobs, particularly in his field, were of the kind that had unlimited duration.

Mr Sharpe said that temporary employment services needed to collect ongoing fees as they provided ongoing services such as training, the management of absenteeism, performance, pay roll and career performance. He said that clients and labour brokers were not colluding on wage rates. Brokers’ powers here were limited. More than 87% of workers placed in the industry were youth under the age of 35; 50% of these had never been employed previously. What made these people valuable in the job market was the on-the-job learning they received as a result of working in their respective environments.

Mr E Nyembeka (ANC) said that, as there was no labour legislation that defined an ‘employer’, it was necessary to come up with a definition in legislation for it. As the labour broker had no actual means of production, how could it call itself an employer? Limited working contracts and labour broking were different things as the person employed under a limited time contract is employed so by the employer.

Mr Anthony said that companies used labour brokers in order to avoid claims against them by those disgruntled by the fact that they were not selected for employment.

Ms Lusizo Makubela-Mashele said there were contradictions between how the labour brokers defined themselves (whether as employers or facilitators). She said that labour brokering was akin to human trafficking. She asked the industry to come up with solutions to deal with the loopholes in the labour brokering industry.

Mr Phillips, a member of the public, quoted from a study done around labour brokers in Cambodia which highlighted the negative effects of labour broking in that country. He said that there had recently been a newspaper report of workers from other African states being bussed into South Africa in order to serve as cheap labour. He said this constituted human trafficking.

A representative from the industry said that every labour broker’s wrongdoing is under the instruction of the customer.

The Chairperson responded that the labour brokers in attendance were evading the question that was being posed to them, such as how the worker benefits through the labour brokering industry. Why was there a need for labour brokers when there were employment agencies? She likened labour brokering to slavery.

An APSO representative replied that 35% of those who work within the industry find permanent employment within the course of a year as a result of the skills gained and being exposed to a working environment. Workers were also continuously up-skilled.

Mr Sharpe said that young South Africans found it very difficult to find employment. The labour brokering industry played an important role in that it smoothed out the process of job-seeking for young South Africans. He said that the small number of wrongdoings within the industry should be weighed up against the industry helping to ease the national catastrophe that is unemployment – particularly youth unemployment. The industry had contributed R500 000 million to the National Skills Fund.

Deaf Federation of South Africa Submission
Judith Madi of the Deaf Federation of South Africa said that their organisation had set up an employment placement office in 1997 for its members. This service was provided free of charge. In 2007 a labour brokering service (eDeaf), was set up which focussed on placing deaf people in employment positions. As a result Deaf SA lost a lot of clients. Jolene Huntley, Job Placement Officer for Deaf SA, said that many deaf people did not know what labour brokering was. Due to this, exploitation was taking place. Many deaf people could not read or write as a result of poor education during the Apartheid era. When deaf people were interviewed by labour brokers, there would not be a sign language interpreter present. Proper information was therefore not given to the deaf person. A labour broker could not act as an interpreter in an interview session. When discussing the salary with the employer, a rate was agreed upon and the deaf person was asked to leave the room in order for the labour broker and the employer to continue discussions. When they received their payslip, however, they often found themselves paid less than the agreed wage/ salary. Many also did not get copies of their employment contracts. Many were unhappy with the salaries they earned but remained quiet about their unhappiness. Whereas Deaf SA also assisted its members in CCMA processes, labour brokers did not. If labour brokers did go to the CCMA, they would charge the employee. Subsequent to experiencing problems of this nature with labour brokers, many were returning to Deaf SA offices. She also said that this particular labour broker had a relationship with the Office of the Status of Disabled People (OSDP), which was a government organ. Did this mean that government was supportive of labour brokering? Deaf SA was in support of labour brokering being banned.

Discussion
Mr Sharp asked whether the comments around dissatisfied members of Deaf SA related specifically to that particular labour broker in question or were indicative of the industry as a whole.

Ms Madi replied that, aside from her dealings with eDeaf, she had personal experience of her rights as an employee being violated when dealing with other labour brokers.

Solidarity Submission
Johan Kruger of Solidarity said that an outright ban of labour brokering was not a feasible option given the present economic circumstances. In Namibia there had been many job losses after labour brokering had been done away with. In South Africa, this would have a negative impact on economic growth and productivity as well as increase levels of poverty. More fair labour practices could also not be guaranteed if this industry was banned. A more flexible labour market also translated into more foreign investment. It should also be considered whether those employed through labour brokers would immediately be absorbed into the formal sector. Solidarity suggested legislation for regulating the industry. It also felt that the Capes Code of Ethics was a step in the right direction. There should also be clearer definition of the temporary employment relationship in the Labour Relations Act. It supported the suggestion that, after a certain period, the employee was longer under the employ of the labour broker but rather the employer. Legislation should also be adopted which stipulated that a temporary employment relationship became permanent after a number of contract renewals. The role of bargaining councils should also be extended. He said that sectors should also be demarcated clearly and that the term ‘workplace’ should be clearly defined. The registration of temporary employment services should be made a legal requirement.

Discussion
Mr Sharpe said that only one in four temporary South African workers was provided by agencies. Was it Solidarity’s intention that the other three in four be bound by the same definition of duration in temporary contract? If 40% of temporary workers were already bound by bargaining council agreements, how could that be extended?

Mr Kruger answered that abuses should be stamped out across the board. The binding nature of collective agreements concluded in a bargaining council should bind TESs as well.

Mr Nyakemba challenged the idea that there would be no foreign investment if the labour market was made less flexible.

Mr Kruger responded that it is a fairly accepted principle that a non-flexible labour market inhibited foreign investment.

Mr Philips said that, considering the make-up of the organisation, Solidarity was an organisation whose members were not directly affected by the activities of unscrupulous labour brokers. There members were drawn from the ranks of skilled employees. Did Solidarity support labour brokering or did it speak on behalf of workers affected by this?

Mr Kruger responded that they were against the exploitation of workers and were in full support of decent work and decent working conditions. He said that Solidarity members were made up of different race groups across South Africa.

Confederation of South African Workers Unions (Consawu)
Mr K Nkushuabane from Consawu listed examples of how workers were exploited by labour brokers. Most workers employed through labour brokers could not provide adequately for their families. Workers also found it difficult to assert their rights in court processes. Consawu called for a minimum wage of R4 000 across all sectors. As employees were made to sign contracts as independent contractors, this led to exploitation.    

Discussion
Mr Sharp said there were those companies who complied with regulations and those who were exploitative. He asked whether Consawu had any suggestions as to how to bolster what was good and make away with what was bad within the industry.

Mr Nkushubane answered that there was almost nothing good in labour brokering. Employment agencies were, on the other hand, doing very good work.

National Certified Fishing and Allied Workers Union (NCFAWU) Submission
Mr Envor Barros (General Secretary: NCFAWU) said that the labour brokering industry did very little training of workers as employers expected these workers to carry out their duties without the necessity for prior training. Once applicants were placed within a position there was no employer-employee relationship. In the fishing industry it was seen how engineers were fired by companies only to be re-employed at a lower wage by the same company through labour brokers. Labour brokers should be viewed as either employer or employee as they could not be both.

Landelani Recruitment Group Submission
Ms Ratsego from Landelani Recruitment Group said the TES industry contributed more to the economy than agriculture, hunting, fishing, water, electricity and gas. The industry employed between 500 000 and 1 million people. She said that the misconduct of certain labour brokers tarnished everyone in the industry. The industry had created an entry point for those traditionally outside the labour market, such as women, the previously unemployed, youth, school-leavers and the aged. Landelani called for the registration and regulation of all TES companies as well as deregistration for non-compliance. If the industry were to scrapped there would be an immediate loss of 40 jobs in the company alone.

There was a brief discussion and the meeting was adjourned. (Please note that PMG was not in attendance during this final discussion).



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