Compensation Fund, Unemployment Insurance Fund, Commission for Conciliation, Mediation and Arbitration, Nedlac Strategic Plans 2010-2013

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Employment and Labour

18 March 2010
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Committee met with delegates from the Compensation Fund, Unemployment Insurance Fund (UIF), Commission for Conciliation Mediation and Arbitration (CCMA) and National Economic Development and Labour Council (NEDLAC), who presented their strategic plans for 2010-2013 to the Committee.

The Compensation Fund noted that it had implemented a new system that would enable the employers to submit claims electronically and decrease the turnaround time. Organisational capacity proved to be a challenge so a recruitment and retention system was developed to acquire specialised personnel. There was a need to raise awareness and educate the public about the benefits of the Fund. Challenges that were highlighted included poor communication system, backlogs of compensation claims and poor revenue collection system. Another challenge was that claims were currently not paid timeously but the objective in the current year was to pay within 90 days and to set up new systems that would reduce this down to 30 days. The Fund further aimed to follow upon on workers after injury and try to reintegrate them back into employment. The Fund undertook training for shop stewards and workforces. It had recognised the need to develop human resource capital, improve the recruitment and retention of staff and have monthly performance appraisals, and a new risk management strategy was introduced to reduce fraud and corruption. A new model to determine employer assessment, whereby premiums would be determined on the number of accidents and claims, was to be introduced. Better communication strategies were to be introduced. Members asked whether the Compensation Fund had improved from the previous year. Members asked several questions about the Siemens systems, how the Fund was advising clients of their claims, and how this would be improved. Further questions related to the current status of the temporary employees, the amendments proposed to the Act, the reporting structure and whether there should not be an independent Chairperson. Members asked for further clarity on figures and the companies who were registered and paying, clarity on the performance appraisal process and the trade union involvement with employers, as also the time frames for clearing backlogs.

The Unemployment Insurance Fund (UIF) aimed to ease poverty to all workers who qualified by providing short term insurance. It would be decentralising the processing centres, and was aiming to have 76 centres. Its strategic objectives included reintegrating employees back to the labour market, investing in job creation, restructuring the benefits cover and increase its revenue.
UIF aimed at re-integrating the employee back into the labour market and improve the quality of benefits. A risk management strategy was implemented so as to combat corruption and improve detection.
To improve the efficiency of the Fund management training, improving retention system and developing internal ICT capacity needed to be done. Claims were to be paid in 5 weeks and a U-filling system was implemented and the target for the forthcoming period was to increase usage by 20%. The achievements were outlined, and an indication of the claims received and paid was given. The advertising and advocacy drive had been successful. The main challenge was the increase in claims, due to the current economic recession, and the need for improvement in service delivery. Members asked the UIF about the increase of assets, why claims were not made, and suggested that UIF should include taxi drivers as well as operators, and should publicise the work it had done for the taxi industry in the media. Questions were asked about the reach of the Fund, the position of domestic workers, and what would be done to assist employees who resigned because of unbearable working conditions.

The Commission for Conciliation, Mediation and Arbitration (CCMA)described its governance issues and set out the former and new strategies that had been formulated. The balanced scorecard for deliverables was explained. It was noted that CCMA aimed to settle 70% of all disputes at conciliation phase, that all conciliations would be done within 30 days, and there were no late awards. There had been improvements in operational efficiency. CCMA had responded to the global economic crisis through participating in training layoff schemes, reversing of forced retrenchment and saving of jobs. The caseload had increased to 1.5 million cases in 2009/10 and CCMA would require more funding to cope with this. Members asked about the minimizing of arbitration awards and the time taken for awards.
National Economic Development and Labour Council (NEDLAC) noted that it was based in Gauteng only, and described its vision, mission, mandate and how it operated. The labour policy workstream, development policy work stream and the public finance and monetary work stream were described. Nedlac also set out issues around communication. It was involved with addressing the challenges of labour broking and the decent work programme. Members asked why Nedlac had been dealing with labour broking through other channels, as it seemed that the Committee and Nedlac were replicating each other’s work, and stressed that Parliament would need to pass legislation on this issue. Members also asked about Nedlac’s operations at provincial level and the involvement of other bodies.

Meeting report

Compensation Fund Strategic Plan Presentation
Mr Shadrack Mkhonto, Commissioner, The Compensation Fund, informed the Committee that the entity derived its mandate from the Compensation Fund Act. The purpose of the Compensation Fund (the Fund)  was to pay compensation for death or disability caused by occupational hazards suffered by employees. The reporting framework consisted of the Minister of Labour, who had Executive authority, and the Director General of the Department of Labour, who was the accounting officer. The Minister had appointed the Commissioner as Chairperson of the Compensation Board. The audit Committee consisted of independent members and a representative from the board.

The Compensation Fund`s strategic objectives for the next period were to be efficient when paying out claims, to re-engineer the Fund, to raise awareness through education about the services. It also wished to engage in organisational transformation and restructuring, improve its image, be financially viable and increase investment returns.

One of the challenges faced by the Compensation Fund was the failure to pay claims timeously. The current year’s objective was to pay the claims within 90 days.  On 1 April a new claims management system would be implemented and measures were in place to reduce turnaround time. With time, the new system would be able to reduce the payment periods to 30 days.

He noted that the Fund paid for medical accounts and compensation for disablement. There were no further initiatives to follow up on workers post-injury. The process of business needed to be re-engineered and benchmarked with other countries, so as to reintegrate the employees back to employment. It was noted that the Compensation Fund participated in the social security reform by contributing input into the industry process. The projects that it intended to undertake included training shop stewards on occupational health and safety and educating the workforce on the role of the Compensation Fund. It also intended to strengthen the relationship with stakeholders.

To develop human resource capital, the culture of the organization needed to be changed, the recruitment and retention system had to be improved and there was a need to have monthly performance appraisals.  A workplace skills plan would be developed. A new risk management strategy was in place in order to reduce incidents of fraud and corruption that existed within the organisation. A new security monitoring system was introduced so as to monitor the attendance and movement of staff.

A new model would be introduced to help determine employer assessment and premiums to be paid. During the period 2010 to 2011 consultation and advocacy of the new model would be done. Premiums were to be determined by the number of accidents and claims made, meaning those with less exposure to diseases and injuries paid less premiums.

A communications manager was appointed to implement the communication strategy in the forthcoming period. There was a plan to change the Compensation Fund’s public image through education of employers and service providers about the submission of claims electronically. A client’s satisfaction survey was to be done so as to understand the client’s need and identify areas where they were lacking.

One of the aims of the fund was to make it financially viable and sound. It anticipated that the new premium model and education of employees to register their employees would increase revenue collection by 5%. from the R4 billion collected from the previous year. Investments returns were to be increased by increasing the All Share Index by +3.

The challenges noted were delays and non-reporting of incidents, the human resource capacity, and the backlog that had to be processed using the manual system.

Department of Labour Unemployment Insurance Fund Presentation
Mr Boas Seruwe, Unemployment Insurance Commissioner, noted that the Unemployment Insurance Fund (UIF) was mandated by the Unemployment Insurance Act. This gave the UIF the power to register employers and employees in South Africa. Its vision was to ease poverty to all workers who qualified, by providing short term insurance. It aimed to render accessible services by decentralising the processing centres. Currently there were 57 centres and in the next financial year the target was 76.

The strategic objectives were to re-integrate the employees into the labour market, invest in job creation, restructure the benefits cover and increase revenue. It also aimed to improve the quality of benefits. A risk management strategy was implemented so as to combat corruption and improve detection.

It was recognised that in order to improve the efficiency of the Fund management training, improving retention systems and developing internal ICT capacity needed to be done. Claims were to be paid in 5 weeks and a U-filing system was implemented. The target for the forthcoming period was to increase usage by 20%.
The achievements included the registration of 800 taxi operators, R2 billion being donated to the Independent Development Corporation (IDC) for job creation, appreciation of the funds, which enabled UIF to have adequate reserves and the 97% approval rate of claims received. UIF had received 746 000 claims and 726 000 had been approved. The advertising and advocacy drive was successful and would be continued, with a target of reaching 15 million people.

The main challenge faced by the UIF was the increase in claims – which was a R1.8 billion increase compared to last year, largely due to the current economic recession. Service delivery remained another challenge.

Mr I Ollis (DA) commended both Commissioners on their presentations. He expressed concerns about UIF`s total value of assets that had increased by almost R10 billion in one year, yet in the same year 1 million jobs had been lost. He asked why 900 000 people had not made any claims. This was disturbing and was a sign that employees were not aware of the existence of the UIF, or how to make a claim. This seemed to him to reveal that in fact the advertising campaigns were ineffective.

Mr Seruwe replied that the assets had increased because of the investment strategy, which yielded R4 billion from interest in investments. The remainder of the increase came from contributions and compound interest. He explained that the report indicated that almost r800 000 of the R900 000 had been paid and the discrepancy came from those that did not qualify for the fund, such as those who earned commission or who worked for less than 24 hours a week.

Mr Ollis said that the Compensation Fund had adequately dealt with corporate governance. He asked whether the Commissioner had managed to restore order, because the previous Parliament expressed that there was ‘crisis’ in the entity. At the last meeting the Committee had been informed that the Siemens system would be done away with, and a new system installed that would solve the problems. He wanted to know if this had been done. He also noted that this entity seemed to have a problem communicating to clients informing them of the progress of their claims, as was evidenced by the complaints received, and he wanted to know what was being done to address this problem.

Mr Mkhonto said that the Fund’s focus was on the finance side first, as it needed immediate attention, and the claims would be dealt with in the forthcoming period. The two issues that needed to be dealt with were the payment of compensation and medical accounts.

Mr Mkhonto clarified that the Fund had a ten-year contract with Siemens and had acquired software from Rand Mutual Assurance, on which Siemens was running the IT infrastructure.

He acknowledged that the communication was poor and that measures were being implemented so as to deal with the issue. The new system would ensure that the claims were processed in once place and clients would be informed of the results of their claims in a short period of time. He said the language of communication to clients would be simplified.

Mr M Nyekembe (ANC) praised the Compensation Fund for decentralising of funding to the provinces. He asked why the temporary workers had not been converted to permanent employees. The presentation did not specify which areas of the Act would be amended and the areas it addressed.

Mr Mkhonto said that the Compensation Fund had absorbed 340 contract workers and they were considered first when opportunities arose. Currently 72 had been recruited.

Mr Nyekembe thanked UIF for registering the 800 taxi operators but asked that the UIF should include taxi drivers as well and engage with the Department of Transport.

Mr Seruwe agreed that UIF needed to engage with the Department of Transport.

Ms L Mathubela Mashele (ANC) asked whether Siemens had met its contractual obligations and if the problems on the old system had been solved. She questioned the reporting structure of the Compensation Fund and said the Board should have appointed an independent Chairperson. However, she was happy that some progress was being made.

Mr Mkhonto said the Compensation Fund was having monthly meetings with Siemens and was also evaluating their performance before payments were made. Siemens was not responsible for the compensation for disablement because it was run by the new system. On the issue of the Chairing of the Board, he said that the Board had looked into the issue and would consult the Minister. However his appointment as Chairperson was in line with legislation.

Ms Mathubela Mashele said she appreciated the work that the UIF had done for the taxi industry, but said UIF should publicise through the media, so that the taxi industry would see the benefits. She suggested that it should engage with the Department of Transport and South African Revenue Service (SARS).

Mr Seruwe said that the adverts would focus on the benefits of the UIF so as to encourage people.

Ms A Rantsolase (ANC) noted that assessment was still a challenge for the Compensation Fund and suggested that the assessment and payment should be linked. She said the presentation lacked clarity in terms of giving figures and details of which companies were paying and which were not. She would have liked to have heard more about the history of the Fund, to indicate how far it had come.

Mr Mkhonto said that he would provide the information requested in future. Currently there were 380 224 companies registered in the system, of whom 358 000 were paying. The remaining companies had closed down or laid off employees.

Ms Rantsolase asked Mr Seruwe if UIF covered employees who had retired, saying that the legislation was not clear in that regard, and whether he had data of the number of people that had retired. She questioned the accountability of the Chairperson/Commissioner and said that it was a conflict of interest. She asked whether domestic workers were protected by the fund.

Mr Seruwe replied that UIF only covered people who were able and available to work, and as such those that had retired did not qualify. He added that the UIF had considered the resignation clause. The research had indicated that in 10 years the surplus of the Fund would go down and therefore resignation was not a viable option. Domestic workers who resigned were not covered unless the employer died, in which case UIF would pay the worker.

Mr Nyekembe asked the UIF how they dealt with the situation of an employee resigning because of unbearable conditions in the workplace.
Mr Seruwe said these cases would only be considered if the client provided an award from the CCMA, so that the case could be treated as dismissal or retrenchment.

The Chairperson asked Mr Mkhonto to explain the performance appraisal process and the capacity of involvement of trade unions with employers. She asked for an explanation on the massive decrease of administration expenditure from R247 million to R24 million, and how they plan to communicate with employers in their communication strategy. She asked for clarity on when the 6 month period of clearing the backlogs would begin.

Mr Mkhonto replied that the education of employers would be done through the distribution of booklets, which it was hoped that employers would give their workers so as to empower them. The Compensation Fund would also broadcast on radio and advertise on television. He said the performance appraisal system was governed by the public service framework, and the Director General had introduced a monthly basis system. The trade unions sat in Executive Committee meetings so as to foster transparency and improve co-operative relationships. He explained that the R247 million was capital expenditure that was needed for repairs and had been over budgeted.

Commission for Conciliation, Mediation and Arbitration (CCMA) Briefing
Ms Nerine Khan, Director,  CCMA briefly spoke about corporate governance and how the CCMA was governed. She mentioned the Tsoso strategy of 2007 to 2010, and touched on the balanced scorecard that was meant to measure the deliverables. The CCMA aimed to settle 70% of all disputes at conciliation phase. All conciliations would be done within 30 days and there were no late awards. On operational efficiencies, the year on year comparison resolving cases on time had shown improvement.

She then went on to speak about new Mvela Strategy, which was set to replace the previous strategy and outlined its vision, mission, values, functional purposes, and discretionary functions (see attached presentation). The users of the CCMA, and stakeholders, were the key components for the strategy.

Ms Khan highlighted the goals, objectives and the key performance areas. The CCMA response to global economic crisis was the training layoff schemes and the reversing of forced retrenchment and saving of jobs.

Ms Khan tabled the budget and reported that the caseload had increased from 900 000 in 2004/05 to 1.5 million in 2009/10. It therefore became clear that the CCMA would require more funds to cope with this increased caseload.

Mr Nyekembe enquired about the objective of minimising arbitration awards    

Ms Khan replied that the CCMA had been striving to resolve 70% of the cases at the conciliation phase in 2010. There would be material reduction in the CCMA cases referred to the labour court. All conciliations would be conducted within the statutory time frame of 30 days. She emphasised that the CCMA was aiming not to have any late awards by 2010.

National Economic Development and Labour Council (NEDLAC) briefing
Mr Herbert Mkhize, Executive Director, NEDLAC, mentioned that Nedlac was based only in Gauteng without provincial offices. He then spoke about the vision, mission, mandate and modus operandi of the Council and (see attached presentation for details). He went on to speak about the labour market policy work stream, the development policy work stream and the public finance and monetary work stream. Nedlac work on communication included operating through publications, website and public information. He said that Nedlac was also involved with other programmes such as addressing the challenges of labour broking and the decent work programme.

Ms Makhubela-Mashele mentioned that the business fraternity had complained, during the public hearings on labour brokers, that Nedlac had already dealt with labour broking through existing channels. The Committee appeared to be replicating the work done by Nedlac. She emphasised that the role of Parliament was to enact legislation.

Mr Mkhize replied that the Nedlac had tried to use existing legislation to deal with the problems of labour brokers. It later became clear that the labour broking was infiltrating the whole market and was entwined with casual labour practices. Nedlac had been dealing with the problem long before the Committee initiated its public hearings. Nedlac was not trying to undermine the work of the Committee in any manner. He mentioned that in the past 15 years the Parliament had only initiated hearings on policy issues only twice; once in connection with the policy on the National Youth Commission, and once in relation to the labour broking.

Mr Nyekembe enquired about Nedlac activities at a  provincial level. He mentioned that National Union of Metal Workers in South Africa had initiated a Provincial Jobs Conference to address issues peculiar to provinces.

Mr Mkhize replied that different provinces had different social dialogue bodies.  The Western Cape, Mpumalanga, KwaZulu-Natal and Gauteng had such structures, but they were not initiated by Nedlac 

The Chairperson thanked the two entities and pledged the Committee’s support to their endeavours.

The meeting was adjourned.


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