South African Post Office (SAPO) strategy on use of labour brokers

Meeting report

The Committee elected Mr G Schneemann (ANC) as Acting Chairperson as Mr Kholwane was ill. Mr Schneemann thanked the Committee for giving him the opportunity to act as Chairperson. He wished Mr Kholwane a speedy recovery. He noted that the week had been declared a national week of mourning because of the tragic events at the Lonmin mine, and so he asked for a moment’s silence.

South African Post Office (SAPO) on the use of labour brokers
The Chairperson, Mr George Mothema, introduced the members of the Board who were present and the Acting CEO, Mr Molefe Mathibe. Mr Mathibe introduced his Executive Team.

Mr Mathema introduced the presentation, saying labour brokers were a highly topical issue and there had recently been a strike because of these issues. The Committee had raised a number of concerns and requested that SAPO come to them with a strategy for better standards of employment. He gave an overview of what the presentation would entail, emphasising that they had developed a model to deal with these labour issues but were still in the process of engaging with stakeholders such as labour and Parliament. They were eager to hear the Committee’s views so that they could be incorporated.

Ms Nomathemba Kela, SAPO Board Member, gave an overview of the purpose of the review on the use of labour brokers. She said that the issue affected 7 500 employees, and that the Board was aware that they had legitimate concerns. The recent strike was resolved at an operational level, and the Board was now taking a long-term view in trying to find sustainable solutions. A service provider was appointed to do a rapid assessment of alternative flexible labour options. They worked with management, and their scope of work was to review the current model, to observe alternate models, to consider cost, social and other implications, to recommend the best model, and to propose a strategy for implementation. The report was complete and it had been presented to the Board, which was currently reviewing it. This process needed to be finalised as soon as possible. Ms Kela encouraged the Committee to give feedback and to support the process.

The Acting CEO, Mr Molefe Mathibe, discussed the strategic and business requirements. The daily fluctuating volumes exceeded crewed volumes, requiring daily alignment of resources. Seasonal volumes and workload trends repeating themselves monthly or quarterly required alignment over stretched periods. Flexible and extended hours were worked by branches for specific activities such as pension pay-outs. Strategic projects which were part of the SA Post Office mandate such as the address expansion programme required once-off large numbers of staff for a limited period. In addition, retail network rollouts which required permanent staff in newly rolled out branches had to be taken into account.

To meet these needs there were various forms of workforce. Permanent employees, who worked full time permanently; permanent part timers, who worked less than 8 hours a day on a permanent basis; and flexible labour. Flexible labour consisted of fixed term contractors, sometimes referred to as S32s because of the form number on which their details were recorded; owner drivers, who were employed during high volume times using their own transport for deliveries and collections; independent agents, who were contracted from within their communities primarily to service rural and underdeveloped areas in both Mail and Consumer services; and casuals, who were employed via a labour broker on a temporary basis due to seasonal trends, absenteeism, or other reasons.

The complexity of the labour broking issue at SAPO was exacerbated by the involvement of three parties amidst the changing legislative landscape. These parties were SAPO itself, the labour broker and the casual staff. SAPO was the client of the labour broker and transacted with it on the basis of a commercial contract. The labour broker fell outside of the remit of labour law and was not properly regulated. The result of the situation was that the casual staff employed by the labour had no employment security and no parity with salaries of the SAPO staff. They worked long periods of time under labour brokers for SAPO and were not protected by the Labour Relations Act (LRA).

In total, SAPO had 12 979 permanent staff, 721 S32 staff, and 7 536 temporary staff. This included 1 250 temporary staff employed in retail and 6 150 employed in mail services. SAPO had worked out optimal ratios of permanent staff to flexible staff for each of their three divisions, based on their differing operational requirements. In mail processing the optimal balance was 50% permanent staff, 20% permanent part time, and 30% flexible staff. They had achieved this balance already. In retail, the optimal balance was 70% permanent and 30% flexible, this had also been completed. Mail delivery was the only area where the balance was still being addressed. The optimal division was 70% permanent and 30% flexible, but there was only 63% permanent staff at the time. SAPO needed to get to these balanced numbers while addressing the issue of how to employ flexible labour.

Mr Mathibe outlined the concerns that had been raised within SAPO and the corrective actions which had been proposed. There was an inability to provide for succession planning, which SAPO intended to counter by using flexible staff as a pipeline for future recruitment and placement purposes. This would also rectify the problem that trained staff were being lost and therefore there was a loss of benefit of the training effort. Using flexible staff as a pipeline for recruitment would mean that there would be a pool of trained workers for future employment.

SAPO was to implement equitable pay and benefits for equal work. Due to the alleged unfair labour practices by the labour broking firms associated with SAPO, the contracts had been reviewed and it was decided that they would no longer use brokers. With regard to the loss of benefit-of-training effort, SAPO would now be able to create a pool of trained workers for future employment. There had been a lack of consistent branding and corporate clothing, SAPO now intended to provide all staff with a uniform. A further problem was that discipline had been outside of SAPO’s control. For example during the strike, workers were in fact striking against the labour broking company, but this had affected SAPO. By moving away from labour brokers, SAPO hoped to have discipline within its own control.

To find the way forward, SAPO had researched various flexible labour models which were implemented in businesses. Those models used in State Owned Enterprises, banking and retailing had been studied. It was found that there was no single best practice flexible labour model. Each company adopted a model suitable to their operational needs. There was therefore nothing to copy directly because of the diverse entities in SAPO. SAPO had therefore adopted a model that they felt could be defended from a number of strategic positions.

Five categories of criteria had been identified to assess the various possible models. These were strategic fit, or how the model would support SAPO’s current and future business growth; financial viability, or how the model would impact on SAPO’s financial performance in the short and long term; organisational efficiency, or how the model would improve SAPO’s operational efficiency going forward; legislative compliance, as it was important for the model to comply with current labour legislation and align with potential future changes; and finally societal impact, or how the model would affect stakeholder expectations, including staff, unions, customers and government.

Three possible models had been identified. These included the current outsourcing model, a co-sourcing model which would include a strategic partnership with a staff management company, and in-sourcing, which would require an internal SAPO contracting unit. The five criteria were applied to each model for evaluation. The result was that in-sourcing was the best model. It offered a good strategic fit, high levels of efficiency due to direct management of training and deployment, high compliance to future legislation and the highest levels of social impact. It would however involve medium to higher cost as SAPO would have to manage staff in house.

The financial implications would mean an increase in the cost of flexible staff from the current R280 million per annum to R322 million. The rationale for this included equal pay for equal work, creating decent working conditions, providing corporate clothing, providing adequate training, and creating a pipeline for future employment.

Mr Mathibe explained the rationale for the increase. SAPO used to pay what the labour brokers asked for and did not concern themselves with how much the casual employees were being paid by the brokers, but they were now committed to the policy of equal pay for equal work. To pay the casual workers directly at the same rate as permanent staff would cost more than what was being paid to the labour brokers. Working conditions should be improved so that they were similar for permanent and temporary staff. Corporate clothing came at a cost but added value because staff should be identifiable as belonging to the organisation. More would have to be spent on training, but this would be beneficial to SAPO in the long run. When SAPO was in need of permanent employees, they would not have to provide further training as they would hire from the pool of trained casual workers. They would therefore have created a pipeline for the organisation to function properly. The difference in value was worth it for benefits SAPO was going to accrue.

A rapid schedule for implementation had been worked out. The labour contracts would be terminated by the second quarter of 2012. Flexible staff would be employed directly for six months by the third quarter of 2012, and SAPO would commence with the implementation of the model in the first quarter of 2013. 

Discussion
Ms Newhoudt-Druchen thanked SAPO for their presentation. She asked for clarity on the various forms of workforce. There were four types of flexible labour – fixed term contractors, owner drivers, individual agents and casual workers. She asked if it was only causal workers who were employed through labour brokers and if it was only this category that was not receiving the benefits of full employment. Were the other three getting benefits?

Ms Newhoudt-Druchen asked how SAPO explained to the workers that they were part of the pool of trained workers for future employment. What would it actually mean for them to be in that pool?

Mr Mathibe responded that every single person employed by SAPO would receive appropriate training for the work they had to do. This was essential to ensure efficiency of the organisation.

Ms Newhoudt-Druchen asked what S32 was.

Mr Nhlamulo Ndhlela, SAPO Sub-Committee Chairperson, responded that S32 referred to fixed term contractors.

Ms Newhoudt-Druchen asked if SAPO had the capacity to directly employ staff. Under the current system the labour brokers would have done the scheduling and organised the casual workers. Did SAPO have the capacity to take over this role?

Mr Ndhlela responded that the scheduling had always been done by SAPO, and sourcing was the area where increased capacity would be needed. The cost of this had been included in the R322 million.

Ms Newhoudt-Druchen asked if SAPO’s recruitment would include people with disabilities.

Mr Mathibe responded that SAPO had always and would continue to focus on recruiting people with disabilities into appropriate jobs.

Mr Maphutha Diaz, SAPO Group Executive: Human Resources, added that this was policy and SAPO continually focused on it.

Ms M Lesame (ANC) said she appreciated the presentation and SAPO’s promise for decent jobs. She asked if the various catagories of staff were managed by the same team.

Mr Mathibe responded that one team managed all employees.

Ms Lesame asked if SAPO was intending to absorb the ‘warm bodies’ from the employment agencies.

Mr Mathibe responded that SAPO would employ those already in the system, which would ensure continuity of work.

Ms Lesame asked if staff working part time were allowed to moonlight.

Mr Mathibe responded that casual workers were not forced to work for SAPO alone even though they were working shifts as short as two hours. The benefit of the co-sourcing model was that SAPO could potentially partner with a company like Telkom, which did similar work, and could share human resources. People would then be employed full time, but would divide this between SAPO and Telkom.

Ms Lesame asked what would happen to staff during the transition from one model to the next. Would they still be employed by the labour brokers or would they be employed by SAPO? She asked what the legal implications of the transition were.

Mr Janras Kotze, Head of Mail, responded that during implementation they would optimise numbers and types of individuals needed on a permanent basis. In anticipation of the new labour law amendments, SAPO would only be employing casual labour for six months with the expectation that they would have to make provision for new amendments. Mr Mathibe added that all staff would be working for SAPO. There would not be any sourcing of labour through labour brokers, once implemented.

Ms M Shin (DA) asked how many people were employed through the labour broker system and how many would be employed in the new system. Would anyone fall out through the implementation of the system?

Mr Mathibe responded that the recruitment of staff would be guided by the optimum balance between permanent and temporary staff for each of the sectors. Mail delivery’s optimum percentage of permanent staff was 70% and it currently had 63%. It therefore had an extra 7% temporary staff. Possibly that 7% would not be employed in the same jobs but would be moved to permanent staff.

Ms Shin asked how much of the R322 million was a once-off cost and how much would be recurring.

Mr Mathibe responded that the figure was an aggregate of once-off and permanent costs, but that they expected it to would be continuous because, for example, every two years they would need to renew the uniform. So while some portions would be once off, such as recruitment costs, 80 to 90% were permanent costs.

Ms Shin asked how temporary staff would be recruited and who would be managing the recruitment. Would they have to pay a commission fee or would they be strictly salaried employees? How would this be monitored?

Mr Mathibe responded that the recruitment of permanent staff would be an internal process. SAPO would effectively no longer recruit permanent staff employees, but would instead promote people from casual labour when eight hour jobs became available. All recruitment would then be for causal labour. There would be no commission as it would all be done internally.

Ms Shinn asked if there would be people left with no income?

Mr Mathibe responded that there would not.

Ms A Muthambi (ANC) said that there had been mention of a service provider. What were the terms and reference of this service provider?

Mr Mathibe responded that SAPO had tried to find a system where it could get an independent view of the different models. The terms of reference for the service provider were to look at the current situation and to look at the different models. The idea was to come to a researched methodology which was presented to the Board. The reason for hiring this service provider was purely to get an independent review.

Ms Muthambi said that she would liked to have seen a cost breakdown. She asked how SAPO had reached the R322 million figure given that the presenter had said they had never worried how the labour brokers were paying the employees.

Mr Mathibe responded that they should have included slides showing cost breakdowns. They would try to send them in. The main costs were overheads, training, improving working conditions, corporate clothing.

Ms Muthambi asked what would happen to the people who were employed by the labour brokers and who had worked for four or five years but did not have any formal qualifications.

Mr Kotze responded that there was more emphasis on the experience the person had had in the Post Office environment. Officially the staff required a Grade 12 certificate, but this had been lowered to take into consideration the current pool. They also allowed staff to do a portfolio of work so that they could give them basic qualifications equivalent to Grade 12.

Ms Muthambi asked for an explanation of the 7% that was being discussed.

Mr Kotze said that the adjustment of proportions in mail delivery was still ongoing. He explained that the ideal ratio for Mail Delivery was 70-30, but that they were currently standing at 63% permanent staff. Therefore 7% of the temporary staff had to be moved into permanent positions. This would be completed in the coming financial year.

Mr Diaz added that the concessions for staff without the necessary qualifications only applied to Mail Services. For staff in retail, qualifications could not be compromised, but for Mail Services they could lower the Grade 12 due to recognition of prior learning.

Ms Muthambi noted that in the 2012 financial year SAPO had reported spending R140 million on training. She asked was the projected amount to be spent on training, again pointing out that a better breakdown of costs was needed. She asked what the financial implications of terminating the labour broker contracts was, and if there was any risk of being sued.

Mr Mathibe replied that they were in a contractual agreement and SAPO had pulled out with the required notice. They had consulted their legal department about this as part of their risk analysis. 

Ms R Morutoa (ANC) asked for an explanation about the time frames, as she was concerned that they were overly ambitious.

Mr Mathibe acknowledged that the plan was very ambitious but was confident that it was feasible. The third part of implementation would be ongoing from third quarter of next year. He would be embarrassed to come back not having met the time frames, but thought that these were feasible.

Ms Morutoa noted that research had been done on the various possible employment models. She asked who was conducting the research.

Mr Mathibe said that an external organisation did the research.

Mr A Steyn (DA) felt that a proper risk assessment had not been done. What were the contractual conditions with the labour brokers that they may be liable for? He found it hard to believe that every single one of the 7 500 people who were employed through labour brokers would be employed directly. It was unlikely that 7 500 people were appointed at any one time, and thus unlikely that they would be needed after the transition. There was a contradiction in that SAPO had presented the in-sourcing model and then said in response to a question that they were still considering co-sourcing. Mr Steyn argued that co-sourcing was the better model due to the short time period that people would be employed for. He pointed out that there was a risk in employing casual labour as they were likely to seek something more permanent and full time. If those people who had been trained then found other employment, then the money invested in training them was lost.

Mr Mathibe said that losing staff was a risk that they had to accept. As they were hiring people on a two or three hour basis then it was an inherent risk. Mr Mathibe said that they would look further at some of the risk areas which had not yet been considered. The ideal model was in-sourcing but there were other areas where co-sourcing might be beneficial. How does one keep people for four hours a week and expect them not to work anywhere else? This was one of the challenges that SAPO was trying to address.

Mr Steyn asked why the cost of employing people directly was more than employing a labour broker. When the Committee spoke to the workers, the impression they had got was that the bulk of the money the Post Office paid went to the labour broker and what filtered down to the employees was much less. Why then would the cost of employment increase when the labour broker was no longer included in the arrangement?

Mr Mathibe explained that they had been paying less to the labour brokers than they had been to their own employees. It was a tender process to secure the contract with the brokers and the competition had brought the price down. To pay workers directly cost more because they would be earning a better wage and because of the extended benefits. The labour brokers had been paying a lot less than SAPO paid its staff.

Mr Steyn said that he suspected that the Post Office did not have the capacity to manage the casual workers. While they might currently do the scheduling, it was the labour broker that coordinated the staff actually knowing when to arrive at work. Did the Post Office really have the capacity to do that?

Mr Steyn noted that SAPO was battling to break even at present, and felt that they were not adequately considering how this would impact on profitability. He suggested that they could be putting an entire entity at risk, which would ultimately mean that all employees’ jobs could be at risk. Again he said that he did not believe that a complete risk analysis had been done.

Mr Mathibe said that they had tried to summarise the cost-benefit impact of this in the presentation, but should have put numbers to the cost benefits. He said that he had spoken to the working conditions, and would speak about the issue of training more clearly. The idea was to give workers a guarantee of the number of hours they would be working for the Post Office.

The Chairperson said that capacity issues had been raised by a number of members. He asked if the Post Office themselves had the names of all the staff members involved. Did they have a database with contact details and addresses already? If part of the budget was to increase the capacity, were those people employed already? He asked how SAPO intended to ensure that nobody fell through the gaps. The manner in which people were currently employed, the number of hours, and so on, would have to continue.

The response was that they did not have a comprehensive database. In some regions they had the staff information, but not in others. They were embarking on a plan to obtain this and had sent out biographical forms to all staff members.

Mr Mathibe said that while they were exploring models it was still necessary to consult. While looking at the models, they had the opportunity to engage with labour and all other stakeholders on what would be the best model to implement. This was why comments from the Committee were welcomed because they could go back and look at these issues.

Ms Kela commented that the current model was not the most appropriate. The ideal one would be in-sourcing, but the second one needed to be looked at seriously. It could be used as an interim model as they organisation moved towards in-sourcing and built capacity. It was subject to consultation, but the idea was not to jump straight to in-sourcing, but to get there through co-sourcing. SAPO was quite aware of the risks, and was looking at whether they had the capacity for this.

Ms Lesoma suggested that SAPO improve on the presentation and then submit a progress report with more details. Ms Kela was contradicting what had been said in the presentation, and she asked which model was going to be used. It was not clear because the more comments the team made, the more they contradicted themselves.

Ms Muthambi felt that SAPO was withholding certain information from the Committee. She commented that it would have been ideal to have a detailed presentation. The Committee was now raising issues which should not need to be raised as they should be in the presentation.

Ms L Van de Merwe (IFP) agreed that there were contradictory statements being made which she found concerning. While the presentation had been geared towards in-sourcing, the comments being made in the discussion suggested that SAPO was still considering various models. Given how soon the date for implementation was, it seemed unlikely that the deadline would be met unless a decision was made quickly.

Ms Shinn asked what the benefit to the customer was of the extra R42 million that was been spent? They needed to make an improvement along the line, to make it worthwhile. She suspected that they had already determined that in-sourcing was the model and were now trying to justify it. There was a predetermined outcome, and they had got the research to support it. She asked if SAPO was open to changing to a different model if that was the outcome of their consultations.

Mr Mothema responded that they would prefer to go with particular model but that the consultation would create flexibility and they were willing to consider other models. Management and the Board would prefer in-sourcing, but they were flexible to hear and consult and then look at the best model to employ. The benefit to the customer was consistency of service. There would be fewer incidents of mistakes or inefficiencies because of new staff who were still being trained or adjusting to the job.

He said that they would improve on the presentation and send it out again to add some of the other information that had been requested so far.

Mr Steyn said that he would like to make a few final comments but did not expect an answer straight away. He did not see the benefit to the customer, as whether casual staff were employed directly or through a broker they would still only be working two or four hour shifts. This would not provide consistency. He said that there was a contradiction. SAPO had indicated that their preferred model was in-sourcing but that they were open to looking at others. However, if they were truly open minded they would not have a preferred model in the first place. The Committee had been promised a report on what happened during the strike and what measures had been taken to avoid a recurrence; he requested that this be provided.

Ms Muthambi re-emphasised that a breakdown of the financial implications would be helpful to the Committee. She also requested that SAPO provide the report that had been done on the appropriateness of the various models.

Mr Mothema responded that he was excited about the robust engagement that had gone on in the meeting. It had given management a lot to think about. He would be happy to provide a copy of the research and this could be circulated within the next week. He also undertook to provide a detailed breakdown of the cost information and the report on the last strike and measures that have been taken since.

Ms Morutoa commented that when bringing a report to Parliament, the Committee should not have to ask for things to be brought in dribs and drabs. Next time, SAPO was expected to bring a comprehensive report.

The Chairperson agreed that it was better to bring too much information than too little. He thanked SAPO for the information given, and said that they had the support of the Committee, but it was important for members to understand everything that was taking place and how it would be rolled out. He hoped that the interactions in the meeting would be of use as SAPO finalised the presentation.

Short listing of candidates for SABC board and ICASA Council
The Chairperson suggested that the rest of the agenda be postponed due to the memorial service taking place to commemorate those killed at the Lonmin mine in Marikana