Labour Laws Amendment Bill; Nedlac UIF proposals: Impact Assessment Report by Department of Labour

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Employment and Labour

17 August 2016
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Department of Labour gave its view of the private member’s bill, Labour Laws Amendment Bill PMB6-2015, introduced by Ms Cheryllyn Dudley MP. It noted that the Unemployment Insurance Fund (UIF) currently has an accumulated surplus of about R120 billion. The Unemployment Insurance Amendment Bill [B25-2015] currently before the National Council of Provinces, aims to extend unemployment benefits from eight months to 12 months, provide cover for scholars undergoing training and for public servants, and increase maternity benefits. The Department told the Committee there had been Nedlac proposals and requests that informal and self-employed workers be provided unemployment insurance, as well as those who resigned and had no alternative employment. However the Department is not keen to adopt these proposals immediately, without first investigating their cost implications. Nedlac had mandated it to evaluate these proposals 18 months after the promulgation of the Unemployment Insurance Amendment Bill. This time has already lapsed because of the delays in Parliament in dealing with the bill, and Nedlac has agreed the Department should begin looking into these proposals. Including the informal sector and the self-employed would place a strain on the Fund. It also raises the problem of defining when a person in the informal sector became unemployed. On paternity leave, which is another amendment proposal from Nedlac, DOL said it would be affordable if the informal sector was not included in the Fund. For those who had resigned, providing cover for them would have cost implications and there was the risk of benefit payments exceeding accrued income. For this to be implemented, the income replacement rate might have to be lowered. Further DOL would not want to extend the benefits, only to have to remove them later if the Fund could not afford these. People would then accuse the Department of “playing with their emotions”. The DOL said those working in the informal sector were vulnerable and the government wanted to extend social protection to them.

Some Members were opposed to benefits being extended to the informal sector, and warned of the consequences since there was no accurate assessment of the number of people involved. The Committee was of the opinion that the Committee take a proper look at the proposed amendments before taking a definite position on the private member’s bill and the Nedlac proposals.

Meeting report

Opening comments
The Chairperson said it was important for the Committee to address all the issues which were brought up during their oversight visits before the end of the current parliamentary year. She mentioned the case of Mpumalanga and the legality of the workers working on the farms there. The Department of Home Affairs (DHA) had been made aware of this and there was an outstanding report from DHA on that which would be presented to them. The Eastern Cape was also visited and that report is pending. The same applies to the Western Cape. The Labour Laws Amendment Bill [PMB6-2015] before the Committee is a private member’s bill and everything will be done to ensure it is attended to properly. The DG and Nedlac had been asked to send a report to the Committee on the national minimum wage as there were a lot of reports in the media about it.

Presentation of the Department of Labour
Mr Thembinkosi Mkalipi, Chief Director: Labour Relations, outlined proposals they had received from Nedlac as well as those in the Labour Laws Amendment Private Member’s Bill [PMB6-2015] before the Committee and dealt with the affordability of these proposals and their effect on the Unemployment Insurance Fund.

In the Nedlac negotiations on the Unemployment Insurance Amendment Bill [B25-2015] which is currently before the NCOP, it was agreed to consider further amendments to the Unemployment Insurance Act, 18 months after the promulgation of this Bill. This time has lapsed because of delays in Parliament dealing with the Bill, and Nedlac has agreed the department should begin looking into the proposals. The proposed Nedlac amendments include:
• Short-time employment.
• Fixed term and seasonal employment. This covers employees who work for more than 24 hours per month.
• Informally and self-employed. This new proposal is currently under consideration. The actuaries have conducted a research however it was found that there is little comprehensive data to provide an accurate outcome.
• Parental benefits / Paternity leave. The proposal was contained in the Private Member’s Bill before this Committee. In the Private Member’s Bill, adoption and surrogacy are also mentioned and an evaluation of this proposed amendment showed that this could be affordable if implemented. The paternity leave also falls under this category. The amendments proposed in the Private Member’s Bill are affordable and could be implemented.
• Resignation. In the original bill, there was no provision for people who resigned from their jobs to have access to the UIF. The new proposal seeks to change this and allow people who resign from their job access to the UIF. The actuaries have conducted a research however inputs from management are still to be incorporated by the actuaries.

The Nedlac amendment about payment of benefits to persons who had resigned, if included, might overrun the income coming into the UIF and become too costly for the UIF.

The evaluation outcomes had shown that the Fund was in a position to cover all amendments in the current Bill if implemented. The proposals on resignation appeared to be more expensive. The proposed amendments on informal employment would be discussed later at Nedlac. It was recommended that the proposed amendments be ranked and rationalised for implementation and the implementations be staggered due to the financial implications.

DOL Director General, Mr Thobile Lamati, said that the actuaries had made a recommendation that in a worst case scenario, the Fund may look at the possibility of basing the benefits at 60% of the income replacement rate rather than the 100% for the first 238 days and using the fixed 20% of the income replacement rate. He was of the opinion the Department would not want to extend the benefits only to remove them later if the Fund could not afford them. He stated this would make the people accuse the Department of “playing with their emotions”.

Mr M Bagraim (DA) thanked the Department for the summarized report. He was of the opinion it was dangerous to include the informal sector in the Bill since the size of the sector could not be calculated and it was not possible to determine the number of people in that sector. Talking about Part 11 of the amendments, he wanted to know how this will affect the other proposed amendments if it is taken out entirely. On resignations, he was of the view that it is important to encourage those who have resigned to receive their UIF benefits since they had contributed over a period of time.

Ms F Loliwe (ANC) was of the opinion that there were areas that needed further interrogation but it was understood that some of the items discussed were newly introduced. She therefore appealed to the Committee to take note of the presentation and afford themselves the opportunity to look further into it and consider all the legal aspects.

Mr D America (DA) agreed with Ms Loliwe on further deliberation of the impact assessment report. He referred to Part 12 which discussed resignations, he was not sure if it applied to constructive dismissals. On the informal sector, he asked how that was quantified since some self-employed professionals are also classified to be in the informal sector. It is also important to consider reducing the UIF contributions made by people. He stated it is important to provide people who are out of employment with the maximum benefits.

Ms S van Schalkwyk (ANC) stated her positions aligned with those of the previous speakers.

Ms P Mantashe (ANC) also agreed with all the previous speakers. She expressed concern about Part 12 which deals with the payment of people who have resigned. She wanted to know why the Department said it would be expensive to pay benefits to people who had contributed to the Fund yet it found it easy to be able to pay benefits to people in the informal sector who perhaps had never contributed to the Fund.

Mr T Rawula (EFF) wanted more emphasis on the principles as regards Part 10 and 12 of the proposals. He agreed that there should be an integration of the informal sector into the mainstream economy but there has to be a way of quantifying this sector. He also stated that people who have contributed to the Fund must be allowed access to the Fund.

Mr Bagraim asked if the informal sector referred to employers. If this was the case, then this destroys the whole concept of the UIF.

The Chairperson agreed with Members that the Committee needs time to look at the presentation properly before taking a definite position on the proposed amendments. She told the Department they have an opportunity to go back and work on all the clarity seeking questions raised by Members.

Mr Lamati agreed that the idea was to integrate the informal sector into the formal sector since most of the workers in that sector are very vulnerable. There are incentives from government to ensure that the workers in that sector work under suitable conditions. This is the basis for trying to include workers in this sector in the UIF and contributions are expected to be made towards the Fund. On constructive dismissal, he said that this issue had already been looked at and it was operational.

The meeting was adjourned.

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