Compensation Fund Action Plan update; Department of Labour Quarter 2 performance

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Labour

07 December 2016
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Department of Labour briefed the Committee on its action plan for the Compensation Fund and on its second quarterly performance report for the 2016/17 financial year.

The Compensation Fund had developed an action plan which would serve as a blueprint for the service delivery improvement initiatives. Implementation had started on 1 July 2015. The main objectives were to put in place basics that would assist in improving the service delivery performance of the Fund. It was also aimed at restoring its reputation, as there had been negative feedback across the spectrum. Details of a wide range of initiatives adopted after consultation with relevant stakeholders were described.

Members acknowledged that there had been a substantial improvement in the performance of the Department, but asked how it was planning to deal with eradicating the backlog of claims. What was the timeframe for this? What was the strategy to expedite the very slow bulk payment processes in the uMehluko on-line claims management system? Would the Department consider outsourcing in order to catch-up and get to the point of eradicating the backlog? They said it was unclear what had been done in the past six months to get rid of the pile of papers at the Department’s various offices, and a computer system that sometimes went offline. They also wanted to know if the dispensing of chronic medication to clients would be a countrywide exercise, and whether rural clients would also benefit from this.

The Department of Labour (DoL) reported that it had achieved 69% of its targets for the second quarter. The Eastern Cape, KwaZulu-Natal and North West provinces had all achieved a 100% inspection and enforcement performance. In regard to public employment services, the Eastern Cape had been the only province with 100% achievement. The Department had achieved 100% in terms of reporting and detecting irregular, fruitless and wasteful expenditure amounting so far to nearly R170 000. Amendments to the Occupational Health and Safety Act had been delayed due to further consultation requirements by National Treasury, and further engagements between the economic cluster and National Treasury were under way. The Department was committed to improving its performance and service delivery in 2016/17, and monthly monitoring of performance had been instituted.

Members commended the Department for processing invoices within 30 working days, as this was one of the ways of sustaining small businesses and opening up job opportunities. They asked what remedial actions had been taken to deal with the irregular expenditure that had been reported in order to prevent a recurrence of the problem. Training for shop stewards had been a good initiative, but why had there been poor attendance at these workshops?  It was suggested the Department needed to outsource the service needed to handle the backlog in Private Employment Agency (PEA) and Temporary Employment Services (TES) applications, as well as the applications for foreign nationals’ corporate and individual work visas. Concern was expressed that the Department seemed to be setting targets that it would find extremely difficult to achieve. The reality was that there were not enough inspectors within the Department, and there were no mechanisms in place to ascertain whether employers were adhering to the labour laws.  

Meeting report

Compensation Fund: Department of Labour briefing
Mr Thobile Lamati, Director-General (DG), Department of Labour (DoL), said that the Compensation Fund had been receiving a negative spotlight from the media and other key stakeholders due to its service delivery record. In order to restore its reputation and improve the service delivery record, the Fund had developed an action plan which would serve as a blueprint for the service delivery improvement initiatives. The action plan had been developed by the management of the fund in June 2015, and implementation had started on 1 July 2015. The action plan had been submitted to the Standing Committee on Public Accounts in June 2015. It should be highlighted that the action plan was not a replacement for the current strategic plan and annual performance plan of the Fund, but would enhance the pursuit of the objectives as outlined in these documents. The main objectives of the action plan were to put in place basics that would assist in improving the service delivery performance of the Fund, increasing the efficiency of the Fund’s overall operations. The action plan was also aimed at restoring the reputation of the Fund, as there had been negative feedback across the spectrum.

Mr Lamati said progress had been made in financial administration, and this had included the finalisation of the revised Assessment Model document which had already been sent to the Department of Performance, Monitoring and Evaluation (DPME) for the social economic impact assessment system (SEIAS) process. Concurrently a consultation process at the National Economic Development and Labour Council (NEDLAC) had commenced. A position paper had been developed and adopted as an accounting policy for revenue. This was reflected in the annual financial statements of 2015/16. The initial information and communication technology (ICT) intervention to deal with the loading and reduction of assessments had been revised due to further research. An actuarial model was being developed to achieve the same objective. The employer discounts had been calculated and applied against employer accounts, and enhancements on key-offs and batch processing had been completed. The data on the correction of the prior year’s interest and penalties had been extracted and submitted to internal audit for quality assurance prior to implementation. The R62 million out of the R96 million of unclaimed merit rebates had been identified in the SAP collections and disbursements (FS-CD) module, and cleared to employers. The automation of the ability system had been de-scoped due to the decision to re-implement SAP FS-CD.

There had been notable progress in the areas of customer focus and service delivery improvement. These included holding regular monthly meetings with hospitals and other related stakeholders in an effort to improve relations. There were also meetings between the German social accident insurance association, Deutsche Gesetzliche Unfallversicherung (DGUV) and the Compensation Fund in November 2015 to discuss the concept of rehabilitation. The outcome of the resolutions of the meeting would result in a pilot project for rehabilitation. The post traumatic stress disorder panel had already been appointed and had already commenced with work on dealing with cases and developing policies. A chronic medication dispensing service provider had been appointed in the third quarter of the financial year, and was operational. Reorganisation of the query resolutions process had been implemented and the Department was in the process of filling vacant posts in the call centre
 
The Minister had approved the reviewed functional structure to align the core business of registration and benefits under the internal business process, and this was awaiting final consultation with the Department of Public Service and Administration (DPSA) as per the directive before implementation. All nine provinces had been visited, and follow-up visits were taking place monthly to support the decentralisation process and monitor performance. Eight nurses and one doctor had been appointed on a session basis to assist with the adjudication of the medical claims, re-openings and pre-authorisations. In order to pay all the vouchers that were still open during migration from the SAP ICM (Incentive and Commission Management), 2 287 payment distributions (PDs) amounting to R15 928 226, and 382 open voucher TTDs amounting to R2 390 951, were processed and paid. The process to appoint medical service personnel was under way, but not all provinces had been able to attract the required skills. Quality assurance had been carried out and the results had been implemented in order to improve the systems used for processing and paying claims.

There was no suitable service provider. The Fund had investigated the possibility of using the SAP CRM (Customer Relationship Management) system for the legal case management system and no decision had been made as yet, pending the licence renewal.

Mr Lamati said that a skills audit was conducted and a training plan had been developed to implement corrective action where skills gaps had been identified under people management. The provision of support, training and development interventions, coaching and mentoring would be undertaken as part of the implementation of the recommendations of the skills audit project. The change management project had been completed, a report produced and a survival guide for staff with regard to future change interventions had been developed. The performance management policy was being strictly implemented and all staff had performance agreements and were assessed bi-annually, though performance was monitored monthly. The investigations on decentralisation issues had been conducted and corrective action where possible was being implemented.

Discussion
Ms S van Schalkwyk (ANC) said it was clear a lot of work had needed to be done. It was also evident that there had been a substantial improvement in the performance of the Department. How was it planning to deal with eradicating the backlog of claims? What was the timeframe for this? What was the strategy to expedite the very slow bulk payment processes in the uMehluko on-line claims management system? What was the projection that was expected by the end of the financial year? The Department should explain how it managed to have 0% completion under ‘correction of all prior open vouchers.’

Mr M Bagraim (DA) also acknowledged that there had been incremental steps towards improvement, but it was worrying to see that the general improvement had been going very slowly and the problem was mainly due to 20 years of inactivity. It was clear that it would be difficult for the Department to catch up from 20 years of disaster and inactivity. There were thousands of people who had been waiting for more than a decade to receive compensation or any relevant response. He wanted to know if the Department would be considering outsourcing the service from other companies in order to catch-up and get to the point of eradicating the backlog. It would obviously be difficult to have good morale among staff if there was 20 years of disaster or inactivity, as more time was spent trying to resolve the backlog than on processing new claims. The Department would be facing an uphill battle in even trying to focus on the action plan where there was clearly a monumental backlog to be eradicated   

Mr I Ollis (DA) asked if there was a particular reason why people should not be able to claim a total of R62 million out of the R96 million for merit rebates. The assumption that could be made was that perhaps people were not aware that they were entitled to these rebates, or that they had already given up hope on the possibility of getting those funds. It would be important to know why the Department had not been able to adjudicate these post-traumatic stress claims for years. It was unclear as to what had been done by the Department in the past six months to get rid of the pile of papers at various offices, and a computer system that sometimes went offline. 

Ms T Tongwane (ANC) wanted to know if the dispensing of chronic medication to clients would be a countrywide exercise, and whether rural clients would also benefit from this.

Mr Vuyo Mafata, Commissioner, Compensation Fund, responded that the Department had teams working on both the current claims and the old claims, and this was again aimed at eradicating the backlog. The Department did not have a backlog of any claims that had been submitted in about two and half years, except in cases where there was outstanding documentation from either the medical service provider or the client. The Department had been able to reduce the backlog in the medical service significantly. There was indeed a backlog in claims that were dating back to 20 years ago, and this was usually in cases where liability had not been accepted. The Department had set itself a target by the end of the financial year to finalise all those claims that had already been extracted -- and there was a total of about 355 000 claims that had been extracted. It must be made clear that the Department would not accept liability for all the claims that had been extracted.

The Chairperson pointed out that the Department was not only dealing with claims from the new government, but also from the old apartheid government.

Mr Mafata said that in relation to the matter of bulk payment processes, there were a number of plans that the Department was planning to achieve in this regard, and one was to improve the infrastructure as there were lots of complaints that the system of processing claims was very slow. There was also an integration of uMehluko with the SAP system, which was one of the projects that were still being undertaken but had not been finalised. There was a process to play claims, but the Department wanted to ensure that the whole system was efficient and effective. Another issue that was slowing down the process of payment was when there was a litigation case -- there was no functional system in place that was able to immediately process claims that were coming from court cases without compromising the pace of payment of claims. The Department was always compelled to comply with the court order in cases where there was a pending litigation, and this was also slowing the processing of claims.

The Chairperson asked that the Committee be furnished with a report on those individuals that had not been given compensation from the Fund prior to 1994. It must be clear to the Committee that the backlog was not only on those claims from 1994 onwards, but also from the apartheid regime.

Mr Mafata promised that the Committee would be provided with the report as requested by the Chairperson.

In relation to the matter of open vouchers, the Department had identified that there were about 3 000 open vouchers in the system on permanent disability that had been left unpaid and unattended to, and the Department had already dealt with 2 287 of them. There were 400 open vouchers that had not been handled for those with temporary disability, as the Department had done only 382. There was on-going work to finalise the rest of the open vouchers. The Department had been finding it difficult to trace some of the clients because some of the contact details in the system were not updated or valid. It would appoint a tracing agency that would assist in tracing some of the clients in order to get the latest banking and contact details so as to pay the vouchers.

Mr Mafata said that there was scope for the private sector to assist the Fund in the eradication of the backlog. The private sector had been helpful in clearing the backlog in the dispensing of the chronic medication. The system that was being used to process the claims had been procured from the private sector, and therefore there was space for collaboration with it. There were doctors that were not necessarily deployed permanently by the Fund, and these doctors were normally coming in to assist whenever there was a backlog on adjudications and the approval of claims. There were currently about six doctors on staff that had been appointed at head office as well as the provinces, and the Fund had recently finalised the appointment of four additional doctors. The nurses and doctors were not always on site, but they did come and assist whenever when there was a need for additional resources. This was once again another form of collaboration between the Department and the private sector.

Mr Mafata clarified that the outstanding rebates were also due to employers, and they dated back to a number of years. There had been several attempts to try and reach employers directly for them to be able to claim these rebates. The Fund had now published these rebates, as well as a list of these employers, in government gazettes and newspapers, and sufficient time had been given for them to make a claim. The piles of papers in different offices was as a result of the backlog that dated back to the past, as there had been no automated system then and a lot of claims had been dealt with on the basis of paper. There would be a need to go back to those papers and process those claims, and there was a process to scan and index the paper claims. There was also a team that aimed to ensure that the papers were captured electronically.

The dispensing of the chronic medication was a nationwide project and the biggest beneficiaries would be those in small towns and rural areas, as there were few pharmacies in these areas. 

The Chairperson asked if it was possible to perform an audit of the manual files in various offices in order to establish the exact number of files that still needed to be processed, and those that had been completed. There should be a special team that would specifically focus on conducting an audit of the manual files.

Mr Mafati promised to provide the Committee with such information, as it was important to know the exact number of manual files to be processed. There was on-going work within the Department to upgrade its data centre, and it would be moving to a new data centre by the end of the current financial year. This was likely to improve the system of the Department across the spectrum. 

Mr Bagraim commented that there was indeed a backlog that dated back to the apartheid government era, and this should be taken into consideration. It was shocking to hear that there were unclaimed funds that dated back to the 1970s, and it was likely that those individuals had already passed away.

Department of Labour: Second quarter performance 
Mr Lamati said the Department had achieved 69% of its targets for the second quarter, with 12% partially achieved and 19% not achieved.

With regard to the targets on inspection and enforcement performance per province, the Eastern Cape, KwaZulu-Natal and North West had all achieved 13 out of 13 targets for the second quarter. Limpopo had been the lowest achieving province, with a total of 69%, followed by Northern Cape with 77%. With regard to public employment services per province, the Eastern Cape had been the only province with 100% achievement, while North West was the lowest achieving province with 43%, followed by Mpumalanga (57%) and the Western Cape (57%).

The Department was still battling to fill vacant posts, although an action plan had already been developed. It had achieved 100% for reporting and detecting irregular, fruitless and wasteful expenditure -- the total that had been detected so far was R169 699.

The Department had managed to partially achieve on the number of designated employers inspected per year to determine compliance with employment equity legislation. The target had been 1 419 and the DoL had achieved 1 403. The reason for the variance involved human capacity challenges, in that there had been a need to provide training. It had already trained about 36 Inspectors on 14 and 15  November 2016, to address the gaps that had been identified.

The DoL had not achieved the target for processing the amendments to the Occupational Health and Safety Act through the relevant structures. The delay was as a result of further consultation requirements by National Treasury, and further engagements between the economic cluster and National Treasury were under way.

There had been partial achievement in the number of employer payroll audits conducted per year, with 3 684 completed against a target of 3 905. The reason for the variance had been the high turnover of staff and the fact that although the vacancies had been filled, the newly appointed auditors required training. As of 28 November 2016, newly recruited auditors were undergoing six months of training to be ready to conduct inspections.

Mr Lamati said that the Department had failed to table the number of regulations and policies in terms of Employment Services Act to the Employment Services (ES) Board per year. The draft regulations were in place but they had not yet been tabled to the ES Board, which had been established towards end of the second quarter, and would convene during the third quarter.

The Department had achieved 65% out of the target for 100% for the completion of the Private Employment Agency (PEA) and Temporary Employment Services (TES) applications processed within 60 calendar days of receipt. The reason for the variance was due to delays in the verification process of the applicants’ information. The Department would implement improvement plans with under-performing provinces during the third quarter.

There had also been an achievement of 44% for the completion of the applications for foreign nationals’ corporate and individual work visas processed within 30 working days. The reason for the variance had also been due to delays in the verification process of the applicants’ information.

In conclusion, in 2015/16 the Department’s performance had stood at 47% in Quarter 1. In 2016/17, it started off at 62% for Quarter 1, and performance for Quarter 2 had improved to 69%, compared to 58% for the corresponding period last year. The Department had committed to improve its performance and service delivery in 2016/17. Monthly monitoring of performance had been instituted, with monthly reports to the monitoring and evaluation steering committee. The monthly reports would be drawn from each labour centre and would be consolidated into provincial and branch monthly reports to be deliberated at head office level by the monitoring and evaluation steering committee. The steering committee was chaired by the Acting Chief Operating Officer (COO) and reported monthly to the Executive Committee (EXCO) chaired by the DG. This would serve as an early warning and enabler for the implementation of the annual performance plan. There was a commitment to maintain a higher level of performance in this financial year, with consequences for non-performance.

Discussion
Mr D America (DA) commended the Department for its achievements in the second quarter, especially in regard to the processing of invoices within 30 working days, as this was one of the ways of sustaining small businesses and opening up job opportunities. He asked what remedial actions had been taken to deal with the irregular expenditure that had been reported to the Department, to prevent a recurrence of the problem. The Committee should be briefed on whether there was a particular reason why the Northern Cape had achieved less than 50% in terms of inspections done per year on Occupational Health and Safety (OHS) legislation. Was there any plan in place that was planned at addressing this problem? The Committee had made an oversight visit to Northern Cape, and it had been clear that there were considerable shortcomings with regard to inspections.

Ms Van Schalkwayk also commended the Department on the improvement in its general performance when compared in the previous financial year. It was a good initiative to see that training was being provided to the shop stewards. However, had the Department established why there had been a poor attendance to these workshops? These workshops were meant to help the trade unions and labour movement in order to improve their services to the workers. Regarding the non-compliance of employers on inspection and enforcement services, was there a monitoring system to ensure that the repeat offenders were dealt with accordingly? It was concerning to see that there had been a general regression in the performance of most provinces, and corrective measures should be implemented to address the shortcomings.

Mr Ollis also agreed that there had been general improvement in the performance of the Department and this was something that needed to be noted. He referred to the Department’s achievement of 65% of its target for the completion of the PEA and TES applications processed within 60 calendar days of receipt, and the 44% for the completion of the applications for foreign nationals’ corporate and individual work visas processed within 30 working days. He suggested it would perhaps be wise for the Department to outsource the service that would deal with the approval and completion of these applications. There was no doubt that 44% achievement should be regarded as “ridiculous” in terms of meeting standards, and there should be measures in place to make this at least a 90% achievement.
           
Mr Bagraim expressed concern that the Department seemed to be setting targets that it would find extremely difficult to achieve. The reality was that there were not enough inspectors within the Department, and there were no mechanisms in place to ascertain whether employers adhered to the labour laws. 

Mr Lamati appreciated the fact that the Committee was taking into consideration the improvement in performance during the current financial year. The Department was doing its best to ensure that the invoices were processed within the stipulated 30 working days. The Department was taking the issue of irregular expenditure very seriously, and there was an investigation immediately when irregular expenditure was detected to establish the cause of it. Consequence management was also implemented, as the target was to completely eliminate irregular expenditure and encourage compliance to the government prescripts.

It would have been noted throughout the presentation that the Northern Cape had been experiencing problems. This was an indication of the challenges in the office, and the Department was working hard to resolve to issues. The DDG on inspections and enforcement services had been spending some time in Northern Cape trying to resolve all the issues that had been highlighted in the presentation. The inspections and enforcement and services in the province had been put under administration, and there was hope that performance would improve going forward. A number of challenges had been identified when the Department conducted a road show to some of the provinces, and there were plans to work with those offices to address them.

The reason for poor performance on the training of shop stewards had been the unreasonable expectation from the shop stewards that the Department would also provide transport and accommodation. The Department was working with the different federations to address this misunderstanding, as the training would empower the shop stewards to be able to effectively conduct their work properly.

The issue of the registration of the PEAs and also the visa applications was of great concern to the Department. The main issue was on where the final decision was to be taken. There were efforts in place to streamline the processing of these applications, and this would be improved in the coming quarters. The Department appreciated the gravity of the situation.

The Department had considered the fact that there were not enough inspectors. It would like to have more, but the reality was that there not enough money to employ more inspectors. The plan was to maximise these limited resources so as derive a bigger impact from the small number of inspectors in place.   

Ms Aggy Moiloa, DDG, Inspection and Enforcement Services, said that there was movement of staff within the province of Northern Cape, and this had particularly been the case in the first and the middle of the second quarter. There were three vacancies for inspectors in the Northern Cape, and two of those were in the process of being filled.

The non-compliance of employers to labour laws usually involved first offenders. The Department had managed to refer to 65 employers for prosecution in the previous financial year, but this number had grown to 200 in the current financial year, and in some instances, fines had been enforced and paid.

The Department was planning to have a training academy that would be aimed at the professionalisation of the inspectors. This would include working with institutions of higher learning. There were also plans in place to utilise technology for conducting inspections, including the use of “Skype,” as this would save resources and time, and could be particularly useful when inspecting employers with a good history of compliance.

Adoption of the Minutes 
The Committee adopted the minutes of 30 November 2016 without amendments.

The meeting was adjourned. 
 

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