LUDWIG FRAHM-ARP Amendments to the Labour Relations Act aim to provide increased protection for vulnerable employees
Amendments to the Labour Relations Act (LRA) are set to drastically change employers’ use of temporary employment, says business law and litigation firm Fasken Martineau.
President Jacob Zuma signed the amendments into law in August 2014, but these have yet to come into effect, and have been further delayed by events arising from the Labour Relations Indaba held in November 2014.
Fasken Martineau partner Ludwig Frahm-Arp says that only now will feedback from the indaba be facilitated; therefore, the amendments are unlikely to be enforced before February. “However, it would be difficult to provide an exact date, as more delays or further amendments may arise closer to the time.”
It was previously expected that the amended LRA, once signed by Zuma, would come into effect on October 1, 2014.
One of the major changes proposed by the amended LRA involves atypical employment – an aspect which arose out of issues raised by trade unions, particularly the Congress of South African Trade Unions.
Frahm-Arp says the amendments aim to provide increased protection for these vulnerable employees, as well as rights and benefits equal to those of permanent staff. “A major complaint that led to these proposed amendments involves employees on fixed-term contracts and those employed through labour brokers not being entitled to the same benefits as those that permanent employees have, such as pension and medical aid,” he says.
In terms of employment benefits for temporary employees, for example, medical aid membership, conditions stipulate these employees are not entitled to join the company’s medical aid scheme, owing to the nature of their short-term employment. “Therefore, besides not allowing the temporary employees access to company benefits, the employer would also not make any contributions towards these benefits,” says Frahm-Arp.
However, the amendments to the LRA require employers to treat atypical employees generally no less favourably than permanent employees, for example, by permitting the employee access to become a member of the company’s medical aid scheme. “This requirement will be to such an extent that the employer will be liable to make a contribution to the cost of the employees’ medical aid,” he adds.
This increased cost to company will lead to a significant increase in the overall cost of employment when using temporary staff, which is likely to lead to a decrease in the use of fixed-term or labour broker employment.
Further, using labour brokers often leads to a discrepancy between the salary of a temporary employee and that of a permanent staff member. This discrepancy can be attributed to the employer and the labour broker, as Frahm-Arp explains: “The labour broker may offer a minimum wage to its employees, while the employer pays permanent staff higher rates. It must also be noted that, for labour brokers to make a profit, they deduct a percentage of the money paid from the employer to the temporary staff, resulting in less money for the temporary employee, even in circumstances whereby the employer may be paying the labour brokers the same as permanent staff.”
Frahm-Arp says, in some instances, the increased cost of employment will be passed on to the customers, but this is not always the case and such aspects depend on the industry and clients specific to the employer.
The increased cost might also lead to businesses considering other means of cost cutting, which include adapting business models, retrenching staff, mechanising production lines or even closure of a company.
The amended LRA will most severely affect the mining, motor and construction industries, as these industries rely heavily on labour brokers.
Implementing the Amendments
Once implemented, the greatest challenge of the amended LRA will be for companies to examine ways in which to incorporate fixed-term employees, which might include restructuring operating systems and retrenching to allow for an increased cost to company per employee.
“It is important to keep in mind that the amendments to the LRA have been in the pipeline for about three years, with employers debating this topic for a long time so that they can be ready by the time the amendments come into force,” notes Frahm-Arp.
From a contractual perspective, Fasken Martineau partner Paul Fouche says compliance with the amended LRA will be an extensive process. “Employers with a large head count or many workplaces should conduct an audit to determine the extent of employment of people in the atypical category.”
Large-scale employers should also examine existing labour broker and fixed-term contracts to highlight and address areas of noncompliance regarding the amended LRA, he continues.
Further, in terms of company benefits, employers will also need to examine to what extent they will need to increase benefits allocated to its entire workforce.
However, there are some aspects of the amended LRA that provide employers with some “breathing space”, including a three- month rule, through which a temporary employee will have access to certain benefits only after being employed for three months and upon which time they will be regarded as permanent staff.
Fixed-term or temporary employees would, however, not qualify for same or similar treatment, if there are appropriate reasons substantiating the temporary nature of their employment.
“The message Parliament is sending with the amended LRA is that labour brokers are meant to be used to address temporary employment needs, and not as a means to pursue saving money on labour costs,” warns Fouche.
Resulting from the Labour Relations Indaba, provisions regarding minimum wages, unprotected or unlawful strikes and onerous dismissal procedures are all part of the debate about whether the amendments should be implemented as is or whether further amendments are required.
“Considering solutions such as compulsory interest arbitration for wage disputes and simplified dismissal procedures, as a trade-off for a general minimum wage, will inform the difficult discussions that lie ahead,” concludes Fouche.