The Department of Labour’s (DoL’s) plan to absorb the contracted staff of its information and communication technology (ICT) service provider EOH Holdings could add R148.8-million to the department's yearly ICT wage bill.

This emerged after the DoL briefed the Standing Committee on Public Accounts (Scopa) this week on the department’s ICT transition progress and the history behind, and termination of, the public–private partnership (PPP) contract with Siemens Business Services, as the DoL moved to build internal capacity in the office of the chief information officer.

JSE-listed EOH took over the R2.02-billion, ten-year PPP agreement with the DoL when it acquired the Siemens subsidiary in November 2012.

However, DoL director-general Nkosinathi Nhleko previously commented that the management of the contract did not fully meet expectations, owing to the department’s inability to manage the scale of the project, and described it as being “a boat that was allowed to float without direction”.

This week, he stated that there was a phased approach to the takeover of all staff connected to the contract, with Phase 1 and 2 focusing on absorbing management and critical staff respectively, followed by the balance of the staff in Phase 3.

“We are negotiating with EOH on the possible takeover of those employees involved in the daily provision of ICT services to DoL. The worst case scenario is that DoL might have to take over all the resources of EOH on the PPP contract,” he said.

The “time-consuming” and “complex” process was expected to be completed by November.

Scopa expressed “grave concern” over the ballooning wage bill, which equated to R12.4-million a month in ICT staff wages, as Nhleko pointed to some EOH staff members earning salaries higher than government salary structures, with some of the salaries comparable to those of premiers and chief directors.

Further, Section 197 of the Labour Relations Act compelled the DoL to take over EOH resources such as those that saw it providing termination support and resources and employees.

Other risks included the disruption of service delivery owing to discontinuation of information technology services; litigation on the part of EOH employees on the back of the finalisation of the Section 197 obligations; budget constraints; political risk; and reputational risk for the department.

Nhleko did not elaborate further.