Maintaining the Flex in Flexibility in a contentious South African Labour Market
Maintaining the Flex in Flexibility
in a South African Labour Market
Disclaimer: The interpretation contained in this presentation does not constitute
legal advice, it is the opinion of our Group Director and his interpretation of the
Foreword by Wayne Stainforth – Measured Ability Group Holdings (Pty) Ltd
Temporary employment service providers are an instrument of necessity, they safeguard between
unreasonable labour demands and the successful operation of a business.
The alignment of a TES with an employer who shares dubious values is a dangerous combination.
In a world where bottom line triumphs over ethic, ours is an instrument that requires execution
with integrity or it can easily be the equal and opposite of “a fair wage for a fair days work”.
Beyond service offerings and value of hard work, core values of any reputable TES must be
“no profit without integrity”. Cultures and values must be convergent and integration of our
people with those of our clients must result in a successful and beneficial outcome for our
employees, it is within this spirit that the new legislation must be interpreted.
Discussion around pending legislation affording extra protection to a class of employee
Speculated as imminent although effective date unknown.
Amendments to the Labour Relations Act pertaining to dismissal obligations will now see
joint and severable liability (formerly exclusive to the TES) extended to include the client ,
allowing vulnerable workers collective recourse against individual parties or both.
By application of Section 198(1)(b)(i) and Section 198(2)(b)(ii) a 3 month threshold is placed
on TES employment after which an employee is deemed to be an employee of the client
and the TES for the purposes of the Labour Relations Act .
• Does the employee transfer to the client after 3 months ?
Deemed: Just as the employee is included by both TES and client for reporting
purposes under the Employment Equity Act, so too will the employee be
afforded extra protection under the LRA. Should the drafters of this
legislation have wanted the employee to become an employee of the
Clients they would simply have said so.
• Has historical precedent already been set for this joint scenario ?
Client and TES are already joint and severable liable for sections
within the LRA, BCEA and EEA.
What extra protection is the employee afforded under the LRA ?
The employees scope of recourse will now broaden and the employer will be both client and TES or either for perceived unfair dismissals,
severance and equal treatment.
Which category of TES Employee does not qualify for extra protection ?
a) Employees engaged on a pre-existing collective agreement e.g. a bargaining council supersedes the new deeming provision.
b) Employees earning more than the earning threshold of R193 805 per annum.
c) Employees engaged on justified successive fixed term contracts.
What reasons are envisaged to justify successive fixed term contracts ?
Section 198(3) An employer may engage an employee on a fixed term contract or successive fixed term contracts for longer than three months of
employment if the employer can demonstrate any justifiable reason for fixing the term of the contract.
What is an example of a justifiable reason for the continued use of TES staff in terms of Section198(3)(b) ?
Remaining competitive in a global market is imperative to any South African business survival . The ability to react to variable market conditions by
adding or shedding staffing costs is a critical component within this.
International Status Quo
• Traditionally international business maintains upward of 30% of their staff on a non-permanent basis, the uncertainty of global markets and
worldwide recession has pushed that figure to 48% within the UK alone. Global competitors in the United States can disengage permanent
staff on the same day without formal notice.
Local Status Quo
• Section 189(a) of the impending retrenchment legislation will require up to a 4 month period to occur prior to lay off.
• Section 187(1)(c) will prohibit you to use the retrenchment process to change conditions of employment.
a) What is the perceived increased risk to the Client for dismissals?
Joint liability for dismissals is now extended however, legal precedent already exists for this
in case law.
Reputable outsourcing agencies :
- have followed correct dismissal procedures for many years;
- indemnify their clients accordingly;
- have institutional market place reputations to uphold.
Only companies dealing with small, non-reputable agencies who do not follow fair
procedures and who do not have the financial backing to substantiate an indemnity
permeate associated employee risk from their TES.
b) What is the perceived increased risk to the Client for severance ?
The obligations for severance contained within the LRA have alwaysbeen applicable to TES employees, case law already places the legal obligation
within the clients ambit of responsibility, Grinpal Energy Management Services (Pty) Ltd v City Power Johannesburg (Pty) Ltd 2013 1 BLLR 34 (LC).
Reputable outsourcing agencies have always contained a provision for severance on their client costing schedules with anticipated pay-out being
“on occurrence”, due to the rarity of the fulfilment of circumstances warranting a severance pay-out its occurrence is seldom if ever effected.
That severance only triggers upon final termination for operational requirements i.e. if an employee leaves voluntarily, is dismissed or refuses
an alternative assignment no severance is due.
As a result of the high cost of vetting candidates, candidates are mostly transferred on an ongoing basis amongst clients, this is envisaged
in their contracts of employment wherein which they permeate an “on” and “off” assignment status and are only paid for hours worked.
The ending of an assignment does not constitute the end of employment only a reverting to a “pending placement” status.
That aside in the unlikely circumstances where severance may become payable experience has shown that due to staff movement, cyclical
assignments, attrition and dismissals due to misconduct a provisional estimate of 1% is by far more accurate than the actual wage rate of 2.13% .
c) What is the perceived additional risk to Clients for Equal Treatment ?
Section 198 (4)(f) Temporary Employment Service (TES) employees must be treated
on the whole not less favourably than an equivalent employee of the
client (after 3 months).
Section 198D (2) For the purposes of sections 198A (5), 198B(3) and 198C(3)(a) a
justifiable reason includes that different treatment is a result of the application of a
system that takes into account:
(a) seniority, experience or length of service;
(c) the quality or quantity of work performed; or
(d) any other criteria of a similar nature, and such reason is not prohibited by
section 6(1) of the Employment Equity Act, 1998
Therefore there are plenty of options for differentiating TES employees to other
permanent employees. In the section above some of those areas are listed
and are not limited so long as they are non discriminatory in terms of
section 6 of the Employment Equity Act.
What other protection is envisaged in the new legislation ?
• In future when determining representivity of a trade union, the extent to which employees are from
a TES provider, are part time or fixed term employees will be taken into account.
• This will make it easier for the union to gain organizational rights at lower thresholds of
• Historically TES employees have always proven to be difficult to organise .
Trade Union Representivity
What perceived risks permeate to the Client under notice pay or notice payment ?
This obligation is not new and has always been managed by the TES. Good practice dictates that
the Client schedule staffing requirements to include 1 weeks notice if employed less than 6 months,
2 weeks if employed between 6 and 12 months, and 4 weeks if employed for more than 1 year.
However, traditionally the TES contract of employment makes provision for the temp to permeate
and “on” and “off” assignment status and only be paid for hours worked. The ending of an
assignment does not constitute end of employment with the TES only a reverting to a
“pending placement” status.
This has not been tested, it is however accepted as common practice amongst all TES companies.
To manage mutual risk it is essential therefore that each client provide the TES with a 30 day
end of SLA notice period.
BCEA – Notice or Notice Payment
The amendments to the EEA are intended to give effect to the right to equality, fair labour practices and
protection against unfair discrimination. The Employment Equity Amendment Act seeks to strengthen
the implementation and enforcement mechanism of the Act and ensure equal payment for work of
What are the significant amendments to the Employment Equity Act ?
The beneficiaries of affirmative action (designated groups) are limited to black people, women and
people with disabilities who are citizens of the Republic of South Africa by birth or decent.
The grounds of unfair discrimination are extended to include differential treatment claims because of
discrimination on the listed grounds , in relation to terms and conditions of employment between
employees that perform the same or substantially the same work or work of equal value. In future
every designated employer must submit a statement on the remuneration and benefits received on
each occupational category and level of that employer’s workforce. Designated Employers will be
required to take steps eliminate differences in terms and conditions of employment.
The CCMA has extended jurisdiction to arbitrate unfair discrimination disputes if the alleged
unfair discrimination concerns sexual harassment or disputes concerning differential terms and
conditions of employment.
What is the impact of the changes and what can Employers expect ?
An increase in disputes due to the extension of the CCMA's jurisdiction to arbitrate
certain unfair discrimination disputes.
A significant monetary risk for contravening the Act.
Employment Equity Act Amendments
As the Client what must I do ?
• Sign a 12 month renewable Service Level Agreement with a 30 day notice clause;
• With an indemnity;
• Justified by means of a flexible business model in a global economy;
• Justified by temporary service employees being employed as a different class of worker.
The Service Provider
• Must sign a 12 month assignment confirmation with its employee in that employment
will not extend beyond the date contained in the Service Level Agreement.
• No deeming provision will extend and staff can be paid differently because they
are a different class.
Review your pay structures and job categories and identify any structures that
are not sustainable and correct prior to the new laws coming into effect. Ensure that there are
justifiable reasons for any discrepancies.
Review your staffing requirements - embark on any retrenchments
prior to the new laws to ensure you build in flexibility and
ensure you remain competitive in your market place.
Ensure that you have an Equity Plan in place that incorporates the new amendments
and ensure that it is known to all staff, including those who are responsible for
recruitment. Where appointments are not aligned to the Plan,
records of the reasons for the deviation should be kept .
Putting the Flex back into Flexibility
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