Labour law changes ‘will shed jobs’ in South Africa

Despite being bound up in negotiations for months, the proposed changes to a raft of South Africa's labour laws are still receiving fierce opposition from business, which warned of drastic potential job losses if key amendment Bills go ahead.

The Labour Relations Amendment Bill and the Basic Conditions of Employment Amendment Bill are part of a suite of changes to labour laws that were first proposed in 2010 and have been under protracted negotiation in the National Economic and Development Labour Council (Nedlac) for about a year.

The Bills are now the subject of public hearings before Parliament's portfolio committee on labour, which are set to continue next week.

A regulatory impact assessment done in December 2010 for the government warned that a number of the proposed amendments to the labour laws were highly problematic and could negatively affect employment.

Revised Bills were tabled following the Nedlac negotiations, but business continues to take issue with a number of aspects in them.


Greater protection
A second regulatory impact assessment, recently completed for Business Unity South Africa by SBP (The Small Business Project), an independent research company, said although the effect the amendments would have on job numbers was difficult to determine, it could "confidently be expected to amount to several hundred thousand [job losses]".

The aim of reviewing the legislation is, in part, to provide greater protection to vulnerable workers.

According to the labour department, the focus of the amendments is to address what is now commonly referred to as the "phenomenon of labour-broking", regulating contract work, strikes and lockouts, essential services, organisational rights and collective bargaining, among others.

But Business Unity South Africa said the two Bills were not ready for Parliament and there remained "significant areas of disagreement" on the issues among social partners.

The labour department has been quoted in media reports as saying that a 90% consensus rate was reached in negotiations on the Bills. But one source with knowledge of the Nedlac process said it was clear disagreement on "substantive" issues remained significant.

In a presentation to the committee, Vanessa Phala, social policy executive director at Business Unity South Africa, argued that the 2010 Bills proposed the banning of labour brokers, but this had now been replaced – although in different formulations – in a number of sections of the Labour Relations Amendment Bill with the introduction of substantive rights to equal treatment for labour brokers, fixed-term contracts and also part-time workers.

Phala was adamant that Parliament needed to do a comprehensive, updated regulatory impact assessment before it decided to finalise the Bills.

Atypical employees
The equal treatment provisions are aimed at securing atypical employees – hired for longer than six months and earning less than R183000 a year – the same pay, ­benefits and general treatment as permanent workers.

According to SBP's regulatory impact assessment, these provisions "will increase the costs of employment". It argued that wage-employment elasticity was estimated at 0.7%. In other words, an increase in the cost of hiring workers, such as wages and benefits, of 1% is likely to imply a decrease of 0.7% in employment. Given these assumptions, it estimated that at the "very minimum, 215150 jobs will be lost as a direct consequence of this amendment".

"The actual figure is likely to be in the region of a quarter of a million upwards," the project said and, given the nature of the local labour market, small businesses were likely to be disproportionately affected.

Proposed changes to the Basic Conditions of Employment Act gave the minister power, in sectoral determinations, to prescribe increases on actual rates of pay. At present, the minister is empowered to prescribe increases on minimum rates of pay. SBP's assessment said that this threatened to undermine collective bargaining.

It argued that deciding actual rates of pay was "best resolved through negotiations between employers and employees … who will ­ultimately bear the consequences of the decision".

The heightened demands would place added pressure on businesses, raising personnel costs.

It estimated that a cumulative loss of between 11 684 and 105 155 jobs could take place as a result.

In addition to the strain it would place on businesses, it could have the "unintended consequence of benefiting better-paid workers disproportionately", thus increasing wage gaps.

Another major concern explored by the SBP assessment was the proposal to extend the rights of minority unions.

As a result, "smaller and poorly organised unions are able to participate in bargaining at a level at which they are at present not entitled".

"It lowers the incentives for responsible, professional and orderly unionism and increases the incentives for brinkmanship, opportunism and industrial conflict," the assessment stated.

Proposed amendments
The SBP impact assessment only examined three key aspects of the proposed amendments. Business Unity South Africa, however, had more than 20 points of concern relating to the Bills.

"We feel that our concerns were not taken into consideration when the new amendments were tabled," the organisation's Phala told MPs.

The private sector supported the intended objectives of the Bills and supported the move to treat workers equally, but the Bills as they stood could lead to "poor policy choices", she said.

Some trade unions in the labour constituency, under the banner of the Federation of Unions of South Africa, have also taken issue with certain aspects of the Bills.

Unequal regime
The proposal under the Labour Relations Amendment Bill to have different dismissal procedures for high-income earners would have the effect of creating an "unequal regime" and lead to "all sorts of inequities to that generic group of employees," the federation argued.

Should the Bills move through Parliament with minimal changes, there was significant scope for constitutional challenges to the laws, said Jonathan Goldberg, chief executive of Global Business Solutions, which represented the Confederation of Associations in the Private Employment Sector.

The restrictions on atypical employment "effectively amounted to a ban" and was constitutionally challengeable, he argued.

So, too, were amendments such as the determination on actual wages, which would undermine collective bargaining.

The department of labour did not respond to requests for comment.

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Lynley Donnelly
Lynley Donnelly
Lynley is a senior business reporter at the Mail & Guardian. But she has covered everything from social justice to general news to parliament - with the occasional segue into fashion and arts. She keeps coming to work because she loves stories, especially the kind that help people make sense of their world.

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