The impact of Covid-19 has had a profound impact on the employment and labour market around the world. As many countries head back into lockdown, even with a vaccine in site, it is difficult to predict what will happen in the next few months, not to mention years.
As fluctuating demand in the global economy has caused an obvious need for a more agile and flexible workforce, it is therefore important to understand what your options are in terms of temporary staffing solutions, especially in South Africa’s strict regulatory environment.
This temporary employment sector remains a massive driver of employment and skills development in the country but misinformation and misinterpretation of legal rulings have resulted in much confusion in the industry.
One key point being how long you can hire a temporary worker and the long-term triangular relationship between the employee, client and service provider. To understand better, let’s go back a few years:
South African Labour Market
If we look at the South African Labour market 30-40 years ago, much of the workforce was informal and lacked regulation. Temporary workers would wait outside the gates of large employers or were picked up off the street on an irregular basis by the so-called ‘bakkie brigade’. Some companies were even known for throwing pieces of numbered paper into an eager crowd. Workers would scramble to get one for their chance to work, often leading to disruption.
The mid 90’s saw the well needed implementation of the Labour Relations Act No. 66 of 1995. It provided a more comprehensive legislation governing labour relations which included stricter policies on how businesses work with and employ temporary workers. Following this, came the Basic Conditions of Employment Act 75 of 1997 (BCEA) and the Employment Equity Act 55 of 1998 (EEA).
The Rise of the Temporary Employment Service (TES) / Labour Broker
Due to the stricter legal framework, there came a sudden change to the way many employers hired their temporary workers. Laws governing the length of time casual workers could be hired disrupted the market and many businesses were unable or unwilling to employ these workers on a permanent basis. This was often due to the nature of the temporary or seasonal requirements of their business.
This resulted in the rise of the Temporary Employment Service, also colloquially known as a labour broker who would take on the contracts for the management of temporary workers on a massive scale.
The key drivers of this large-scale outsourcing included decreased legal risk, cost reduction, efficiency and the expertise, knowledge and support gained from the specialist provider.
With the previous lack of government regulation, the TES industry began to help formalise a large part of the South African workforce. There were of course some companies who did not comply who were eventually brought to book. One of the key drivers of this formalisation was that it made commercial sense simply to keep good, vetted and well-trained workers available for peak fluctuations.
This formalisation saw temporary workers receiving benefits such as leave pay, sick leave, PPH, workmen’s compensation and UIF under the BCEA. In instances where they fell under wage determinations such as Road Freight, Motor Industries or Industrial Council’s, they now accumulated advanced benefits such as pension, sick fund and 13th cheques.
Amendments to the Labour Relations Act
One of the most controversial and debated amendments to the Labour Relations Act 198A (3) came into effect in 2015. It stated that if a worker provides services to the TES’s client for more than three months, and the worker earns below the minimum of R205,433.30 per annum, the worker would be ‘deemed’ to be employed by the client of the TES.
Once the employee was seen to be ‘deemed’ as an employee of the client, they should be to be treated “on the whole no less favourably than an employee of a client performing the same or similar work, unless there is a justifiable reason for different treatment”.
Difficulty in interpreting the application of the term ‘deeming provision’ under the LRA led to a number of disputes concerning the employment status of temporary workers. It was first referred to the Commission for Conciliation Mediation (CCMA) in 2015, then taken to the Labour Court followed by the Labour Appeal Court.
It finally concluded with a dual (TES and Client) vs sole (client) employer debate and a judgement given by the Constitutional Court (Assign Services (Pty) vs NUMSA).
On 26 July 2018, the Constitutional Court handed down its landmark judgement.
The sole employer interpretation, which applied to employees earning under the above-mentioned threshold and working past a three-month period, would be seen to operate for the purposes of the Labour Relations Act only. However, the triangular employment relationship between the employer and the TES would continue to exist as below:
Paragraph 75 of the judgment explains.
‘‘Section 198(2) gives rise to a statutory employment contract between the TES and the placed worker, which is altered in the event that section 198A(3)(b) is triggered. This is not a transfer to a new employment relationship but rather a change in the statutory attribution of responsibility as employer within the same triangular employment relationship. The triangular relationship then continues for as long as the commercial contract between the TES and the client remains in force and requires the TES to remunerate the workers.’’
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The judgement confirmed that there would be no transfer of employment past this time even though the worker would be ‘deemed’ to be an employee of the client.
To clarify, the legal term ‘deemed’ can be better translated as ‘treated as’. And again, employees would be ‘treated as’ an employee for the purposes of the Labour Relations Act
The TES and Client would be jointly and severally liable under this Act for issues such as unfair dismissal, unfair labour practices, organizational rights, bargaining councils etc. This was nothing new to the TES industry as reputable agencies already indemnified their clients from the agencies actions and prevailing CCMA decisions already had them affecting the employment relationship between the client, the temp and themselves in-line with the Con. Court decision dating back historically.
In terms of all the other important key legislations beyond the LRA, namely the Basic Conditions of Employment, Skills Development Levy, UIF, Employment Equity etc. – the TES would continue to take all the responsibility for these as usual, pay staff and provide services to clients and workers after this period.
It is important to note that this popularized issue did not concern the status of employees on legitimate fixed term contracts or defined projects such as seasonal work (fruit harvesting season), peak/ troughing etc. as well as those of service providers who offer services on an outsourced basis.
The triangular relationship would therefore continue between the employer, worker and the TES while offering employers the agility they needed to run their business and more protection for workers.
The Mass Staffing Administrator
Over the last 25 years, increased regulations consequently pushed many of the small-time labour providers out of the sector. This has left the more established service providers who are able to offer an increased value-added service and take the risk back from their clients by indemnifying them from any potential legal proceedings.
Over time these large organisations have invested much capital into HR and legal compliance systems as well as having the expertise to deliver at a very high standard.
The new term for this service provider being the Mass Staffing Administrator. These service providers work at such a scale (often being larger than their clients) that they have the skills and means to drastically reduce costs and overall risk to their clients.
Relationships with clients operate on a strict service level agreement depending on the needs of the client.
As the client’s workers remain the employees of the service provider, the client would have no obligations or necessary involvement in any IR issues, and they would be indemnified for any financial or legal responsibilities regarding employee disciplinary action, grievances, industrial action, CCMA’s etc.
Health and Safety is strictly adhered to and stringent HR processes are set in place in order to promote fair treatment and prevent unfair discrimination against employees – the essence of what the labour legislation over the last few decades have been looking to achieve. Employees as ever, remain protected by South Africa’s strict labour legislations.
Mass Staffing Administrators such as MASA continue to fill the education, training and development gaps that will help build employee skills as well as offering clients the flexibility and the ability to adapt in these unprecedented times.
Strategic workforce planning is the key and working with a partner who can offer you the flexibility and peace of mind to allow your business to adapt is critical.
Masa Outsourcing is a South African labour powerhouse placing thousands of staff countrywide through its various divisions and entities. We have offices in Johannesburg, Cape Town, Bloemfontein, Port Elizabeth and Durban.
Four decades of experience in Vetting and Hiring, Recruitment, Site Operations, Industrial Relations Solutions, Payroll Services, Staff Management, Human Resource and Labour Management; we are the only Staffing Specialist positioned to manage your labour hire needs comprehensively.