UNIONS WAR AGAINST LABOUR BROKERS LACKS RESEARCH AND FACTS
Cosatu's onslaught on the Temporary Employment Solutions (TES) industry, or labour broking, is based on anecdotal evidence and emotional accounts.
The fact remains that as at the current moment, there is still no peer-reviewed research comprising readily available CCMA awards or Labour Court judgments to support the union's claims that labour broker-led violations of labour laws and regulations are widespread and growing, not only in small, informal enterprises, but also in South Africa's largest and most reputable companies. The decision to either ban or further regulate the labour broking industry is being based on unrepresentative sector interviews that take anecdotal evidence as the basis upon which national labour and employment policy is to be decided, and is alarming and at worst, going to have dire repercussions for South Africa's economy.
This is according to the Confederation of Associations in the Private Employment Sector (CAPES), an industry association representing the interests of the Temporary Employment Services (TES) industry.
"There are many misperceptions about TES and the role that it plays in economies throughout the world, including South Africa.
As an industry locally, we have more than sufficient proof and researched facts about the industry readily available, both from the industry association CAPES and various statutory bodies such as the Services SETA and Statistics SA," says Loane Sharp, a labour analyst whose research was rated in the top percentile of the country's analysts by the Financial Mail.
According to CAPES, since 2000 labour brokers introduced around 3.5 million temporary, part-time and contract employees into the South African labour force. Approximately 2 million of these employees were first-time job-seekers, 92% were African, and 85% were youth aged between 18 and 35.
More than 32% of these employees secured traditional, permanent jobs within 12 months - and 47% did so within 3 years. According to the Services SETA, labour brokers contributed R415 million to the National Skills Fund in 2008/2009 alone. And, according to Statistics SA, "atypical" employees represent between 13.1% and 59.2% of total sector employment in South Africa, with the highest proportions of atypical employees found in construction (59.2%), wholesale and retail trade (42.8%), and transport and communications (39.7%) (Statistics SA, 2008).
"It is expedient for unions to present a picture of labour brokers as a recent innovation largely specific to South Africa and specifically geared to violating labour laws and regulations, but the facts suggest, instead, that labour brokers are South Africa's primary, formal channel for introducing unskilled, unemployed African youth into the world of work. Private enterprise and the greater social good seldom coincide as significantly as they do in the private employment services sector," says Sharp.
John Botha, Chief Operations Officer of CAPES adds to the debate: "TES is a massive industry and requires the highest levels of engagement to ensure an equitable outcome for all role players, but most of all for the employee.
There is a need for responsible trade unionism and serious thought needs to go into the consequences and negative impact that a ban would have on hundreds of thousands of temporary employees and their further estimated 3 million dependents. Bargaining without proper consideration given to the unintended consequences is dangerous and irresponsible," says Botha.
For many in the labour movement, the primary point of contention concerning labour brokers arises from the presence of a third-party in the ongoing employment relationship and claims that a third-party intermediary gives rise to such problems as employee uncertainty over the employer's identity, logistical difficulties experienced by unions when organizing in multiple, dispersed workplaces, and the apparent lack of unfair dismissal protections in circumstances of self-terminating employment contracts.
"This stance is highly selective and does not consider that organisations have a valid basis for entering into these arrangements, which are increasingly common in South Africa and around the world. For example, by cross-utilizing temporary workers between multiple organisations and sectors, agencies provide their workforces with a degree of continuity in employment that a single employer subject to various internal and sectoral cycles could not easily provide. Moreover, by providing recruitment, training, payroll, leave administration and other services, agencies allow organizations to focus on their core competencies and outsource time-consuming and non-core functions to specialized third-party service providers. Agencies are able to provide staff consistently during peaks and troughs, not only seasonally during the year, such as tax filing season or summer holidays, monthly over month-end or after pay-days or daily during lunch hours or in the evenings, but also during long-term fixed investment contracts such as construction, engineering, and other projects," explains Sharp.
It is extremely dangerous to base concrete proposals for national labour and employment policy on anecdotal evidence, poor research methods, and limited reference to available industry data.
The programme to ban or severely curtail labour brokers comes to a head at NEDLAC this month -and the livelihoods of 1 million people, supporting 3.6 million others, hang in the balance.
Facts and Myth about the TES Industry
Myth #1: Agency workers are not adequately protected against unlawful
labour practices
It is important to note that South Africa's existing labour laws and regulations apply equally and adequately to permanent employees and temporary assignees, and provide resolution procedures that cover a wide range of employee/employer disputes. However, it is unfortunately true that some unregulated and disreputable private employment agencies do not adequately protect their employees against unfair or unlawful labour practices. Unacceptable practices existed, prior to the promulgation of their respective industry regulations, in the credit, casino, farming, real estate, taxi, and tobacco industries. The private employment sector's industry body has acknowledged these problems: around 32% of private employment agencies, representing more than 60% of all agency workers employed in South Africa, are self-regulated as members of the industry body and meet or, typically, exceed the requirements of all labour laws and regulations; whereas the more numerous and hard-to-regulate, small-time operators undoubtedly engage in nefarious employment practices. A clear distinction should consequently be drawn between legitimate companies with compliant, transparent and audited business and financial practices, on the one hand, and unregulated and disingenuous operators, on the other.
Myth #2: "Labour brokers" exploit workers, earning an abnormal profit from their activities
Private employment agencies represent a R26 billion revenue industry. Among responsible private employment agencies, and on average, 78.8% of total revenue was paid directly to their agency workers in cash and benefits; a further 3.3% was received indirectly by workers in non-cash forms such as classroom and on-the-job training; a further 6. 1% was used to offset recruitment, screening, assessment, verification and other inherent costs; a further 7.3% was used to offset costs incurred in the management and administration of payrolls, benefits, leave, training, performance, and recognition - and just 3.8%-4.5% was retained by private employment agencies as a return on their investments in recruitment tools, countrywide branch and office infrastructures, payroll and other systems and technology, etc.
A modest net return of 3.8%-4.5% is one of the lowest of all sectors in the South African economy. These figures are important, because they show that there are two forms of healthy competition in the industry: competition between private employment agencies, which tends to drive private employment agencies' profits down; and competition for agency workers, which tends to drive wages up. With roughly 5,140 private employment agencies operating in South Africa, competition between them is fierce. The myth that private employment agencies depress wages to artificially drive up profits is one of the most pervasive and erroneous myths about the industry.
Myth #3: "Labour brokers" are causing the casualization of the labour market
In terms of labour law, a "casual worker" is a person who works for less than 24 hours in a month. However, the highly emotive term "casualization" implies much more, specifically diminished observance, enforcement and/or significance of labour laws and regulations. Responsible private employment agencies observe all labour laws and regulations, and there is generally a mix-up of terms between "casualization" as defined above - which private employment agencies vigorously oppose - and "flexibility" - which not only private employment agencies promote, but which is a corporate and business imperative, as well as an increasing demand from the new generation of job-seekers. Private employment agencies specialize in the recruitment and deployment of "dynamic" workforces, that is to say, workforces which due to their inherent economic characteristics are seasonal, cyclical, or otherwise variable. Agency workforces are therefore found in specifically identifiable economic sectors; they constitute a remarkably stable proportion of the total (traditional and flexible) workforce (approximately 4.3% of employee assistance programs are attributable to private employment agencies); and these services are generally provided by specialized third-parties, such as private employment agencies, for the simple reason that it is not possible for a single company (such as a mining company or a bank) to redeploy agency workers into different jobs or industries when their internal business cycles experience downward trends (such as during a downturn in the commodity cycle, or at the end of the tax filing season).
Myth #4: "Labour brokers" erode the permanent employee base in organizations
Private employment agencies connected with a recognized industry body provide more than 1,000,000 employment opportunities in South Africa each year. (Figures for private employment agencies who are not connected with a recognized industry body are not available.)
Many of these employees are taken on in permanent capacities, either in different roles with the companies where they are flexibly deployed, or in other companies in new or similar roles.
Agency work is, therefore, one of the country's most important single channels for entry into traditional, permanent jobs.
At the same time, the permanent employment base is being eroded, not by private employment agencies, but by job-seekers themselves.
The new "Generation X" and "Generation Y" are no longer willing to commit to long-term employment in the hands of a single employer, and favour self-managed development plans and career paths that suit their individual aspirations. Indeed, the term "permanent employment" hails from an earlier, simpler time, when companies recruited individuals expecting a lifetime of service, and when job-seekers sought long-term assurances related to their incomes and careers. Today, no employment relationship is "permanent" in the traditional sense.
Myth #5: Agency workers are less loyal, and perform less well, than their permanent counterparts
On the contrary, in countless studies we have proved that flexstaff are in fact as loyal or more loyal than permanent staff members, who often view their "permanency" as an eternal, irreversible employment arrangement. Permanent and especially unionized workforces tend to possess a "sheltered employment" syndrome, which reduces productivity and instills a "I just need to show up" mentality. An independent customer service organization was commissioned by a leading South African financial services company to survey their customers' experiences with frontline customer interfacing staff.
The results showed that out of the top 100 staff, 60 were flexstaff with the overwhelming majority of the flexstaff reflected in the top 40. In this exercise an important ancillary benefit to the organization in question was that flexstaff who were performing better than permanent staff required little or no management time, and hence were more cost-effective. The significance of these results was highlighted by the fact that the ratio of permanent staff to flexstaff headcount was at 70:30, while the performance of the groups was the inverse. Important to note is that flexstaff are constantly improving their career with their staffing company and hence the better they perform the more opportunities they are offered. Unproven but experienced by clients, flexstaff who are seamlessly integrated into the permanent workforce actually increase the productivity of permanent staff.
Myth #6: "Labour brokers" undermine trade unions' power in the workplace
Trade union membership in South Africa (and around the world) has been declining systematically since the 1980s - and the forces at work behind declining unionization have very little to do with private employment agencies. It is hard to comprehend the magnitude of change that information technologies are initiating in the workplace. The stated objective of many information technologies is to reduce labour costs and reduce companies' labour intensity. And, as the adoption and use of information technologies becomes more widespread, workplace and managerial practices are being subjected to large-scale changes, including closer scrutiny of individual performance, elaborate reward-and-penalty arrangements between employers and employees, among countless other changes. Advances in information technologies are creating a "crisis of relevance", not only or even primarily for trade unions, but for employees themselves, since the tasks and roles traditionally filled or executed by people are increasingly being performed by machines and machine code. Such widely-touted phenomena as skills shortages, agency work, and many other workplace phenomena can be traced back directly to the great wave of technology adoption sweeping the world. These forces are relentless and unyielding, and they will almost certainly prevail. This is why trade unions in South Africa seek to ban or curtail, not only private employment agencies, but also sub-contracting, outsourcing and corporate restructuring, which are the poster children of the New Age. Private employment agencies have had to re-engineer their business models (by adding
training, payroll, and other services to their traditional recruitment offering); and trade unions, subject to the identical forces, have had to change their operating models too (by taking greater responsibility for pension fund performance, and other services).
To survive, all organizations and institutions operating in the labour market, including trade unions, will need to re-engineer their operating models further to remain relevant in the context of these forces.
Myth #7: "Labour broking" is a South African phenomenon
Agency work is a worldwide phenomenon. Significant agency workforces exist not only in developed markets such as the United States (where they constitute 9.4% of total employment), Europe (8.1%), Japan (6.6%), but also and especially in developing countries such as India (4.5%), Brazil (5.3%), Hungary (12.1%) - and also South Africa (4.3%). In fact, prior to the advent of democracy in 1994, South African companies historically had one of the lowest rates of adoption of agency work in the world, and this trend has been naturally and inevitably reversing - and attracting political attention - since the South Africa's return to international economic participation.
There are also social reasons why South Africa is experiencing growth in agency work. For example, in the current depressed economic climate, companies employing only permanent staff have no choice but to retrench or shut down operations; whereas companies employing agency workers have many options, including reduced working hours, shorter shifts, job-sharing, just-in-time staffing, among many other options.
The social and economic contribution of an industry that keeps employees in work throughout the economic cycle, not only boom periods, cannot be overestimated.
Myth #8: "Labour brokers" do not invest in their employees
One of the biggest obstacles that a first-time job-seeker faces when looking for work is their lack of work experience. No amount of formal or classroom training can equip an employee for the real-world practical knowledge that comes from doing and understanding, rather than just learning about, a job.
Almost every South African organization - including organizations in the public sector and government service - stipulate that work experience is a prerequisite for a job. Private employment agencies have surmounted this barrier to first-time entry into the job market by providing learnerships (which are a hybrid model comprising both formal and on-the-job training), as well as other innovative development opportunities such as recognition of prior learning and on-the-job training. Indeed, private employment agencies have been the primary adopters and users of government funding for skills development in South Africa, accounting for more than 20,000 learnerships since inception.
Myth #9: Jobs provided by "labour brokers" are unskilled and dispensable
There is no difference in the process of "on boarding" flexstaff and permanent staff. As with permanent staff, flexstaff receive identical training and product knowledge, and their training is ongoing as is the case with permanent staff. Careful attention is paid to learning ability and rate of absorption during the recruitment process which further enhances the ease and success of training. Flexstaff are deployed in integral positions within companies and as such form an invaluable part of any company's workforce and representation to their customers.
There are at least as many variants of "agency work" as there are of "permanent work". It would be surprising, then, if the demographic composition of agency workforces did not resemble that of permanent workforces in South Africa, or of the sectoral pattern of employment opportunities and job creation. For example, some private employment agencies specialize in the recruitment and placement of database administrators, application developers, and software programmers in the ICT industries. Other private employment agencies specialize in the management of call centre agents, back office administrators, branch accountants, data capturers and other clerical roles in the financial services industry.
Yet other private employment agencies specialize in the management of staff in the mining, construction, and related primary sectors. There is consequently no greater "dispensability" in any agency worker's job than there is in a corresponding permanent job. Indeed, in uncertain economic times, private employment agencies are readily able to redeploy employees from shrinking to growing sectors, which makes flexible work, in some ways, more secure than permanent employment, where the only available right-sizing option involves retrenchment.
Myth #10: "Labour brokers" are opposed to regulation
Responsible private employment agencies have promoted regulation on the national agenda since at least 1997. As early as 1993, the industry called for a separate bargaining council for agency workers not otherwise covered by a bargaining council, but this was rejected by trade unions, specifically Cosatu. More than 75% of private employment agencies would be unaffected by reasonable regulations, as their existing models and practices meet or, typically, exceed the levels of compliance required by labour laws and regulations related to the recruitment, deployment and management of staff. By contrast, private employment agencies oppose banning an entire class of economic activity that is directly connected with creating employment opportunities for more than 1,000,000 people each year, many of whom are first-time job-seekers.
Myth #11: "Labour brokers" do not add value
Private employment agencies add value in many different ways. For employers, the use of third-party agencies (rather than organizations' own internal resources) to manage temporary workforces entails several advantages:
by cross-utilizing temporary workers between multiple organizations and/or sectors, agencies provide their workforces with a degree of continuity in employment that a single employer subject to various internal and sectoral cycles could not easily provide, which gives organizations access to a large, stable and work-ready labour force throughout the economic cycle;
by providing recruitment, training, payroll, leave administration and other services, agencies allow organizations to focus on their core competencies and outsource time-consuming and distracting functions to specialized third-party service providers who are able to perform these services consistently on a large scale at very low per-unit costs;
by leveraging their specialized in-house software such as performance measurement systems, workforce scheduling programs, and complex demand prediction tools, agencies are able to provide staff consistently during peaks and troughs, not only seasonally (during the year, such as tax filing season or summer holidays), monthly (over month-end or after pay-days) or daily (during lunch hours or in the evenings), but also during fixed-term projects such as construction, engineering, and other projects.
But the most significant value added by private employment agencies is socioeconomic. Since 2000, private employment agencies introduced around 3.5 million temporary, part-time and contract employees into the labour force, approximately 2 million of whom were first-time job-seekers, 92% of whom were African, and 85% of whom were youth aged between 18 and 35. More than 32% of these employees secured traditional, permanent jobs within 12 months - and 47% did so within 3 years. Over this period, based on audited figures provided by the Services SETA, private employment agencies contributed R415 million to the National Skills Fund. Flexible staffing companies are: South Africa's principal entry-point into the labour market for unemployed African youth; the primary re-entry point into the labour market for women involved in child-rearing, retired people, and redundant or laid-off employees, among others; and key instruments of otherwise unemployed people's skill development and career mobility. Private initiative and socioeconomic needs seldom coincide as directly and significantly as they do in the flexible staffing industry.
Issued by Teresa Settas Communications on behalf of Elias Monage, President of the Confederation of Associations in the Private Employment Sector, October 13 2009
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