Labour Outsourcing

Labour outsourcing in SA

There has been a considerable growth of temporary employment services, or labour brokers, as they are more colloquially known, in South Africa over the past five years. In discussing the reasons for such enormous growth with labour brokers and those companies utilising their services, it is evident that there are two main reasons for this growth.

Firstly, there is a perception that the costs of complying with the employment laws are high, as are the costs of the direct administration of employees, and organisations are better served by temporary employment services (TES’) who have the infrastructure to manage such compliance.

Secondly, that labour brokers often build up a pool of specialist employees who can be brought into a client organisation and utilised at the highest level of efficiency on short notice.

The common factor between these two reasons being one of cost, as an accepted norm in the TES industry is that the costs of utilising the services of a TES are approximately 10% of what it would cost to directly employ a temporary employee. It would be interesting to compile a report on the difference between employing temporary employees directly, as opposed to through a TES, over a 24 month period. It has been my experience that, on the whole, TES’ are generally more efficient as temporary employment remains their core business, whereas in most instances other organisations use temporary employees in pursuance of their core business.

Relevant Legislation

The Labour Relations Act (“LRA”) makes provision for TES’ to lawfully exist and trade, with emphasis on the fact that an employee of a TES will remain an employee of the TES, irrelevant of the employee performing services for a client of a TES.

There is, however, joint and several liability on both the TES and the particular client of the TES in terms of Section 198 of the LRA with respect to contraventions of collective agreements, arbitration awards, the Wage Act or the Basic Conditions of Employment Act.

Section 82 of the Basic Conditions of Employment Act specifically spells out the ambits of such joint and several liability, which would range from salary shortfalls, overtime disputes, and/or incorrect working hours.

In terms of Section 57 of the Employment Equity Act, an interesting situation arises in that, for the purposes of employment equity, a TES employee who provides services for an indefinite duration or a period of three months, is deemed an employee of that particular client and, furthermore, where there has been an act of unfair discrimination, both the TES and the client remain jointly and severally liable.

Contractual Arrangements

The operation of a TES usually involves a tripartite relationship between the TES and client, and the TES and a particular employee. Careful examination of the TES industry reveals an administratively intensive industry in which the TES’ are extremely particular with employment contract administration as there are clear pitfalls in circumstances where fixed term contracts, for example, are not monitored or permitted to roll for months on end.

The principle agreement entered into between the TES and the client usually provides for a series of indemnities from the TES to the client in respect of various issues, including those areas in which the client would be jointly and severally liable.

The most common area for dispute is one in which employees frequently seek relief against a TES client erroneously. This often has its roots in either a misunderstanding of the nature of the relationship or, alternatively, a desire for some type of employment permanency with the client rather than with the TES.

This entails disputes directly against the client being referred in terms of the dispute resolution mechanisms of bargaining councils and the CCMA, necessitating the need for the TES intervention to clarify the situation. There should be no need for such disputes if TES’ have entered into substantial contracts with their employees, in which the nature of the relationship is spelt out. Clearly, this is an obligation incumbent upon the TES.

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