Labour broking: Is it dead or alive?

In recent times there has been much debate as to the future of labour broking. The unions want to see it banned and sections of Government have been sympathetic to union arguments. Legislation, hostile to business broking, has just been passed by parliament (no commencement date has however been set at date of writing). Is the end in sight for business broking? Labour broking has been popular with business as it circumvents many of the most onerous aspects of labour legislation for employers. You need to keep a close eye on this – your cost structure and the way you employ staff could be affected by this legislation. Why do unions want to stop labour broking? Labour brokers take on the employment risks for their clients. Thus, labour is employed by the broker and outsourced to the client. In the event that an employee is dismissed, the broker indemnifies the client against any liability and handles any CCMA hearings and picks up the cost (if any) relating to the dismissal. The client can get on with his business and is not side-tracked by South Africa’s labour laws. Labour broking is often seen when there are seasonal demands for labour, such as the surge in hospitality entertainment over the festive season. Employees of labour brokers do not have the same rights as full employees of a business and the unions have long argued that this is an unfair labour practice. The legislation is aimed at workers who are subject to the protections of the Basic Conditions of Employment Act (BCEA). People earning less than R193,805 per annum are guaranteed a maximum number of working hours per week, leave and sick leave entitlement, lunch and tea breaks etc. The vast majority of labour broker employees are within the BCEA threshold and work for a client for more than three months. The legislation makes any employees of labour brokers into full time employees of the client if they work three months or more for the client. In effect, the rationale for labour brokers will, in principle at least, fall away as the labour broker’s employees become employees of the client. This legislation’s impact is compounded by allowing the employee to declare a dispute with either the client, or the labour broker, or both. Clearly labour broking will suffer a potentially mortal blow. Is there a way out? People employed as independent contractors fall outside the ambit of the legislation. It may thus be feasible for labour brokers to employ labour as independent contractors and to sub-contract this labour to the client.  It is vital that this be a proper arm’s length contract, so take advice from an expert if you consider doing this. Labour broking has been a target of the unions since the late 1990s – don’t be surprised if labour broking stays as part of the economic landscape in one form or another. © DotNews, 2005-2013. This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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