labour law in south africa


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LABOUR LAW IN SOUTH AFRICA. A PRESENTATION BY VAN DER HEEVER & ASSOCIATES at 08:30 on 12 FEBRUARY 2004. WEBSITE: EMAIL: TEL: (011) 789 1110 FAX: (011) 787 3955. Note: To view in Full Screen - Right mouse click and select Full Screen. - PowerPoint PPT Presentation



    at08:30on12 FEBRUARY 2004

    WEBSITE: (011) 789 1110 FAX: (011) 787 3955Note: To view in Full Screen - Right mouse click and select Full Screen


    The concepts of job security and social security have gone hand in hand in the South African Labour market until recently. An employee climbing the corporate ladder at a large company could expect reasonable job security, decent health benefits, regular salary increases and a solid retirement package.

    The entire principle of job security has been affected by so many factors that that concept probably needs to be redefined in a South African context. Factors, which have struck at job-security, are the following:


    Globalization: Due to large merger and acquisition activities in transnational companies, local companies have invariably been affected. International corporate activity has accounted for many closures of unwanted or unneeded companies. There has also been the reintroduction of conglomerates that disinvested in the 80s and early 90s e.g. Mobil and General Motors;


    The information age has meant a larger scale of access to information so that "corporate knowledge" is no longer residing exclusively in the "old guard". Due to the facilitation of information through digitisation, younger employees are blooming at an earlier stage of their careers, which is nowadays referred to as the baby-boom era;

  • 3.

    Health reasons: Workflow pressures, increases in tension levels have had a debilitating effect on middle aged workers and in many instances burnout and early redundancies occur;


    Corporate Downsizing:


    Employment Equity:


    Tighter budgets have crimped salary hikes, trimmed health care and other benefits. In addition, guaranteed pensions i.e. defined benefit schemes are increasingly being replaced by retirement savings plans (defined contribution plans) such as individually funded plans often using unit trusts as the underlying investment. The risk of investment performance has effectively been transferred to employees.


    Introduction of new technology.


    Relatively shorter product and services life cycles.


    The most accurate survey on the extent of employment in both the formal and informal sectors in the country, is contained in Statistics South Africa's Labour Force Survey of March 2003.

    A total of 11 565 000 people were estimated to be employed in both sectors in March 2003.

    Table A below sets out the labour market statistics as at March 2003:



    95% confidence intervals

    Lower Limit




    Upper Limit







    Total employed

    Total unemployed (official definition

    Total economically active = a + b

    Total not economically active

    Total aged 15-65 years = c + d

    11 298

    5 026

    16 442

    12 372

    28 964

    11 565

    5 250

    16 815

    12 740

    29 555

    11 832

    5 473

    17 187

    13 108

    30 145


    Official unemployment rate = b * 100/c





    Labour market participation rate = c * 100/e





    Labour absorption rate = a * 100/e




    It will be noticed that the official unemployment rate is estimated to be 31,2%. Note that this figure could be as high as 42,1% if a wide definition is given to unemployment.

    South Africa has 29.6 million people aged between 15 - 65 years of which 16.8 million are economically active, 11.6 million employed and 5.3 million unemployed.

    12.7 million of age group 15-65 are not economically active for various reasons.


    Whereas the workplace during the 80's and early 90's was characterised by stereotype full time employment contract, many employers have resorted to atypical contracts of employment in order to keep labour costs in check. These atypical contracts of employment took at least the following forms:

    Flexi-time contract

    Temporary employment contracts

    Fixed term employment contracts

    Consultancy agreements

    Outsourcing agreements

    Employer and/or workplace fragmentation structures.

    Each of these contracts are regulated by their own terms. The concept of full time, permanent employment seems to be giving way to these atypical agreements.

    Negotiation and conclusion of contracts of employment is a highly specialised field and especially in the field of employing executives for companies, specialist advice is normally sought before these contracts are concluded. Not enough time is being spent on negotiating relevant and appropriate terms of employment.

    A further trend in the workplace is that employers have sought to contain their costs of labour by employing employees on a basis of total cost to company. Apart from its function of cost containment, this type of contract also serves the purpose of giving the company a full conspectus of its true labour costs. In this way, companies can more readily quantify their actual labour costs.

    Due to the increase in competition, the concept of employee differentiation has, similar to product differentiation, come to the fore in order to make businesses more competitive.

  • The business of staff differentiation comes down to sorting out the A, B and C Players in the workplace. Note the difference in terminology between differentiation and discrimination. Differentiation is certainly not a form of unfair discrimination which we will touch upon later in this seminar.

    Differentiation is uninfluenced by race, culture or religion. It might be that gender comes into play. A system of differentiating between A, B and C Players is quite an acceptable practice in grading employees in a particular workplace. In fact, it is an essential management function.

    A Players possess essentially 4 E's in business - i.e.

    high levels of Energy,

    the ability to Energise employees, suppliers and customers around them

    Edge to make those difficult 50/50 decisions; and

    finally, capability of Executing and performing on their commitments.

    All these attributes are of course embraced and connected by passion. It is this element of passion which separates A players from B players. The B's are the heart and guts of the company and they are critical to its operational success. They essentially have at least three of the four "E" attributes, and they have the potential of achieving all four. Employers devote a lot of energy towards improving these Players into A's. It is the manager's job to convert a B player into an A player but sometimes it never happens.

    C players enervate rather than energise. They procrastinate rather than deliver. C players are also characterised by poor execution.

  • The system of differentiation can be depicted in the following graph:

    Dealing with the bottom 10%, or C players, is one of the toughest tasks for managers. About 3/4's of the body of Labour Law is devoted towards this unproductive group. It is therefore little wonder that the productivity rate in the country is lagging behind that of its main trading partners. In a free labour market which is regulated only by market forces and untrammeled by legislation, C players will usually end up dismissed.



  • In South Africa this would mean that 1.1million economically active people will lose their jobs and with a labour absorption rate of only 10% of school-leavers, of which there are 500 000 per year, society ends up with an additional burden of 1.55 million unemployed people per annum. This would swell the unemployment level to a whopping 45 or 55% level depending on the definition one accords the term "unemployment".

    The South African legislature has, however, seen fit to interfere in the labour market by introducing laws that protect employees against unfair dismissal, unfair retrenchments and unfair discrimination. Managers cannot however, afford to shirk their responsibility of differentiating their workforce into A, B and C players and they accordingly require a deeper understanding of the law relating to unfair dismissal, retrenchment and unfair discrimination. A better understanding of these topics will equip the manager in future to face up to his or her responsibility of differentiating employees. Without this differentiation, companies cannot even attempt to become more competitive and therefore assume a meaningful role in the global economy.

    The job of creating employee differentiation in the workplace becomes gradually more difficult over time and managers sometimes make themselves guilty of "gaming the rules". Practices to watch out for are that managers will sometimes sneak people, who are planning to retire, into the bottom 10% category. It is also not uncommon to find the names of ex-employees and deceased employees in these lists!

  • It is clear that it is only the A and B Players in a company that deliver positive ROI. C Players invariably come up with a negative ROI. A strong case has been advocated for removing the bottom 10% at the company's year-end. if free labour market forces had any say in the matter. It might seem cruel at first but retaining the 10% amounts to a false kindness. At the end of the day it kills produc


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