Presented by Mr Hans Smith, Chairman, Business South Africa.

Business South Africa is an association of 19 business organisations that represents approximately 85% of employers in South Africa, both large and small.

BSA aims to represent the common interests of its members on national policy issues. It has diverse membership and seeks wherever possible to find consensus amongst its members, recognising the independence of each member. Individual BSA members will be making representations to this committee.

BSA was a founding member of NEDLAC. It strongly supports the NEDLAC ideal of defining a social partnership in South Africa which seeks commonality from the diverse interests of the parties.

BSA has actively participated in the process of legislative reform and labour reform in particular. There have been evident successes in finding balances between the needs of the parties. Even where agreements have not been reached the understanding of the parties’ respective positions has deepened. This has contributed to the strengthening of civil society necessary to achieve national goals.

The BCOEB process has not been successful. The bill before this committee was, in the end, the product of bilateral negotiations that directly excluded business. Business’ interests have accordingly not been accommodated, and the search for a broader social consensus has been jeopardised.

The gravity with which business approaches this bill is underlined by its affect on virtually every workplace in South Africa, large and small. Virtually every employment contract will be affected, impacting adversely upon established workplace arrangements and inevitably, upon growth and macro-economic performance.

The question business has to ask is whether this will help or hinder achievement of South Africa’s economic and employment creation objectives. In other words, is this bill consistent with South Africa’s strategy for growth, employment and redistribution (GEAR).

Contrary to perception business in South Africa is not set on defining South Africa’s competitive advantage on declining labour standards. Business supports the review of labour standards legislation. Business also supports the need for fair labour standards, and, indeed, business can support rising labour standards where the rewards of improved economic performance and efficiency are to be shared.

Turning to the bill business supports the concept of a floor of worker rights which defines the basic conditions of employment applicable to all classes of work. Core provisions like protection against victimisation, discrimination and child labour are supported. Business also supports reasonable limitations upon daily working hours and the provision in law of fair annual, sick and maternity leave entitlements. Business also supports the extension of the scope of the bill, with the caution that careful regulation is necessary if new forms of work are not to be prohibited.

Business supports the reduction in working hours to 45 ordinary hours per week, again with the caution that careful attention will need to be given to those industries currently at 48 or more ordinary hours per week. The lifting of the sunday work prohibition is welcomed, although it is of concern that he equivalent prohibition in the mining sector has not been lifted.

Business supports the increase in annual leave from 2 to 3 weeks and the increase in maternity leave from 3 to 4 months. The averaging provisions are an important addition, although not sufficient attention has been paid to protecting existing arrangements which already provide for averaging in different sectors, like, for example, in agriculture.

These, and other provisions which business supports, significantly raise existing labour standards and set a new floor of worker rights in South Africa.

Those provisions of the bill which business does not support exceed what might reasonably be regarded as a floor of basic worker rights, and enter into the arena normally associated with the products of collective bargaining.

The additional costs and increased regulation of these provisions moreover threaten prospects for growth and employment, particularly to the extent that labour standards are raised without regard to economic fundamentals. South Africa’s relatively low growth and high unemployment record remains the hard reality against which labour standards have to be measured.

The proposed goal of a 40 hour week takes South Africa further in law than the majority of comparable upper middle income countries around the world, and would certainly be an additional constraint upon growth and economic efficiency in South Africa.

For business the proposed schedule on the 40 hour week amounts to a de factor obligation and is not merely a goal, given particularly the further refinements to emerge from the ANC/COSATU bilaterals. The proposed duty to bargain on the 40 hour schedule is moreover in conflict with the presumption of the Labour Relations Act and is unworkable in our industrial relations system. The view that the required reduction in hours will inevitably lead to increased employment is not true.

The increase in the overtime premium to time and a half will represent an immediate and substantial increase in wage bill costs for the majority of South African employers, additional to that already proposed by the bill. Calculations in the steel industry indicate that this provision alone will add an additional R231 million to the annual wage bill. No employer, large or small will be spared, and those that will not be able to meet the additional costs will have no alternative to the substitution of labour.

The doubling, and trebling, of notice periods will similarly impose an immediate and substantial liability upon all employers, and particularly those employers entering into new employment relationships. The higher exit cost will quickly translate into an entry barrier and net employment levels will suffer.

The proposed family responsibility leave, additional to the increase in annual leave and maternity leave, amounts effectively to an additional three days of paid leave. This category of leave is not a basic but best condition of employment and is advisably left to the collective bargaining agenda or workplace arrangement.

The full implementation of the proposed reduction of working hours in the bill and the increase in various leave entitlements have the cumulative effect of reducing South Africa’s current annual working hours by 16%. These terms also place South Africa’s annual working hours 20% or 53 working days below the average for countries who have comparable per capita GDP’s to our own. This cannot be a foundation for future competitiveness.

It is evident to employers that a country or company that works less cannot get more. Labour standards cannot be raised if time at work is to be substantially reduced. A more careful balance has to be sought if labour standards are to further rise.

Apart from these fundamental concerns with the bill, BSA has other core concerns. At the heart of the bill lies the concern regarding variation, and the transitional provisions. This relates to the relationship between the law and collective bargaining generally. Save for bargaining councils, and even here we understand that concerns in the unions arise, collective bargaining is relegated to at best a limited, and at worst a minor role, in the determination of conditions of employment. Business understands that further concessions in favour of ministerial determination were made in the recent ANC/COSATU bilaterals.

The transitional provisions proposed, too, have the effect of invalidating the products of collective bargaining over many years on the passing of this bill into law. For long collective bargaining has been the preferred regulator of labour relations in South Africa, and it would seem perverse to deny this tradition barely a year after the passing of the Labour Relations Act which set itself specifically the objective to promote collective bargaining.

A related concern lies with the proposed powers of the Labour minister who through the terms of this bill acquires discretion to determine conditions of employment in all sectors and areas. This power is barely limited, and in some cases not at all, and cannot be consistent with the demands of legal certainty on the one hand and collective bargaining flexibility on the other.

The assumption of ministerial power is clearly described in the reduction of powers of the proposed employment conditions commission. The commission no longer has the authority to convene or conduct its own inquiries but will respond solely on ministerial request.

Business has many other concerns relating to key provisions of the bill, and with regard to a number of technical details, which generally show lack of careful consideration and detailed draftsmanship. These issues are set out by BSA in an annexure which is available to the portfolio committee. The point made here is that there are many provisions of the bill which do not meet current workplace realities. Other provisions are marked by ambiguities and vaguenesses - which make important parts of the bill difficult to interpret and unworkable. In other areas omissions will create legal uncertainty, and will inevitably lead to industrial relations conflicts.

A single example is provided of only one clause of the bill which as a result of ambiguous drafting bears potentially adverse consequences. New wording of the notice period provision can be interpreted as requiring a full calendar month’s notice, meaning that services of any employee might only be terminated on the 1st day of every month. Like this, many other provisions, if passed into law, would be unworkable in practice and a source of recurrent workplace conflict.

The bill does not give sufficient attention to the changing face of employment in South Africa. Workplaces, and employment relations, are being transformed under new conditions. New forms of employment are emerging. These initiatives are crucial in preserving and advancing South Africa’s competitiveness. Labour regulation has to facilitate, rather than frustrate, this process. Careful balances between the needs of the parties need to be found.

There is not sufficient evidence of such balances in the bill. On the contrary additional costs and obligations are imposed regardless of the consequences. The cumulative direct cost of the implementation of the proposed terms of the bill differ from one sector and area to another. In all instances the additional costs are substantial. These are not occasional, but recurrent employment costs. Increases in fixed wage costs imposed by law will jeopardise existing employment and discourage new employment.

The indirect costs of the bill will be seen in the loss of entrepreneurship necessary for future development.
Growth and jobs, and fair labour standards, are surely the priorities of South African labour market reform. This bill should address itself towards these goals. The temptation needs to be avoided of finalising a bill that advances labour standards for the few at the expense of economic opportunities for the many.

Business has, since the commencement of the negotiations, argued the case for a balance between the imperatives of growth and equity. There are balances to be found, although this will require new and creative thinking around labour market issues, and how they might be combined in a labour market system that works. The passage of the bill has limited this search, and in its singular insistence on rising labour standards, has foreclosed all other options.
Business has consistently advanced its views, and participated fully, and regrets in the end that the product, and proposals now before us, in some respects, are unseen, and without the shared purpose necessary for their success.

The BCEB has far-reaching consequences for virtually all employment relationships in South Africa. Long established agreements as well as long-term arrangements will be invalidated with the passing of this Act. Moreover, new classes of atypical or irregular work will be regulated, in many instances for the first time. Additional obligations will be imposed upon all enterprise, including small and start-up businesses. More attention needs to be given to the extent of this regulation and its consequences.

The Bill is not complete. Two Codes of Practice required in terms of the Bill have not been disclosed, making interpretation of the full obligations of the Bill impossible. The earnings threshold determination for the application of certain sections of the Bill have not been disclosed. Agreements between COSATU and the ANC relevant to the terms of the Bill have also not been released, apparently importantly affecting Ministerial powers in respect of working hours and other key areas of the Bill.

Hours of work (S9)
BSA does not support the statutory goal of a 40 hour week.
The duty to bargain on working hours imposed by the Schedule is in conflict with the Labour Relations Act and is unworkable. The Schedule on working hours should be deleted.
The amendments arising from the COSATU and ANC negotiations have not been seen be BSA and cannot be commented upon.
The reference to the Mine Health and Safety Act in Schedule 3 in incorrect. Working hours in the mining sector include a calculation of travelling time which is not referenced in the Bill. A change in working hours in the mining industry requires a longer transitional period.

Overtime premium (S10)
BSA does not support the increased overtime premium.
Overtime should remain at time-and-a-third.

Transitional provisions (Schedule 3)
Section 5 must be amended to provide clear protection for existing agreements which would have been permitted by this Bill. Because of the long history of collective agreements and established arrangements, the 18 month transitional period available to the public sector should be extended to all sectors in respect of all provisions. The averaging provisions currently applicable to Agriculture need to be expressly reflected in the Act and not by reference in the Schedule.

A longer transitional period in respect of all terms of the Bill is particularly important in those sectors in which working hours are to be substantially reduced.

Section 95(3) is not acceptable. The approval of the National Assembly should be required for amending the Schedule on transitional provisions.

Purpose of the Act (S2)
BSA supports the purpose of the Bill, but does not support the objects of the Bill to the extent that they give primacy to labour rights to the exclusion of economic rights.

Family responsibility leave (S27)
BSA does not accept the family responsibility leave provision. The increases in annual leave and maternity leave are sufficient for this purpose.

Notice period (S37)
BSA does not accept the proposed notice provisions. The provisions in the present Act should be retained, including the prescription of notice periods in terms of days and weeks.
Section 39 is not supported by BSA. The provision should provide for payment in lieu of accommodation.
The provisions of S37(5) should apply equally to employers and employees.

Sunday work (S16)
The Bill does not remove the existing prohibition on Sunday work in the mining industry.

Ministerial powers
BSA does not support the Ministerial powers in S44(1), S50, Chapter 8, S63(1), S83 and S85(1) of the Bill. Ministerial powers of determining conditions of employment should be reasonably circumscribed by the law and collective bargaining. Conversely, ministerial power to grant exemption from the Act and "core rights" in particular, should not be circumscribed.

Sectoral determinations and the Employment Conditions Commission (Chapter 8 and 9)
The matters which may be included in a sectoral determination in terms of S54 are not supported, particularly SS(4)(d), (g), (h), (i), (k), (l), (m) and (n).
The ECC should have the powers and responsibility to independently conduct its own investigations and these powers should not be vested in the Director-General as provided for in S52.
Collective bargaining
The primacy given to collective bargaining under the LRA has been eroded by the Bill through wide Ministerial powers, the coverage and content of sectoral determinations and the limits placed upon collective bargaining generally as an agent of variation.

Variation through collective bargaining of the premiums for overtime and Sunday work, and the provisions relating to night work should be permitted.
Collective bargaining through mature bargaining arrangements is not acknowledged in the Bill.

Night work (S17)
BSA does not support the requirement that an employee performing night work may request a medical examination without reasonable cause and that medical examinations must be provided by the employer at undefined intervals thereafter.
BSA’s view is that the transfer of an employee to day work should only occur where it is reasonably practicable for the employer to do so.

Definition of remuneration (S35(5))
BSA’s view is that the calculation of remuneration for the purposes of annual leave, notice pay and severance pay is too wide and should be limited to basic wages which the employee would ordinarily receive, as is the case with payment for public holidays and family responsibility leave. Payments based on work performance should not be included in the calculation of remuneration. As a result of the method of the calculation of remuneration in S35(5), S35(4) is unacceptable to BSA.

Exemptions (Clause 8 of Schedule 3 and S50)
BSA does not support Clause 8 of Schedule 3 which provides for the termination of existing exemptions after a period of 6 months. Current exemptions should remain in force for the duration of the period for which they were granted. This would be consistent with the approach for exemptions from wage determinations in Clause 10 of Schedule 3.

Exemption from "core rights" should also be permitted upon application to the Minister by an affected party.
The requirement in S50(6)(a) and (b)(i) that any trade union be notified should be qualified to the extent that reference be made only to representative trade unions.

Averaging of hours of work (S12)
Averaging by individual and collective agreement should be permitted over a fortnight with a maximum of 10 hours overtime per week. This will set a reasonable floor for averaging. The requirement in S12(3) that current and future averaging agreements lapse after one year is unacceptable.

Maternity leave (S25)
The proposal that payment for maternity leave be determined by the Minister is unacceptable to BSA.

Daily rest period (S15)
The daily rest period does not permit the reduction of hours necessary to accommodate certain shift change-overs as provided for in the Schedule to the present Act on continuous work operations.

Maintenance work (S6(2))
BSA does not support the restrictive definition of emergency work in S6. Maintenance work which cannot be performed without causing the cessation of work, should not attract statutory premiums.

Regulation of hours (S7)
The requirements in paragraph (b) and (d) to arrange working hours with due regard to health and safety and family responsibility are vague and indeterminate. Paragraph (d) should be deleted. The Code referred to in paragraph (c) has not been disclosed and will have a material effect on the Bill.

Public Holidays (S18)
Provision should be made for time off in lieu of pay.

Pay for annual leave (S21(2))
Leave pay should be paid on the usual pay day unless otherwise agreed.

Proof of incapacity (S23(1))
It should be possible to regulate proof of incapacity for sick leave through a collective agreement.
Child labour (S43(2))

The requirements concerning the employment of a child in S43(2) are vague and indeterminate. These requirements should clearly determine what conduct would constitute a criminal offence under S43(3).

Labour inspectors (S63(1))
Persons designated as labour inspectors must be in the employ of the Department of Labour.

Powers to question and inspect (S66)
Persons interrogated by an inspector should be given the opportunity for legal representation and the rules of audi alteram partem should be expressly provided for.

Compliance order (S69)
It should be made clear that a labour inspector will have the discretion to impose a fine less than the prescribed maximum.

Temporary Employment Services (S82)
Section 82(1) should provide for the remuneration of the employee by the temporary employment service as per the definition.

Duration of employment (S84)
In cases of interrupted employment, the employer should be entitled to take into account the payment or allocation of leave pay, sick pay, family responsibility leave and notice pay in addition to severance pay.

Confidentiality (S78(1) and S90)
The provisions of S78(1)(c) and S90 may not adequately respect the confidentiality requirements of the employer’s business interests.