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HR 101 – Labour Broker Employees – Part 1

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Please note that this pertains to South African Labour Relations and Best Practice Requirements.

There has been a lot of controversy in the news of late regarding Labour Brokers and indeed, I have some clients who use Labour Brokers for their staffing requirements. Most people are under the impression that by using the services of a Labour Broker, they will save themselves the staffing problems and hassles that are usually incurred when dealing with employees – let me be clear on this, nothing is further from the truth! Here are some issues that employers need to understand when using Labour Brokers. These are, but not limited to:

Labour Broker employees enjoy exactly the same rights as any other employee under the Basic Conditions of Employment Act. This means that even if the Labour Broker loses the client or the contract comes to an end, the employee cannot just be dismissed. Let’s bring in the protagonists.

Mike is a Labour Broker who employs hundreds if not thousands of employees all over the country. He has clients in every major sector and enjoys a mainly good relationship with most of his clients who range from small 5 employee requirements to clients who have need of hundreds of employees.

George is one of Mike’s employees. George has worked for Mike for the last 15 years, with the majority of that being in a Distribution Company (let’s call them ABC Logistics), where George is a driver.

ABC Logistics have undergone some intense restructuring of the company and have decided to go the route of ‘owner/driver’, which obviously has a huge impact on the 500 odd drivers that they employ from various Labour Brokers. The contracts with the Labour Brokers are slowly but surely not being renewed and Mike finds himself with 150 drivers that he no longer has any work for as his contract was not renewed. Mike’s contract with all of his employees is a ‘temporary’ contract that does not have an end date, as Mike thought that this would be the easiest way to manage the employees, in the event that he lost contracts.

Mike decides that since he has lost the contract and therefore has no work for all of these drivers and since they are all ‘temporary’ staff anyway, he will just dismiss them and then that will be the end of that.

Mike sent out notices to all of the drivers advising them that the contract with ABC Logistics was coming to an end and that it would not be renewed and therefore his contract with the drivers would also be coming to an end.

When the contract ended, Mike dismissed all the drivers. George found himself another job and went to the CCMA as he did not receive a retrenchment package (also known as severance pay).

Mike found himself in hot water with a huge bill to pay. Here’s the thing – just because you have a ‘contract’ in place that says that you are a temporary employee, doesn’t make it so. A ‘temporary’ contract that does not have an ‘end date’ gives the employee a permanent status which means that his termination can only be for a very good reason.

Labour law is also extremely clear on what the requirements are in terms of severance pay and it is well documented. When retrenching staff the value of their severance pay or retrenchment packet hinges on the number of completed years that they have worked and be warned, there is no ceiling on this. So in George’s case, Mike had to pay out 15 weeks salary, but had George worked for Mike for 30 or even 40 years it would have made no difference – Mike would still need to pay one week for every completed year of service.

The only way that Mike could have avoided paying the severance pay would have been if he had offered George reasonable alternative employment, which in this instance clearly was not the case.

Mike learned the hard way, that even though he was a Labour Broker, his employees still needed to be treated fairly in terms of the Basic Conditions of Employment Act and the Labour Relations Act.

Next time we will have a look at some of the other requirements for Labour Brokers.