Labour broker judgment could drive demand for outsourcing firms - CEO

Companies providing short-term staffing solutions, while employing people permanently, are set to see rising demand for their services following a recent Constitutional Court judgment that dealt a blow to labour brokers.

This is according to outsourcing firm Innovative Solutions Group CEO Arnoux Maré.

Maré says the company currently employs 10 000 people on a permanent basis, and hires them out to firms who require contract labour, mainly in the mining, transport, agriculture and manufacturing sectors.

Trade unions have been celebrating the Constitutional Court ruling on July 26, which provided clarity on an amendment to the Labour Relations Act (LRA) and requires clients of labour brokers to hire temporary staff who earn below R205 433 per annum, permanently after three months.

Maré, in an interview with Fin24 on Thursday, said he welcomed the judgment as temporary employment can cause significant difficulties for people. They are unable even to sign up for a cellphone contract, he noted.

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He said that staffing solutions companies who move employees to employment sites as and when they are needed absorb the costs of permanent employees, such as a provident fund, training and medical aid.

Maré added that many companies do not have the expertise of handling security or cleaning services, while they specialise in other sectors and turn to staffing solutions firms to meet their requirements.

Responding to trade union criticism that outsourcing companies take a cut of employees’ salaries, Maré said that their fee is paid by the companies themselves in a transparent process.

However, Ronald Wesso, media coordinator at advocacy organisation the Casual Workers Advice Office, cautioned that the growth of outsourcing companies, providing contract labour while employing people on a permanent basis as an umbrella organisation, could still see workers disadvantaged.

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Wesso told Fin24 that companies were doing "their level best" to avoid workers having the full rights of permanent employment, and special vehicles were being created - such as permanent outsourcing firms - to fill this gap.

"The end result is that workers are in a precarious situation," he said.

When asked about the need by some sectors for seasonal work, Wesso said: "There is absolutely nothing [in the LRA] that prevents employers from hiring for genuinely temporary and seasonal work."

The number of outsourced workers is difficult to quantify, according to Wesso, as Statistics South Africa doesn't measure this category.

A number of sectors rely heavily on contract labour, including transport, warehousing, logistics, retail, contract cleaning and security, and Wesso estimates that there are more than two million people working in SA who are supplied by labour brokers.