The labour broker industry faces great pressure to comply with the changes to the Labour Relations Act 66 of 1995, as amended, (“LRA”) read with amendments giving effect to the ‘equal pay for work of equal value’ principle in the Employment Equity Act 55 of 1998, as amended (“EEA”) in rendering temporary employment services (“TES”).

Clients of labour brokers are at risk of being deemed the employer of labour brokers’ employees, who earn below the earnings threshold , if such employees are provided through TES agreements and the services provided do not fall within the definition of a ‘temporary service’ in terms of section 198A(1). I.e. work for a client by an employee:-

  1. for a period not exceeding three months; or
  2. where the employee substitutes an employee of the client who is temporarily absent; or
  3. in a category of work and for any period of time which is determined to be a temporary service by a collective agreement, a sectoral determination or a notice published by the Minister.

By its nature, temporary employment ordinarily endures for a fixed term and it is therefore vital that this definition is read with the definition of a fixed term contract in terms of section 198B(1) of the LRA as a contract of employment that terminates on the:-

  1. occurrence of a specified event;
  2. completion of a project; or
  3. fixed date, other than an employee’s agreed retirement age.

Fixed term contracts may only endure for longer than three months or be concluded successively if the nature of the work is of a limited or definite duration, or an identified justification exists (such as work of a temporary nature).

When labour brokers’ employees perform services for clients in circumstances that do not fall within the definition of sections 198A(1) and 198B(1), such employees must be treated on the whole not less favourably than an employee of the client performing similar work with immediate effect, unless there is a justifiable reason for different treatment.

Section 6(4) of the EEA requires employers to equalise the rights of employees who perform similar functions in the workplace. Read with sections 198(A) and 198(B), this presents significant risks as labour brokers’ clients will:

  • be deemed employers of labour brokers’ employees; and
  • be required to remunerate the employees equally to their existing employees with immediate effect.

A proposed solution lies in shifting the industry’s TES focus to functional outsourcing.

Functional outsourcing is a narrower form of outsourcing whereby the service provider assumes management and control over its staff, but is granted some flexibility to use the client (former employer)’s systems and tools. The services provided in a functional outsourcing arrangement may continue for any period of time under a services agreement.

Should labour brokers pursue this avenue they must seek adequate advice on the requirements of section 197 transfers to ensure a seamless transition from TES to functional outsourcing. Impoartantly, this is an approach yet to be tested in a court of law with reference to both section 198A and section 197 of the LRA.