Following the changes to the Labour Relations Act and the inclusion of s198 there are few obvious reasons for continuing to use a labour broker in South Africa unless:
- the broker provides a resource for a short term need (< 3 months); or
- the broker has a pool of specialised, trained individuals to meet a pressing business need
This differs from the view a few years back when businesses argued for the use of labour brokers for the following additional reasons:
- the potential to decrease costs by not offering a labour broker’s workers the same benefits as permanent employees; or
- the use of labour brokers to reduce the time and cost spent on hiring managers or HR representatives to supervise and control the relevant workers
These arguments no longer apply.
- Labour brokers cannot decrease your cost base – if you are compliant with “equal pay for equal work” legislation it is not practically possible for a labour broker to be cheaper than hiring these same employees directly as you have to add on the labour broker’s margin. The only exception to this is if the labour broker provides trained, specialised individuals able to offer operational efficiencies which you cannot do yourself.
- The fallacy of less supervision – while not having employees on your books might have given you a false comfort that you didn’t need to manage them, recent court cases deeming the client to also be the employer of labour broker workers means you no longer have this luxury. Now, you as the employer will be facing any claim brought by a labour broker employee so you face even more risk if you don’t manage them yourself. It would be a crazy position to be in if you blindly let a third party manage a situation where you ultimately face the bill.
It is little surprise then that employers who have traditionally used labour brokers are having to re-think their position and many are looking to move their labour broker supplied workers in-house.