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Myth v Fact

Background 
On 26 July 2018 the Constitutional Court handed down a much talked about decision regarding employees of labour brokers.

Since then a great deal of mis-information has been doing the rounds, resulting in myth being confused with fact.

The Court’s decision concerned a very narrow issue. S198A(3)(b) of the LRA states that the client is “deemed” to be the employer of a TES employee, after 3 months. 
The original dispute in the CCMA was about whether the word “deemed” resulted in a dual employer situation (the TES & client) or a single employer (the client only).   

The Court ruled that the client becomes the deemed (sole) employer, but only for the purposes of the LRA. 

So what does this mean?

Myth: This is the end of Temporary Employment Services(TES)

Fact: Not so. Prior to deeming being triggered, the following triangular relationship exists. 



After 3 months there is a sole employment relationship with the client, for the purposes of the LRA only
 (unfair dismissal, unfair labour practices, bargaining & organisational rights) – the ‘TES – employee’ contract & SLA between the TES and the client, remain in place.

Myth: Employees of the TES become permanent employees of the client after 3 months.

Fact: The judgement stated that there is no transfer of employment
 to the client and the triangular employment relationship continues. 

Fact: Payroll, leave & timesheet administration and any other functions undertaken by the TES in terms of its commercial contract with the client, continue after deeming is triggered.

Even after the client is deemed to be the (sole) employer, the TES & the client can still be held jointly or severally liable for LRA contraventions.

Fact: In terms of most other employment legislation (BCEA, COID, UIF, SDA, SDLA, PAYE) the TES remains the sole employer of the employee. In terms of the EEA a dual relationship would exist. In terms of the OHS Act the client would still be liable.

Myth: TESs are unprincipled and exploit workers.

Fact: The “bakkie brigade” does exist and has given the industry a bad name. For example, the TES would charge a client R150 per worker per day, but only pay the worker R80 a day. And this would normally also be without any statutory compliance by this labour broker. 

Fact: Large reputable TESs operate professional & value added businesses. Take CAPES for instance, an umbrella body representing more than 1200 independent staffing businesses & representing a daily average of over 1 000 000 temp workers – it is internationally affiliated & is a member of Business Unity South Africa (BUSA).  

Fact: Reputable TESs recruit, screen & train temp employees before placing them with clients

Fact:  Some TESs run training facilities for temps, which would be unaffordable to most clients.

Fact: Some TESs offer provident fund membership as an option to their employees, whereas many of the clients with whom TES employees might be placed, provide no fringe benefits for their own permanent staff. 

Fact: Reputable TESs comply with all labour laws, minimum wages, bargaining council agreements & sectoral determinations.

Myth: The Constitutional Court’s decision affects all TES employees

Fact: It does not apply
 to TES employees earning above the earnings threshold, which is currently R205 433pa. 
Fact :It does not apply
 to TES employees who substitute for a client’s employee, who is temporarily absent for more than 3 months.
Fact: It does not apply
 in a category of work for any period where a collective agreement deems the work to be of a temporary nature.
Myth: The judgment affects fixed-term contracts of employees who earn under the threshold of R205 433 p.a.
Fact: The provisions of s198B concerning FTCs remain applicable. This section provides for a number of instances where the duration of an FTC can extend beyond 3 months.
Myth: The Court judgement affects the employees of contractors who provide services such as security, catering, cleaning, etc. to clients
Fact: It does not impact
 employees of service providers who render services to clients on an outsourced basis. The employee’s of these service businesses remain their employees. The client e.g. a body corporate, company, etc. is contracting in a service & not labour.
Key considerations
Only use a TES where it makes business sense & there is a value add
Only contract with a reputable TES 
Service level agreements  & standard operating procedures between the client & TES are crucial – they should include appropriate indemnities for instances where the TES breaches any labour or other law
TES Value Add Services
 (acknowledgment – Kirchmann’s Inc)
The traditional perception and experience of labour brokers is of a small operation where a number of workers are provided to a client, to undertake manual tasks on a daily basis. Established TES companies offer a host of value-added services to clients.
Resourcing – advertise, screen & verify employees including ID, licence, qualification & reference checks
Work readiness & integration
Education, training & development 
Payroll & related admin, including UIF, COID, PAYE, SDL & leave management
Labour relations & dispute management (e.g. at CCMA & bargaining councils)
On-site management of temporarily placed employees
Client requires less HR staff because the TES employs it’s own HR professionals
The timing of payroll & SLA payments can significantly free up the client’s cashflow
Functional outsourcing:  end-to-end management of non-core operations
We hope that this article has assisted you to sort fact from fiction and to gain a more balanced perspective on this issue, than what you may have obtained via the media.
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