Two major considerations for international employers deciding whether to enter a market are the practical restrictions imposed by stringent, highly protective labour legislation and the efficiency and expediency of the country's labour dispute resolution mechanisms. South Africa's employment laws are not as stringent as those of many European markets, even though they are still viewed as more rigid than those in various other developing markets. In addition, South Africa's labour dispute resolution landscape is considered to be more effective than those in many other developing markets. This, overall, makes South Africa an attractive jurisdiction in which to employ workers, contrary to views commonly expressed by many local businesses.
Countries typically follow guidelines from the International Labour Organization when developing their labour law frameworks, with the ILO boasting a membership of 186 of the 193 United Nations member states. The ILO sets the standards for fair workers' rights globally, and countries voluntarily subscribe to this organisation's guidance. Member states adopt or ratify ILO conventions and develop or amend their labour laws to give effect to these conventions, factoring in their own social, political, economic, and historical circumstances. ILO-supported employment law frameworks currently exist in Botswana, Kenya, Tanzania, and South Africa, to name a few.
In South Africa, the country's labour law regime includes various employee protections that provide entitlement to unemployment insurance, employee leave benefits, the national minimum wage, employment tribunal protections, and the right to strike.
South Africa's Unemployment Insurance Fund (UIF) is a vehicle for the payment of benefits to employees who become unemployed, take maternity or other forms of statutory unpaid leave, or qualify for various other statutory benefits covered by the fund administered by the State. Employers and employees each contribute 1% of the value of the employee's remuneration to the UIF monthly.
National minimum wage
The country's National Minimum Wage Act came into effect in 2019. This Act applies to all workers and their employers, except members of the National Defence Force, the National Intelligence Agency, and the South African Secret Service. The national minimum wage is currently ZAR 25.42 (USD 1.33) per hour, with a few exceptions.
The Basic Conditions of Employment Act provides for minimum terms and conditions of employment relating to, among other things, the regulation of minimum leave, working times, particulars of employment and remuneration, notice periods, and payments on termination. The minimum standard legislation creates two-tiered protection, with staff earning less than a minimum annual salary receiving additional protection in respect of entitlement to overtime pay, minimum rest periods, maximum duty hours, and similar benefits aimed at protecting vulnerable workers.
The Commission for Conciliation, Mediation, and Arbitration is the country's employment tribunal tasked with conflict resolution, dispute management, education, and disseminating information to employers, employees, and their organisations. The CCMA may accredit bargaining councils to conduct conciliations and arbitrations within their sector. The standard dispute resolution process entails mandatory conciliation, followed by compulsory arbitration, where disputes are not resolved by agreement at conciliation. Arbitration awards are final and binding, and with one exception, they are not subject to appeal, although defective awards may be reviewed and set aside by the specialist labour court. The CCMA boasts an exceptional percentage of being able to resolve disputes by consent at conciliation, with typically only around a quarter of cases proceeding to arbitration.
Right to strike and collective bargaining
The rights to strike and bargain collectively are entrenched in the South African Constitution and given effect in the Labour Relations Act. The LRA sets out procedural and substantive limitations on the right to strike in South Africa, such as requiring employees to declare a dispute with the employment tribunal, subjecting the dispute to conciliation, and providing prior notice of the strike. The right is further limited in that employees may not strike where they have agreed not to do so or where the dispute may be adjudicated by a court or tribunal, for instance. Whilst the legislation provides the statutory framework for union representation and collective bargaining, trade unionism is on the wane in South Africa (as is the case in most jurisdictions), with collective bargaining not prescribed as a matter of law. As a general proposition, employers and trade unions have to agree to bargain collectively, with employers able to agree with whom they engage in collective bargaining, if at all.
In the face of rising labour costs and an uncertain global economy, however, various businesses will continue to look beyond the direct employer-employee model to satisfy their work requirements, with some opting to increase their reliance on third parties and independent contractors. In the current economic climate, almost all global businesses are subject to stringent requirements relating to increases in employee headcount. Businesses in need of increasing capacity without the ability to hire more staff often consider independent contractors and temporary workers as a (short-term) measure to manage internal restrictions. Employee misclassification is a risk faced by businesses in most jurisdictions, where courts and tribunals will consider the true nature of a work arrangement to determine whether an independent contractor is indeed a party to a purely commercial arrangement or is a disguised employee entitled to protection under the employment laws.
Several countries, including South Africa, have further implemented protective laws that govern aspects of temporary workers' employment relationships in an effort to provide greater protection against potentially abusive practices. For the average global or multi-national company seeking to do business in South Africa, these laws and protections are nothing new and certainly not draconian. Global businesses are typically well aware of prohibitive employment practices and manage their businesses in line with commonly accepted legal requirements. Those seeking a safe haven for exploitative practices would be disappointed to find that they would not be able to do things here that are considered wrong in most other countries as well, but those businesses with typical sound employment practices will find this jurisdiction to be surprisingly welcoming to employers.
South Africa is a relatively straightforward jurisdiction in which to be an employer, with highly regarded dispute resolution institutions assisting to ensure legal clarity. Elements of stricter labour laws are needed when considering the country's history of inequality, warranting a heightened need for measures to protect employees' rights. To guard against a labour regime becoming too rigid, however, we should always strive to consider and introduce innovative and dynamic policies that focus on simultaneously encouraging economic growth and alleviating inequality. The death knell of a jurisdiction seeking to attract businesses and create employment opportunities is when the employment law regime becomes so stifling that the victims of such employee protections turn out to be the employees it aims to protect.
Key takeaways for businesses
- South Africa is considered by some to have a protective labour law regime. Its labour laws are not as stringent as those of many other markets, but provide greater employee protection than other developing markets.
- Its labour laws include various employee protections that provide entitlement to unemployment insurance, employee leave benefits, the national minimum wage, employment tribunal protections, and the right to strike.
- The country has a very effective labour dispute resolution landscape that employers and employees can utilise to ensure legal clarity.
- Multinational businesses with sound employment practices already in place will find this jurisdiction to be surprisingly welcoming to employers.
- However, it is important that labour law regimes do not become too rigid by regularly assessing the need for innovative, dynamic policies to encourage economic growth and alleviate inequality.