Service provider or labour broker?

“Our company wants to help out one of our oldest clients by allowing some of our labourers to work for a few months for the client on a project at the client’s site. The client has had to layoff staff during Covid-19 and we would temporarily help him out with our labourers. We would continue to pay our staff with the client paying us a service fee for the labourers and other support services. Our human resources manager however is concerned that we could be seen as labour brokers should we move forward with this arrangement. Would this be the case?”

The Labour Relations Act 66 of 1995 (LRA) refers to labour broking as Temporary Employment Services (TES) and pertinently regulates such services to protect vulnerable employees that have in the past been vulnerable to abuse through labour broking arrangements. 

The LRA defines TES as any person who, for reward, procures for or provides to a client other persons (a) who perform work for the client and (b) who are remunerated by the TES. Once a business is seen to be a TES, important consequences flow from this for both the TES and the client with whom such persons are placed. For example, employees earning below R205,433.00 and who are placed with a particular client for a period longer than 3 months, automatically become employed by the client and may after 3 months automatically fall within the same terms and conditions as the client’s employees in relation to employment benefits and job security. 

In your situation the question is whether a service agreement in terms of which you contract with a client to provide services, including staff, would amount to labour broking? 

Our Labour Appeal Court (LAC) recently had to consider such a situation. Here the LAC looked at a number of factors and also held that it would always be necessary to consider a range of factors when deciding whether a TES relationship existed. Factors such as whether the client could discontinue the services of the employees, was responsible for their working conditions, whether staff were placed at the client’s premises, whether the client had full control over the manner of their work etc. could all weigh in favour of a TES relationship even though the client did not directly pay the employees but paid a contractual service fee.

Accordingly, from the above it does appear as if there could be a risk that your arrangement could be seen as labour broking. There is nothing inherently wrong with this, provided the consequences in terms of the LRA for you and your client is clearly understood. We would therefore advise that you consult a labour specialist before you proceed with the arrangement to help you ensure that your actions and consequences are clearly understood and planned for.

November 10, 2020
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