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Labour Law

Death By Probation

Do small business owners understand what rights they have when dealing with errant employees within their probationary period?

Allon Raiz

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Or will most end up being held for ransom by their employees who understand the labour law better than they do? This is always a concern for SMEs, where poor employment choices can mean huge costs for the smaller business owner.

One naturally interprets the purposes of the probationary period as a time period that affords employers the opportunity to evaluate an employee’s performance before confirming an appointment. It is then natural to extrapolate out of this concept that the employer would easily be able to dismiss an employee who is on probation.

Most entrepreneurs assume that the probationary employment period is basically a licence to dismiss the probationary employee on the basis of non-performance, misrepresentation of skills or ‘cultural fit’. Not so. In fact – there is very little difference between the rights of an individual who is fully employed and one who is on probation.

Being exposed to over 300 small businesses in the various Raizcorp programmes at any one time, the same mistakes are made by entrepreneurs time and time again in relation to how they hire and fire.

When is right, right?

A case in point was an affiliate who recently fired a probationary employee for these very reasons, as well as excessive absenteeism. The employee had wreaked havoc on the business by missing deadlines, which resulted in the exasperated business owner summarily telling the employee to ‘pack their bags’ and he considered the matter closed.

A few months later, the owner was slapped with a secondment to the CCMA for unfair dismissal of the employee in question.

Sadly, the employer’s actions were in direct contravention of South Africa’s labour laws. According to the law, the employer was required to undergo a series of HR-related measures before finally dismissing the employee, and none of these measures were taken.

Due to the marginal profitability of the business, the CCMA’s demands have resulted in two alternatives for the small business owner – either he concedes and pays out the negotiated settlement fee or he is forced to retain the employee with back pay, yet both alternatives make the business unprofitable and unsustainable.

The time spent at the CCMA defocused the entrepreneur resulting in further damage to the business. He decided to close the business and seven other jobs were lost.

Another incident involves a small business owner who had employed a sales manager that was clandestinely operating a competing business by utilising the employer’s business as a feeding trough.

The employee was undercutting his employer’s costs to secure contracts and tenders for his own business from his employer’s client base. These actions were discovered by the employer and the probationary employee was summarily dismissed.

Again, the small business owner failed to complete the requisite steps in order to dismiss the individual legally – leading the individual to take the employer to the CCMA for unfair dismissal. This was done despite the fact that the individual had effectlively been caught stealing from his employer and was within his probationary period.

The employer was faced with the choice of spending a small fortune in legal and travelling costs to fight the case or paying the individual a slightly smaller sum and walking away. The employer made the payment and this outlay almost crippled his business.

Mitigating risks

These stories have become all too familiar; the small business-owner who risks his livelihood due to a poor understanding and application of labour law. It feels wrong on so many levels.

This has become a huge problem for small and medium-sized businesses. These businesses most often do not have the resources and skills required to navigate through tricky labour-related issues such as a conflict in the probationary period of an employee. This leaves the small-business owner vulnerable to opportunists who know how to manipulate this loophole in the legal system to their advantage.

The suggestion is not that the labour laws be amended to strip labour of its rights further, as this would leave big business open to abuse and exploit their workforces at will, which is why the current labour laws were developed.

Neither is the suggestion that two separate sets of labour laws are adopted; one that would apply to big business and one that would apply to small business. This would open Pandora’s Box from an enforcement perspective.

Giving SMEs a break

The suggestion is merely that the legislation around the probationary period be amended to be less onerous on the employer to prove the employee’s lack of performance and/or misrepresentation of skills. This would create an elegant and simple solution to a situation which has seen many small businesses being held ransom by errant employees and, ultimately, being destroyed by the legal costs and time required to fight these incidents.

Running a small business is a tough and risky endeavour. We all know the statistics for survival of a small business. By re-thinking the labour law’s ‘probation clause’ we would reduce some of the risks inherent to being an entrepreneur, resulting in a higher survival rate and, consequently, a higher employment rate. Surely this is worthwhile consideration for our Government?

Allon Raiz is the CEO of Raizcorp, the only privately-owned small business ‘prosperator’ in Allon Raiz is the CEO of Raizcorp. In 2008, Raiz was selected as a Young Global Leader by the World Economic Forum, and in 2011 he was appointed for the first time as a member of the Global Agenda Council on Fostering Entrepreneurship. Following a series of entrepreneurship master classes delivered at Oxford University in April 2014, Raiz has been recognised as the Entrepreneur-in-Residence at the University of Oxford’s Saïd Business School. Follow Allon on Twitter.

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Labour Law

Alternatives To Traditional Legal Services – What Options Do Entrepreneurs Have?

In reality, small businesses that see legal compliance as a priority are often not in the position to hire attorneys.

Nicolene Schoeman-Louw

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Legal Services

Times are tough, especially for entrepreneurs. In order to succeed in the business world, you need “grit” as the Americans say. In addition, to you need access to markets and access to funding.

The problem with accessing sustainable markets, is that it often is a David versus Goliath situation. As a result, long and complex contracts or requirements are set. What is more, because most smaller businesses are more concerned about making sales or simply making ends meet, getting to the legal side of things – well that simply does not happen. This leads to businesses being non-complaint and thus viewed as a risk – as a result cannot access funding.

In reality, small businesses that see legal compliance as a priority are often not in the position to hire attorneys. As a result, their options are:

1. Purchase a template from a news agency

Although very cost effective, the problem with this is that templates are often outdated and the instructions on completion are unclear. If outdated and incorrectly compiled, businesses are, in my view, simply better off without.

Many businesses do not buy templates but actually download it from the internet. The problem with this is that the sources of these are often unclear – so in reality, you really don’t know what you are getting.

Related: SchoemanLaw Shakes Up The Legal Industry To The Benefits Of SMEs

2. Subscribe to legal insurance or legal consultancy

Subscriptions for in case you require legal representation are usually insurance policies. The problem herewith is that often some disputes are excluded, or some advisory needs are not included. Resulting in the business being left without access to these services, in some cases when they need it the most.

In terms of consultancies, these are businesses that are not law firms. In many instances, their service delivery and prices are much more competitive than law firms are. However, should a client be dissatisfied, they have limited recourse. All professionals belong to professional bodies that set and enforce standards. So, contracting with a consultant bears the risk of no specific quality standard guarantee and, in case of dissatisfaction, recourse lies in ombud structures or courts and often cost money.

3. A different way of thinking

It seems that small businesses are really left out in the dark. However, technology and developments in the legal industry may hold the answer. A select few consultancies, and now a law firm, have embarked on automating the documentary needs of small businesses and start-ups. SchoemanLaw Inc. in Cape Town is one of those firms.[1] In essence, this development is addressing a challenge faced by every other purported solution to date. Some benefits of this mind shift include:

  1. Users have access to up to date documents;
  2. It’s instantly accessible and the source is clear;
  3. Some systems include sophisticated help functions so as to ensure correct completion and implementation;
  4. The prices cannot complete with the traditional way of obtaining legal advice;
  5. Those supported by a law firm, are guaranteed the standards and quality associated with a law firm;
  6. Advisory support is often included or can be accessed additionally.

Related: Master The Ins And Outs Of South Africa’s Labour Laws

In addition, relying on more efficient ways of accessing these crucial services also standardises, manages and organises the legal and contractual needs of any businesses. Something that will serve them well whenever they wish to pitch to that large company for that contract that will really change things or access to funding when needing to expand.


[1] For more information: https://www.schoemanlaw.co.za/online-legal-services/

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Unlegislated ‘Other’ Leave Not A Right Says CRS Technologies

Employers are free to offer staff various types of leave, not covered by legislation, but recognised and governed by company policy and contracts – however, as HCM experts explain, this ‘other leave’ is not a right and ought to be seen as a privilege.

CRS HR And Payroll Solutions

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Employers are free to offer staff various types of leave, not covered by legislation, but recognised and governed by company policy and contracts – however, as HCM experts explain, this ‘other leave’ is not a right and ought to be seen as a privilege.

Nicol Myburgh, Head of HR Business Unit at HR and HCM solutions specialist CRS Technologies, distinguishes leave covered by the Basic Conditions of Employment Act (BCEA) – including annual leave, sick leave, family responsibility and maternity leave – from ‘other leave’ including study leave, paternity leave and cultural leave, for example.

For employers, there are a host of issues that need to be kept in mind when regulating ‘other leave’.

As Myburgh explains, leave that falls into this category is not governed by legislation and therefore is at the discretion of the employer in terms of how it is structured and applied.

Related: Poor Sick Leave Management Is Affecting The Health Of Businesses – CRS Technologies

Additionally, HR and HCM experts agree that these types of leave must be regulated by company policy, particularly the reasons why it is approved and when it is approved, all of which must be substantiated to prevent any feeling of discrimination or bias treatment among staff.  It is also possible that these forms of leave may be viewed as benefits, and that the refusal of an application may give rise to claims of unfair labour practises, and or breach of contract.

“Another important factor to consider is that some of these leave types – especially study leave – are offered by so many companies, that many employers have come to believe this is a statutory type of leave, and employers are obliged to provide it. This is not the case, study leave is not compulsory and even if an employer provides for it, they can make their own determination thereon,” says Myburgh.

CRS Technologies advocates that before additional leave types are approved, companies conduct an in-depth analysis to identify business risk with reference to operational requirement and the amount of staff members necessary to achieve operational goals.

“For instance if an employee takes leave that keeps him/her away from the office for a long period of time, like sabbatical leave, would the employer still be able to meet its operational requirements,” Myburgh adds.

It is also advisable to keep abreast of legislative changes that impact on leave management.

Although ‘other leave’ is not covered by legislation, Myburgh reminds the market that there may be some changes on the horizon.

On 25 November 2015, a draft bill was published in the government gazette which proposes to amend the BCEA, and the Unemployment Insurance Act, 2001.

Significant proposed changes include:

  • 10 consecutive days parental leave when a child is born or adopted.
  • The right to claim payment of parental benefits.
  • 10 consecutive weeks adoption leave if the child adopted is below the age of two.
  • If there are 2 adoptive parents, one of the parents may apply for parental leave and the other adoption leave.
  • The right to claim payment of adoption benefits.
  • 10 weeks of ‘commissioning parental leave’ for employees in a surrogate motherhood agreement.
  • If there are 2 commissioning parents, one of the parents may apply for parental leave and the other parent may apply for commissioning parental leave.

Related: Family Responsibility Leave – Know The Law Says CRS Technologies

Myburgh emphasises that employers familiarise themselves with the differences between BCEA and Bargaining Council or Sectoral Determination regulations, particularly where it applies to the governance of other leave.

This can only lead to improved operational efficiency and a more focused, productive and balanced work environment.

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Labour Law

Will Minimum Wage Increase Boost Economic Growth In South Africa?

The increase in minimum wage comes as good news since it raises the amount of disposable income for the domestic workers.

Jeff Broth

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johannesburg-city

The South African government announced on Monday that it is going to raise the minimum wage for domestic workers in the country starting from December 1st 2016. Labour Minister Mildred Oliphant said that the new wage increase will be applicable until November 30th 2017. The increase in minimum wage comes as good news since it raises the amount of disposable income for the domestic workers.

With the higher levels of disposable income, the domestic workers can decide to spend it all in improving their living standards or save the surplus income. However, for the financially prudent domestic workers, they will find ways to invest the surplus income through easy to use channels such as Stern Options and other trading platforms.

In his statement, the Labour Minister added that “The minimum wage adjustment is in line with the Basic Conditions of Employment Act which is regulated through the Sectoral Determination. Domestic workers are by law classified as vulnerable‚ hence the Sectoral Determination governing minimum wage and conditions of employment.” According to the labor laws in South Africa, domestic workers include nannies, gardeners, domestic drivers, housekeepers among others.

Related: Increase For Hospitality Wages

The minimum wage increase will however not be applied uniformly in all places. The government has divided different locations into Area A and Area B. Area A consists of major cities, towns and metropolitan municipalities. For domestic workers in Area A working for more than 27 hours per week, their hourly rate will be increased from R11.44 to R12.42. This will translate to weekly earnings of R559.09 from R514.82; and a monthly increase in wages from R2230.70 to R2422.54.

Domestic workers working for less than 27 hours a week in Area A, their hourly wage rate was raised to R14.54, which adds up to a weekly wage rate of R392.58 and cumulatively sums up to a monthly wage rate of R1 701.06. On average, the change in minimum wage for the metropolitan areas represents an increase of about 8.2% in the net pay for domestic workers from the previous year.

Area B consists of non-metropolitan areas in South Africa. For domestic workers in Area B working for more than 27 hours in a week, their new hourly rates stand at R11.31, which translates to a weekly rate of R508.93 and cumulatively add up to a monthly rate of R2205.17. Those domestic workers working less than 27 hours in Area B will start receiving a new hourly wage rate of R13.53, a weekly rate of R360.54 and cumulatively receive a monthly wage rate of R1 562.21. Compared to the financial year 2015/2016, on average this represents a 10% increase the wages for the domestic workers in Area B.

cyril-ramaphosa

These changes are the first among several others that are expected to be introduced in the coming months by the government of South Africa. Early on in August this year the Deputy President of South Africa Cyril Ramaphosa launched the process of reviewing the national minimum wage for South Africa by appointing a seven member panel to initiate the deliberations on the same. The debate about minimum national wage has been in the media for quite some time now going back to first quarter of 2016.

Related: How To Structure A Fair Salary That Will Motivate Your Sales Team

One school of thought believes that the minimum wage is not the solution to economic development in South Africa. In their argument, they believe that setting a minimum wage will increase the cost of production for goods and services and leave employers with two options.

The employers will either reduce their headcount in order to curb the rising costs or increase their product prices and face the danger of reduced demand and falling sales. Both alternatives are detrimental to economic growth.

Another school of thought argues that with increased minimum wages, spending power for the consumers will be increased and they will buy more goods and services that they could not afford before.

This would then push demand up and translate to higher production to meet the increasing demand and hence result to an increase in GDP. Eventually South Africa would experience higher economic growth rates as higher revenues for businesses result to further increase in wages by the employers which sparks another round of increased production and the cycle continues.

The debate is still raging on whether the increase in minimum wage is the solution to South Africa’s economic development and the final judgment is yet to be arrived at. However, with the panel constituted to deliberate the matter being made up of the best brains in the discipline of economics, we can expect prudent results to emerge from their discussions soon.

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