In line with global trends, youth unemployment in South Africa has reached crisis levels. Our unemployment rate is high for both youth and adults; however, unemployment among young people aged 15–34 is particularly dire. In Q1 of this year the rate was 38.2%. This means that more than one in three young people in the labour force did not have a job. Translating that into numbers, nearly six million young people in this country are out of work. Furthermore, many of them are “NEET” – not in employment, education or training – in other words, well and truly unemployed. We have the third highest youth unemployment rate in the world.
As a nation South Africa faces the paradox of jobs going unfilled for lack of skilled applicants, while thousands of learners leave school with a matriculation certificate but are unable to enter the workforce, either due to a lack of work readiness or an inadequate education. Shockingly, 56% of the million young people entering the job market each year don’t have a matric. Fixing our education system is not an overnight task; so in the short term we need other solutions that will enable young people to access the training and work opportunities they require.
A social and economic crisis
Employers often want experience, but without a chance to step into that first job, youth find it difficult to get the required experience that makes a CV attractive. The crisis is not only economic, it is social, as young people become disaffected and disenfranchised and ultimately lose hope in their future prospects. Challenges such as HIV, gender-based violence, drug abuse, crime and gang activity are not caused by unemployment, but it is often a contributing factor to many social ills. Economically, everyone loses out: tax receipts are lower and there is less public funding available to contribute to infrastructure, healthcare and education. GDP is negatively affected, because when consumer spending is dampened due to low personal and household incomes, our national output suffers.
And it is not just a crisis of the present – our youth represent the workforce of the future. If they are not being trained, educated or employed, who will be the backbone of our economy 10, 20, 30 years from now?
On 27 March this year, President Cyril Ramaphosa launched the Youth Employment Service, or YES. The initiative is a joint effort involving government, labour, business and civil society, designed to provide more than one million young South Africans with paid work experience over the next three years. At the launch, Ramaphosa stressed that the initiative is just one pillar of a broader national effort to create opportunities for young people. “Another central pillar of this effort must be the development of the skills and capabilities of young people,” he said.
How does YES work?
For the youth:
Any young person can register for the programme, provided they:
- are between 18 and 34 years old
- have been unemployed for more than six months
- are black people (African, Coloured or Indian)
Once registered, young people will be required to sign a contract with YES indicating their commitment. The salary is expected to be the national minimum wage of R3 500 per month. Registering for the programme is not a job offer and individuals will still have to apply for placements on a competitive basis. The YES website contains a range of work readiness resources to help young people prepare for interviews and placements. Currently, placements will only be released once the YES legislation is finalised.
The aim of YES is to create new one-year positions for unemployed youth over and above current employment numbers. YES is designed to be “additive”. Businesses can be part of YES by employing a number of young people – or a single young person to mentor and develop. As an incentive, businesses will qualify for a new youth employment B-BBEE recognition, to be gazetted shortly. This will allow a business that meets YES targets and complies with registration criteria to move up a level on their current B-BBEE scorecard.
Not all organisations have capacity to host young people, but there are other ways for companies to participate in YES. There is provision for large companies to sponsor the salary of a one-year starter position in an SMME near a young person’s home (e.g. in a rural area). The benefits of this option are twofold: – the larger company will qualify for B-BBEE recognition, while the SMME will gain capacity and competitiveness. It is also possible to develop youth-owned micro-enterprises that feed into the supply chain and place youth in external service providers for training and work experience.
Employment Tax Incentive
The Employment Tax Incentive is not new, and is not a component of YES, but if youth employed under the YES scheme are between the ages of 18 and 29, the employer will be eligible to claim the ETI, which reduces the cost of hiring young people through a cost-sharing mechanism with government. The employee must earn not less than R2000 per month and not more than R6000. The employee’s wage is unaffected by the ETI; the tax incentive is worth c. R1000 per month to the employer (it’s a bit more complex than that, for full details see www.sars.gov.za). Employers must be registered for Employees’ Tax (PAYE) with SARS and must be tax-compliant to be eligible for the scheme.
Say yes to YES!
Young people need high-value careers, not just jobs. They need employment that harnesses their skills and talents and contributes to the intellectual as well as economic growth of the country. They need training that develops their potential and moves them from entry-level jobs to rewarding careers. But to do that, they need your support. President Ramaphosa has challenged business to create half a million jobs a year to tackle youth unemployment, saying that young people don’t want favours, they want opportunities. For young people in rural areas particularly, it can be very costly to find employment, with places of work being located far from homes. “This is where we all work together to respond to a social challenge that affects our people,” said Ramaphosa.
This Youth Day, let’s all consider how we can make YES a success, and build the workforce of the future.
For more information, visit www.yes4youth.co.za.
We’ve been looking at workforce management in our last few blog posts. Trends regarding contingent workers and how to implement a contingent workforce strategy are two of the topics we’ve explored. But maybe you’re still not sure if you’re ready to expand your staff complement to include contractors, freelancers, gig workers, etc. Your policies and procedures are all geared to managing your permanent employees, and the notion of moving away from these familiar processes may be a bit daunting. How do you know you will reap the benefits?
Ironically, contingent workers tend to be used by very large and very small organisations. Large companies have sufficiently robust infrastructures to manage the on- and off-boarding of contractors, and usually have a variety of projects needing specialised skills for a fixed time period. Very small companies, on the other hand, are not equipped to carry the overheads of all the skills they require, particularly when they don’t require them all the time. It makes obvious economical sense for a micro or small enterprise to engage certain functions or activities on a contingent basis. But if you are in the middle – a medium-sized company – with all the basic departments staffed by qualified professionals – HR, finance, IT, communications, etc., you may be unsure as to what value a contingent element would add to your current workforce strategy.
It may be helpful to consider the following “Big 5” advantages that contingent workers bring to an organisation and ask yourself if your business could benefit from them.
Does your business experience fluctuating demand? Are there seasonal variances or is a lot of your activity project-based? A flexible workforce could help you navigate these variable requirements, insulating you from the ups and downs and the risks associated with hiring and firing permanent employees to meet demand. Contract workers move on when the contract is finished and the off-boarding process is simple. You may even find a contingent workforce makes expansion more attractive, as it removes some of the risk and allows you to take a just-in-time approach to your staffing requirements.
If the cost of contractors has deterred you in the past, it’s worth considering the total cost of an employee. You may find that the “premium” you associate with contractors is not as much as you think, when you factor in the cost of recruitment, on-boarding, benefits, etc. Contingent workers cover their own holidays, sick days, medical aid, etc., and the cost of recruiting, on-boarding and termination is covered by the managed service provider (like Highveld) providing the resource.
Timeliness, aka speed
Think of how long the typical recruitment and selection process takes. If you manage to fill a vacancy in less than three months, from first advertising the post to inducting the new employee, you are either very efficient or very lucky. Finding suitably qualified people takes time. But if you want to be seen as an agile and flexible organisation, there are times when you must act quickly. A contingent workforce gives you the element of speed. Contractors and freelancers can be sourced quickly in the event that an unforeseen need arises urgently. Managed service providers have databases of qualified and vetted professionals who can respond to your request immediately.
Perhaps you are working on a project that demands a particular specialist skill. When the project is finished, that skill may be surplus to requirements. Do you carry the overhead and under-employ the resource, waiting for the next relevant project? Using contingent workers allows you to recruit exactly the skills you need, when you need them, and then part company. It enables you to access far more technical, highly skilled experts than you could afford to employ on a full-time basis. Furthermore, you can usually source these experts at short notice (see “speed”, above).
Temp to perm
Now this may seem contradictory, but those contingent workers could just be a good source of permanent employees. Not all contractors and freelancers will be tempted by such a proposition; in fact many wouldn’t choose any but the “gig” lifestyle. But it is not unusual for a “temp” to fit in so well they are offered…and willingly accept…a permanent job offer from a “casual” employer. If you have a cohort of contingent workers you use semi-regularly, your HR department may see them as a good source of talent for key positions, with the added advantage that you have a performance record for them. You’ve been able to “try before you buy”.
Alternatively, if you are using a contingent worker to fill a gap that is taking some time to fill, you can ask the contractor for feedback on the lived experience of doing the job. Their observations may help you refine the job description and your selection techniques to better identify the most suitable candidate for the position.
Talk to us
Taking the plunge and adding contingent workers to your staff complement can seem like a big step, but a good managed service provider like Highveld can take the strain, leaving you free to focus on doing what you do best – running your business. Let us show you how a contingent workforce can improve your productivity and help you manage your costs.
Contact us on 012 367 5600 or firstname.lastname@example.org. Your business is worth it.
Last week we examined the importance of having a strategy for your contingent workers, to optimise your investment in this vital part of your workforce. Knowledge of developments in contingent workforce management will help you make the most of ever-changing opportunities and manage the ever-present threats. This week we take a look at the evolving trends for contingent labour.
According to Deloitte’s 2018 Global Human Capital Trends, it appears that most non-traditional workers are managed tactically, often by the procurement department. Few organisations have a comprehensive talent strategy that includes contingent workers. In What’s Your Game Plan?, we looked at the challenge of managing labour as an expense, but if that’s your organisation’s policy, you are far from alone. In this year’s survey, only 29% of respondents say their contingent workers are issued contracts, and only 32% track the quality of contractors’ work. Only 16% have an established set of policies and practices to manage a variety of worker types.
A new set of concerns
If contingent workers represent an expense, rather than an asset, it is a growing one. Looking ahead to the workforce of 2020 (only a year and a half away!), 37% of survey respondents expect to see growth in the use of contractors, 33% in the use of freelancers, and 28% in the use of gig workers (nothing to do with gigabytes, the term comes from the music industry – these are workers who take on very short-term ‘gigs’).
Software is keeping up – a number of major HR software vendors have introduced products or product extensions to manage the changing employee ecosystem; but software alone can’t allay the growing concerns employers voice about managing a non-traditional staff complement. 42% of survey respondents are worried about the loss of confidential information, and 36% mention reputational risk arising from a negative perception of non-traditional employees as a concern. Instability is a risk for 38% of respondents, and a similar number are anxious about breaching tax regulations and labour laws in managing or classifying contingent workers.
The drivers behind the changing workforce
We’re seeing an increase in the use of the various kinds of contingent workers, new software to manage them, and rising concerns, even if organisational talent strategies haven’t caught up. But what are the environmental trends driving the shift to a more flexible workforce?
It seems there is no getting away from the influence of AI (artificial intelligence, in case you’ve been living under a rock for the past few years). AI is often used generically, but it is in fact just one of the disruptive technologies, which also include machine learning, natural language processing and cloud storage, and they are quickly becoming commonplace in our personal and professional lives. The experts who develop and maintain these systems are in high demand and short supply, so inevitably many of them choose to work independently, moving from contract to contract (or gig to gig) to provide the support organisations need to make the most of this technology.
The human cloud
‘Cloud computing’ has become the norm. It is becoming less and less common to have whole rooms dedicated to an organisation’s servers. Everything is ‘in the cloud’. Enter the ‘human cloud’. Technology facilitates increasing mobility. The human cloud is defined as a set of work intermediation models enabling the digital establishment of work arrangements. On the one hand, this means that functions from procurement to payment can be carried out centrally, without the need for physical interaction, and on the other hand it creates a mobile workforce for whom geography is irrelevant. Workers may work from home, significantly reducing organisational overheads, and they may even be based on another continent.
Where once being a contractor or freelancer could be a lonely life, lacking the social benefits associated with belonging to a permanent workforce, the social environment for contingent workers is growing. Online communities of independent professionals are collaborating, sharing, learning and connecting. Contingent workers are building their own professional networks. If you want to tap into them, you need to learn to navigate that space.
While no one has yet invented Tinder for contingent workers, contractors, freelancers and gig workers are being used to fill roles strategically, rather than to put ‘bums on seats’. Selection of contingent workers is no longer commoditised, where any systems analyst will do as long as they possess the relevant qualifications. Employers have access to more information about prospective workers, thanks to social media and digital platforms, and are able to make better decisions when sourcing, thus improving efficiencies and reducing risk for both employer and employee.
Total talent management
Total talent management, or TTM, is the new buzzword in workforce management. TTM refers to the integration of the full range of talent sources, from traditional employees to a wide variety of non-employee workers, who might include temporary workers, independent contractors, consultants, freelancers, volunteers, outsourced resources, and even non-human options such as robots and drones. While the classification of workers has become a serious concern, not only here in South Africa but globally (see No Hiding from the Long Arm of SARS), properly implemented TTM brings significant advantages to organisations:
- Ability to source the right talent to fill a specific need, with no geographic restrictions
- Cost and resource savings associated with onboarding processes for full-time workers for projects that don’t require full-time cover
- Capital released and greater flexibility and competitiveness gained by retaining talent on a project-by-project basis
Which way now?
The evidence is conflicting. While use of contingent workers is on the increase, driven by the inexorable advances in technology and changing attitudes to work (many of which are characteristic of the millennial generation – see Bridging the Generation Gap in the Workplace), and the software exists to monitor and manage all categories of workers, most organisations’ policies and procedures have not caught up with the trends. As a result, businesses have a rising set of risks – or at least perceived risks – to manage.
If you are using – or want to use – contingent workers, but are not sure how to make the most of the opportunities they present, talk to us. Highveld can help you optimise your contingent professional workforce, effectively managing quality, efficiency, compliance and cost.
Contact us on 012 367 5600 or email@example.com. Your business is worth it.
Whether you call them contingent workers, your non-employee workforce, independent contractors, or just temps, it’s likely that contingent labour is becoming an increasingly important part of your HR strategy. Or is it? Perhaps you started with the occasional contractor, when a project needed additional resource or a key individual was out of action, and over time your reliance on independent professionals has grown to represent a significant proportion of your total resource, without any planning having taken place.
If this sounds familiar, now might be the time to take a more strategic approach to your flexible workforce.
Who owns it?
This is a key question. If you think the obvious answer is the HR department, think again. In some organisations contingent workers are managed by procurement. This brings a very different dynamic to contractor engagement. Procurement or finance departments may see flexible labour as a financial resource and manage it accordingly – as an expense. However, a talent management strategy may be more relevant. Is your contingent worker strategy mapped to your human capital and total workforce strategy? If it sits in procurement there may be a disconnect…or even a conflict…between the two.
Have you reviewed your policies and procedures recently? Do they accommodate contingent labour? Do you have meaningful controls in place and does your risk strategy include recognition of and mitigation for the risks associated with contractors (theft of intellectual property, etc.)?
Even if your policy framework is up to date, what about your internal communication practices? Do you advise the right people when you make a change to a policy or procedure? If you engage your contractors through a third party, terms and conditions, annual leave, etc. may be governed and managed by the contractor management service. But that doesn’t eliminate the need to keep all staff…employees and contractors alike…informed about company policy on key issues such as internet use or smoking.
Let’s assume for a minute that you have great systems. You know how many contractors you have in every department at any given time (you do, don’t you?). Your records are current and you have nothing to fear from the taxman when it comes to correctly categorising all your workers. But how do you measure the inputs/outputs of your contingent workforce? Do you have robust mechanisms in place to ensure you can quantify the value added by your temporary teams? Peter Drucker famously said, “You can’t manage what you can’t measure.” Do you measure the success of your contractor programme, so that you can defend it if faced with budget cuts or challenged about results?
Skills, structure, standards, strategy
Have you conducted a skills analysis to determine precisely what expertise you need, now and in the future, to meet your business objectives? If you’ve used contractors purely to fill gaps on an ad hoc basis, you may not be optimising this key talent pool. A contingent workforce can…and should…be part of your total resource management strategy, feeding into your overall business strategy.
It’s worth taking some time to think through structural issues such as reporting lines; roles and responsibilities, i.e. what roles do contractors fill and to what extent are responsibilities delegated to them; key stakeholders; and cross-functional collaboration. Strive for efficiencies wherever possible and make sure you engage all the necessary organisational functions, e.g. legal for any compliance issues, IT for data security, etc.
Apply the same standards and rigour to decisions concerning your contingent workforce as you apply to your permanent employees and to other procurement decisions. This includes thorough background checks, unless a contractor management service does this for you. A contractor may only be with you a short while, but untold damage can be done in that time if an unscrupulous worker slips through your defences.
Communicate your strategy to all hiring managers. There may be departments within the organisation that haven’t considered the use of independent professionals but may benefit from a skills injection or more flexibility in resource management. Along with the strategy, ensure everyone in the organisation who may eventually hire contingent labour is familiar with the policies and procedures you have so carefully put in place so the correct process is always followed.
And finally, ensure your permanent employees understand why and how you are using temporary or contingent workers. They may feel threatened, either by the individuals or by your approach – they may worry that you want to replace permanent positions with flexible labour to cut costs, or they may think the temporary workers are after their jobs. Reassure your teams that contingent workers add value and enhance productivity and therefore profitability, and everyone benefits.
You’re not alone
Turn your contingent workforce into one of your strongest assets. Highveld can help you put the right strategy in place and the best contractors in your vacancies. If you want to know more about our contractor management services, contact us on 012 367 5600 or firstname.lastname@example.org. Take your business to the next level with Highveld.
Last week we wrote about the benefits of being an independent professional, or contractor. Flexibility, freedom from office politics, earning potential, independence and variety of work were some good reasons to consider the contracting lifestyle. We touched on the personalities most suited to contracting…if you need high levels of security it may not be the best career choice for you.
This week we look in more detail at some of the personality traits or attributes that characterise the successful contractor. Many of these can be acquired, even if they are not your natural inclination. But if the thought of developing these qualities leaves you cold, it’s probably advisable to keep your day job!
Above all, you need discipline. When a contract comes to an end, and long lie-ins beckon, this is precisely the time to focus on finding the next assignment. It is not a time for an extra holiday. If you are fortunate enough to have a steady stream of contracts, you must still make time for admin, financials, networking and personal growth. No training department will conduct a needs analysis and provide you with a training plan each year. You must do this for yourself. You must log your expenses and ensure you have adequate insurance cover and investment for the future. Finally, you must be able to resist taking all your profits, and instead prioritise reinvestment in your business, to ensure growth and sustainability.
While it may be refreshing to be spared the annual performance review, at the same time no one is particularly interested in your morale, or your career growth. Your employer wants results, and as a contractor you are paid to deliver them. The soft benefits that permanent employees enjoy do not apply to you. If you make a mistake, prepare to feel the full extent of your employer’s dissatisfaction. This may not happen; you may have an employer who treats all staff alike, permanent or temporary. But very often more is expected of contractors, with less margin for error. If you don’t handle criticism well, or need constant praise and affirmation, contracting may not be for you.
This may well be what drove you to consider contracting in the first place. Successful contractors are not satisfied with the status quo and always seek ways to do things more efficiently and/or effectively. The desire to enhance processes and tasks, when unfulfilled, often provides the motivation to leave a permanent post and take up contracting. The quest for continuous improvement is why contractors are in demand by employers, particularly for projects like system upgrades and migrations.
The complement to dissatisfaction is curiosity. If you are dissatisfied with a way of working, you are probably also curious about how you could make it better, which leads to continuous improvement. You are also curious about the world around you. You are interested in meeting new people (otherwise you’d find it very tedious going from one organisation to another); you have an enquiring mind and enjoy figuring things out, like the intricacies of a new situation that may appear baffling at first.
Tolerance for risk
Inevitably, risk is a factor of contracting. Risk accompanies lack of security. There is always the risk that you might not win another contract, or that you might experience a very long gap between contracts. There is a risk you might not perform to the standard the new employer expects, and you may be let go. You have no job security. If you find risk difficult to stomach, stay in your permanent job. But if you have an appetite for risk and find new challenges exciting, and don’t crave guarantees in life, contracting may suit you.
Allied to risk tolerance is resilience. You must be able to bounce back when things go wrong, or when the risks become actual events. You need to be able to rely on yourself and not depend on others to help you out when the going gets tough.
Your employers must know they can count on you to come through, no matter what. Even more importantly, they must trust you to be discreet and protect confidential information. You are perfectly placed to disclose industrial secrets to the next employer; as a contractor certain key corporate data has to be shared with you. It is your integrity that creates trust in your employers and will lead to you being hired over and over again.
Whether you are an extrovert or an introvert, you need to be able to communicate effectively to be a successful contractor. As a systems analyst or coder you might have got away with hiding out in your office when you were permanently employed, but as a contractor you have to build relationships and keep your employer informed about progress, setbacks, scope changes, etc. And you have to communicate to win contracts; no one is going to market your services except you.
And that’s not all
There are other traits that successful contractors demonstrate, such as the ability to innovate, focus, and adapt. We’d like to hear from you…what qualities do you have that make you an excellent contractor? If you are an employer, what do you look for in contractors? What attributes characterise the best contractors you have employed? Leave your feedback in the comments box at the bottom of this post.
If you’re new to contracting or thinking about a career change, Highveld can help you structure your business and maximise your earning potential as an independent professional. If you are an employer, let Highveld show you how to get the most you’re your continegent workforce.
Contact Highveld on 012 367 5600 or email@example.com. You’re worth it.
If you’re currently employed in a permanent position, you may look at the contractors in your organisation with a degree of envy. They may earn more than you do, and they seem immune to the office politics. You may be thinking of moving into contracting yourself. Contracting/consulting can be very rewarding, but you need to be clear about your motives and the benefits you expect to realise from a career as a self-employed professional. Tax rules have recently been tightened around the classification of contractors (see , so it’s even more important than ever to become a contingent worker for the right reasons.
Contracting is often seen as a short-term option after retrenchment or when considering a change of employer, but it is not a temporary solution. It is a conscious decision to change your career to a completely different employment model, that of an independent entrepreneur. It is a lifestyle choice, not just an alternative work option.
What can you offer as a contractor?
Some skills are more in demand than others, and some lend themselves to contracting better than others. According to leading South African careers website CareerJunction, the three most in-demand skills in the country at the moment are software developers, middle/department managers and representatives or sales consultants. Software development remains the most sought-after skill set on CareerJunction. And software developers are very often contractors, so if this is your profession, you are in luck.
Other positions commonly contracted out by employers, according to Monster.com, are database administrator, systems administrator and web developer. If you work in the field of IT or engineering, you are well placed to consider becoming an independent contractor, but there are independent professionals in other fields too, such as human relations, communications, finance, to name but a few.
Five reasons to consider contracting
Having determined you have a marketable skill, and there are opportunities for contingent work in your field, what are the benefits of contracting? It is important to weigh these against what you are giving up, and be very honest with yourself about your priorities and your personality. Contracting is not for everybody. If you like or need the security of a regular income and prefer to know that your retirement and medical aid contributions are always covered…if the prospect of potential gaps between contracts makes you nervous…then contracting is probably not an option that suits your temperament. If you like to plan your holidays well in advance, and take off knowing that someone has your back while you are on leave, you may not enjoy the “always on” nature of independent contracting.
If, however, you like the idea of being your own boss, of having some say over the work you take on, and of potentially being able to earn more than you currently do in fixed employment, then the contracting lifestyle may be for you. Let’s look at some of the tangible…and intangible…benefits.
Contracting gives you the flexibility to work around your personal circumstances. You are free to choose when and where you work, and to take on the assignments that appeal to you, turning down those that hold less allure. The flexible nature of contracting allows you to take holidays when you like and not have to fit into a team schedule, though that may be more of an ideal than reality. Depending on the contract, you may need to be on site until project completion. However, you may then choose to take time off between contracts. Overall, contractors have greater control over work/life balance.
Contracting can broaden your experience and diversify your skills. Working across a wide range of companies, industries and assignments will allow you to learn new skills and gain exposure to different management styles and business processes. If you decide the contracting life is not for you, you have an enhanced CV to offer the next permanent employer. And, if you remain a contractor, with each contract you complete your skill set and experience increases, putting you more in demand as an independent professional.
One of the biggest perks of contracting is variety. It is hard to get bored when your working environment and your activities change regularly. You may work in completely different industries from one assignment to the next, even if the job you are doing is similar. Moving from one organisation to another will expose you to different cultures, which brings its own sense of variety.
Pay and conditions
It is no secret that contract workers get paid more than permanent employees in many sectors. It is not unheard of for independent contractors to earn up to twice as much as their permanent counterparts, with the added bonus of overtime pay for every extra hour worked. However, this does need to be balanced against the absence of paid sick leave or annual leave. It is very important to remember that the rate charged by the contractor is total cost to company. Many new contractors overlook the fact that they will have to pay their own medical aid, retirement fund and annual and sick leave out of this rate. Employers may balk at the rates contractors quote. They forget that they are paying for results, not attendance. They are not paying when the contractor is sick or on leave. They only pay for productive time. As a new contractor, the market rates can look very enticing, but it is important to factor all these costs in when calculating your total earning potential.
Be your own boss
For some, this is the biggest attraction of contracting. For the entrepreneurially minded, or those who simply don’t like being told what to do, it can be liberating to run your own business as an independent professional. But be realistic about what this means. You may be spared the annual performance appraisal but you will still be expected to contribute to the achievement of objectives and have to follow a work plan. Often, the motive behind contracting out certain functions or activities is the single-minded task focus and dedication to results that an independent contractor brings to the organisation or department. If a new system needs to be installed or a product launched, you will most certainly have to take instructions from the project leader or department head responsible for delivery. However, most contractors report a significant difference in attitude towards them compared to the permanent employees; they feel their contribution is more highly valued and they are treated as experts, rather than subordinates. And of course, if you don’t like the culture, once the project is complete you are free to move on, and you can decline future offers from that employer. This is what it means to be your own boss as a contractor.
As most contracts are short-term, i.e. between three and 12 months, contracting can seem insecure. But, paradoxically, the life of the independent contractor can be more secure. If you have skills that are in high demand, it is unlikely that you will be out of work, and you may be in a position to choose between a variety of offers, unlike your permanent colleagues, who must work on whatever their boss decrees. Many functions and roles that used to be filled by permanent employees are now being contracted out, to save overheads, so ironically you may be more secure as a professional than as an employee.
If you’d like to have a no-obligation conversation about your prospects as a contractor and your personal earning potential, contact Highveld on 012 367 5600 or firstname.lastname@example.org. We’ll help you decide if the contracting lifestyle is for you, and, if it is, we’ll get you started and on your way to a rewarding and lucrative career as an independent professional.
Who doesn’t love a public holiday? Especially two in very close proximity, causing many people to do what the French call “making the bridge” (taking one working day – Monday – as leave to create a five-day weekend). As a nation we love our public holidays. But it’s easy to forget that we enjoy these days off because they commemorate crucial events in our history. We at Highveld think it’s important to take a moment to reflect on the meaning of our public holidays and to celebrate the efforts of those who changed our society for the better.
While many of our public holidays are unique to South Africa – think of last Friday, Freedom Day, or June 16th, Youth Day – 1st May is not a celebration we can lay proprietorial claim to. More properly called “International Workers’ Day”, this day is observed in many countries around the world.
The eight-hour day
What time do you generally finish work? Everyone has days when they put in extra hours, or take work home, but most employed workers work roughly an eight-hour day (the self-employed and entrepreneurs are a different breed; we’re talking about conventional employees). Depending on your organisation’s structure, you may work 08.00-16.30 or similar, because your half-hour lunch break is technically unpaid time (although in Europe, while the same practice exists, the paid work week is actually 35 hours, so even with a lunch break workers only clock up 40 hours on site). But unless you are a shift worker (or a junior doctor!), eight hours is widely recognised as the standard working day. And, correspondingly, we are socialised to think of this a reasonable amount of time to spend at work. More than that either earns overtime, is associated with a very high salary, or provides the motivation to start looking for a new job.
But this was not always the case. The eight-hour day emerged as late as 1872, and then only in the USA and mostly in the building trades. Before that, campaigners lobbied hard for a reduction in the working day to 10 or 12 hours – six days a week. Only Sunday was a day of rest. Life was hard for workers, who incidentally were often children. In the mid-19th century, French workers, spurred on by victory in the February revolution of 1848, lobbied for and won the right to a 12-hour day. If a 12-hour day was a triumph, imagine what workers’ lives must have been like. By the late 19th century, there was a global demand for an eight-hour day.
The modern Workers’ Day, and the date on which we celebrate it, can be traced to 1st May, 1886, when roughly half a million American workers demonstrated across the country in support of an eight-hour day. On 4 May that year, in Chicago, police fired on crowds and at least 11 people died (reports of the incident vary widely; there may have been an incendiary device released in the crowd). Regardless, protestors’ demands were met and the eight-hour day came into being. In 1890, demonstrations were staged on the anniversary of what came to be known as the Chicago Haymarket Massacre, 1st May, in the United States and most of Europe, as well as in Chile, Peru and Cuba. It became an annual event, with more and more countries taking part each year. By the 1920s, 1st May was celebrated as Workers’ Day throughout most of the world. Ironically, in the US the notion of a workers’ day was associated with the dreaded Communism, so the observation lapsed. The Americans celebrate “Memorial Day” on 30 May, to commemorate the fallen in various wars, but “Labour Day” takes place in September, far removed on the calendar from the perceived socialist International Workers’ Day.
South Africa, then…
In South Africa, following the first democratic elections in South Africa in 1994, 1st May was inaugurated as an official national public holiday and has a special significance for us. It serves both as a celebration of workers’ rights and as a reminder of the critical role that trade unions, the Communist Party and other labour organisations played in the fight against apartheid. Non-white South Africans made up the bulk of the working classes and therefore were among those most oppressed by apartheid. Consequently, the struggle for better working conditions and the struggle to defeat institutional racism became intertwined.
Early in the 20th century, South African workers undertook a number of strikes, which were increasingly stamped out by the state, until in 1973 trade unionism began to take hold. A series of strikes in Durban resulted in the rise of the modern workers’ movement. Not long after that – in 1982 – the National Union of Mineworkers (NUM) was formed. COSATU, or the Congress of Trade Unions, followed in 1985, strongly supported by the NUM. COSATU allied with the United Democratic Front (UDF) in the shared struggle against apartheid. Labour and trade groups often used Workers’ Day as a symbol around which to rally the population against the oppression of apartheid, organising demonstrations and encouraging widespread resistance.
Our Constitution and supporting legislation protects workers’ rights and ensures fair labour practices. Worker-friendly legislation includes the Labour Relations Act, the Basic Conditions of Employment Act, the Mines Health and Safety Act and the Employment Equity Act. We have some of the most progressive laws in the world, of which we can be proud.
However, despite our Constitution, many workers in low-paid jobs and in the service industry continue to be exploited. We have a system of law that awards workers fair treatment and equitable pay, but the employment culture in South Africa does not always live up to the ideals laid out in our Constitution, especially for women. Equal pay for work of equal value is still an ideal not fully implemented. As a very basic example, the wages of an unskilled (male) gardener are often considerably higher than those of an unskilled (female) domestic worker. Casual workers, male and female, often fall outside the legislative and regulatory safety net and are therefore unprotected by employment law.
The introduction of a national minimum wage for all South Africans, officially launched on 1st May, is an important step towards fair remuneration. President Cyril Ramaphosa said of the minimum wage, “We have made important progress in improving the conditions of the working poor.” However, the rate of R20 per hour is seen by the South African Federation of Trade Unions as a “slave wage”, sparking a national strike last week. COSATU, on the other hand, views the minimum wage as a starting point, given that six million South Africans currently earn less than R20 per hour. (COSATU did not participate in the strike.)
Until all workers enjoy dignified treatment and fair and equal remuneration, Workers’ Day will remain an important tribute to the ordinary worker and a vital reminder that our society cannot thrive without the full engagement of all levels of workers, from management to cleaning staff.
We live in a democracy, but is your workplace a dictatorship? As we celebrate Freedom Day, marking the first democratic elections in South Africa, we ask: How democratic are South African companies? How viable is democracy in the workplace? Do empowered employees with a say in the running of the organisation work more productively, or does a company with a clear hierarchy and chain of command function more efficiently?
In this article we’ll explore what democracy in the workplace means, and look at some examples.
What does democracy in the workplace look like?
Workplace democracy is the application of democratic practices, such as voting, debate and participatory decision-making systems, to the work environment.
This may sound straightforward and a logical status quo to adopt in a democratic society, but the practical application of workplace democracy not only varies widely, it is not always achievable, at least not in its purest form.
Democracy may not be in the best interests of all stakeholders, including employees
This size of the organisation has a major impact on the feasibility of democratic and participatory exercises. Small companies and start-ups often succeed in embracing democratic principles, and not-for-profit organisations usually exercise direct democracy because it is embedded in NPO culture. A co-op is an example of a democratically run business. But as those small companies grow, and start-ups morph into established businesses, the level of employee participation may wane.
A truly democratic model is extremely difficult to manage. If all workers were involved in every decision, very little actual work would ever get done. Furthermore, there is a reason recruiters spend a lot of time describing the skills and experience necessary for positions they seek to fill. Not everyone is qualified or sufficiently experienced to understand the factors involved in a particular decision, which might comprise regulatory requirements, supplier issues, client concerns, rate of return on investment, etc. Managers are present in organisations not only to provide supervision; they bring particular expertise needed to run the business effectively, compliantly and ethically. Leaders must ensure that all the areas that might be impacted by a decision are adequately consulted and considered before taking decisive action. To allow a majority vote on business-critical matters could expose a company to unnecessary risk and ultimately all employees could suffer.
But that doesn’t mean a lack of engagement…
More commonly found are democratic processes implemented within the framework of strong leadership. These may include staff surveys, participatory management and employee share (or stock) ownership plans (ESOPs), among others. Increased participation in decision-making and ownership is associated with heightened employee engagement, which in turn leads to greater productivity and contributes to the success of the business. What is an ESOP? As the name suggests, it is a scheme that allows employees to own shares in the company, usually via a discounted purchase of listed shares. There are various types of ESOPs and there is not scope in this article to go into detail about the legal and financial structures, but ESOPs have become a popular means to attract, retain and reward employees by giving them part ownership of the company they work for and thus a vested interest in its financial performance.
Ownership alone is not enough
The theory of employee ownership may sound logical, but research has shown that employee share ownership alone may not achieve very much. It is the combination of ownership and participatory management that provides a competitive edge. Participatory management happens when employees are encouraged to voice their opinions about their environment or about organisational issues. It does not mean they have a “one person, one vote” level of involvement, but that their views are taken into consideration in management’s decision-making process.
In this scenario, there may be a hierarchy in place, but the structure is flatter than the traditional corporate composition, with fewer layers of management, and channels of communication are more open. Leadership is less autocratic and confers more power on individual employees. Most large organisations globally have moved toward this model or are doing so. Employee engagement in decision-making is vital in a fast-moving environment characterised by constant innovation. Dictatorial decision-making may be quick and expedient, but the execution can be hindered by a lack of buy-in from employees, who may sabotage the decision if they don’t agree with it. So an element of democracy benefits everyone, including customers.
Some examples of democracy at work
William Gumede, Associate Professor, School of Governance at the University of the Witwatersrand, and Executive Chairperson of Democracy Works Foundation, has written extensively on democracy in the workplace, particularly within the South African context. He believes strongly that workplace democracy is a key factor (he goes so far as to call it the “missing link”) in building an economic democracy. But in his Policy Brief on workplace democracy, all the examples he cites of functioning democratically run companies are overseas, suggesting that South Africa still has a way to go in our quest to embed democratic principles throughout society, not just in the voting booth.
John Lewis Partnership
The John Lewis Partnership in the UK, which runs a nationwide chain of eponymous department stores as well as the upmarket Waitrose food stores, has been managed by participatory methods since 1929. Employees sit on representative bodies and are seen as partners, with the ability to vote on key decisions, and to elect representatives to a company‑wide council and the board. All employees are part of a profit-share scheme.
In Spain, Mondragon, which has interests in finance, industry, retail and knowledge, is run as a co-operative. It has been around since 1956, has operations in 30 countries, and employs c.85 000 people. Despite this scale, employees are involved in decision-making on profit‑sharing, strategy and appointment of directors. There is a general assembly, made up of employee co-operatives, which elects a governing council to decide on matters of strategy and finance. A social council also exists to manage internal structures.
In Norway, IT company Kantega has employee and outside representatives on the board – and every employee has a vote on board appointments. All employees are entitled to participate in an annual general assembly, although only employee shareholders have voting rights. But all staff are entitled to buy shares if they wish, and Kantega sets the share price as low as possible as allowed by Norwegian law.
These measures to involve employees in the decision-making machine of the organisation enhance rather than hinder performance. All the companies cited above out-perform their competition, and win awards for being among the best places to work in their respective jurisdictions.
Gumede believes that workplace democracy empowers people, not only at work but also in society at large. Workplace democracy has the potential to teach people, particularly those who have historically been denied their voice, the power of participation and decision-making. It can reduce social inequalities based on race, class and gender.
As we remember the struggle to achieve a democratic society, let’s reflect on the opportunities for participation within our own organisations, and look for ways to improve employees’ right to participate and to have representation in the governance of the company. The evidence suggests that everyone wins.
Independent contractors have long known the challenges of correct employment classification, and the requirement to prove to the revenue authorities that their status is truly “independent”, and not pseudo-independent while being employed in all but title. While arguably a contractor working for one client for an extended period of time could be said to be more “employed” than “independent”, most contractors have been conscientious in making sure they pass the necessary tests of independence.
Latest position from SARS
However, the South African Revenue Service recently clarified its stance on the taxation of so-called Independent Contractors and/or Consultants. In its Interpretation Note 17 of 14 March 2018, it outlines stringent conditions for the taxation of Independent Contractors. In essence, the tests are so onerous that in most instances companies are obliged to deduct PAYE and to treat “Independent Contractors” as employees for income tax purposes.
SARS has adopted a “substance over form” approach. What this means is that even if an Independent Contractor passes the statutory test, this is over-ridden by the common law test. In other words, even if the contractual arrangements are that of an Independent Contractor, if the true nature of the work approximates the definition of an “employee”, then employers are required to deduct PAYE as they would for a standard employee.
In adopting a “substance over form” approach, SARS has applied both “control” and “intuitive” tests.
Tests of independence
If the Independent Contractor works under the supervision of the company and the company is therefore liable for the actions of that person (“vicarious liability”), then the contractor is not seen as independent – the “control test”.
The “intuitive test” is an arguably subjective evaluation of status, based on how an average member of the public would classify the worker – if someone would be described as an employee, then that person is not an Independent Contractor.
The “organisation test” assesses how integral the person is to the functioning of the company. If the role is seen as critical, rather than incidental, then that individual is not independent.
Finally, the “dominant impression” test measures the contractor against a range of criteria; failure to meet any of them may mean the person is regarded as an employee and therefore must be taxed as such. The “dominant impression” test is exhaustive and multi-factoral. Foremost amongst these is the need to be able to answer yes to the following criteria, inter alia:
- Person uses and/or chooses their own equipment and tools in the production of outputs
- Person directly bears all risk for the work performed
- Person determines own work, sequence of work, etc.
- Prson is bound by contract terms and not orders from company managers
- Person’s services are incidental to the employers operations
- Person is only paid when the work is complete, i.e., piece-work as opposed to remuneration by time period
What this means in practice
What does this mean for contractors and employers? If you operate as an Independent Contractor and thus avoid paying PAYE, you may be in for a nasty surprise: SARS will apply the “substance over form” approach and you may be deemed eligible for PAYE. Employers who employ contractors may be obliged to deduct PAYE; failure to do so will result in substantial penalties.
The decision tree provided in the SARS Interpretation Note makes it clear that a natural person resident and receiving remuneration in South Africa, who does not pass the “dominant impression” test, must be taxed as an employee. Furthermore, anyone working for a labour broker must be taxed as an employee. Personal service providers are also subject to employees’ tax.
Employers who apply the statutory test and are confident they have contracted a person as an Independent Contractor may be exposing themselves to huge risks. They are mistaken in thinking there is no obligation to deduct PAYE. If contractors do not pass the “control” and “intuitive” tests, they must be taxed as employees. The same applies to individuals who present themselves as “independents” but fail to comply with the true definition of an “Independent Contractor”.
Navigating the minefield
While tax law and independent contracting has never been simple, it has become much more complex with this latest guidance from SARS and the stakes are much higher. It’s not worth taking risks.
Whether you are an employer or a contractor, if you need advice on classification and tax status of independent contractors, contact Highveld on 012 367 5600 or We have extensive experience in managing and advising contractors and we can help you stay on the right side of SARS.
This is the third in our series on the Fourth Industrial Revolution. Having explored What Is the Fourth Industrial Revolution and The Fourth Industrial Revolution – Will It Spell the End of Your Job?, we now look more specifically at the South African context…how our workforce will be impacted – positively and negatively – by automation, robotics, artificial intelligence and the like.
The reality is that the Fourth Industrial Revolution is set to change our world and our lives in much the same way that the First, Second and Third Industrial Revolutions transformed the lives of previous generations. Concepts and technology that were once the realm of science fiction are fast becoming – or have already become – reality.
And while this has created justifiable anxiety for many of us, the shift will bring with it massive opportunities. Just as today we cannot imagine living without electricity or cars, cellphones or online shopping, so too will AI and robotics become the “new normal”.
Losing jobs or learning new skills?
Yes, jobs will change, and low-skilled and routine jobs may become automated, but people will always be needed to operate machinery, analyse data or conduct an interview. So, although mundane aspects of a job could fall away, new opportunities abound for workers to grow and be upskilled. One cannot move forward by staying in the same place.
Economic modelling shows that innovation will create more jobs than losses in just about all sectors of the economy. In South Africa, carbon capture and storage, for example, can provide cleaner electricity and create construction jobs, while Afta, a robot that uses smartphones to connect commuters and minibus taxi operators, makes transport more efficient for drivers and passengers alike.
Other South African success stories such as electronic payment platforms and e-government initiatives have harnessed new technologies and investors have realised the need to not only make technology available to consumers, but to make sure South Africa has the skills and capabilities to build technology itself. South African start-up truID is making the arduous task of obtaining authorised bank statements for credit and other applications fast and easy by securely automating the link between credit provider and the applicant’s bank, with the consumer in control of the process. Gone are the days of spending one’s lunch hour in a bank queue simply to get verified copies of bank statements. truID is a tech enabler, providing the platform for young entrepreneurs to create other financial apps.
In total, medium and high-tech exports now make up 54% of the value of our manufactured exports and, according to the AngelList, there are 1,418 South African tech start-ups looking for funding in the sector.
Even more jobs could be created by transforming the energy and transport sectors, making them more competitive. This would allow us to deliver commodities to international markets more quickly and more affordably and attract more tourists.
Beyond economic benefits
Developments such as these offer both economic and social benefits – links between government, business and people provide easy access to information and bring those who were previously excluded into the formal economy or into the healthcare system.
In the public health space innovative technologies such as hand-held blood analysis machines that deliver results almost immediately and battery-powered monitors to accurately measure breathing rates – a critical symptom for pneumonia diagnosis – are enhancing service delivery and improving treatment outcomes.
The government-led Tier.net is moving patient records onto an electronic platform, linked centrally, so that patients moving around the country can be assured of a consistent standard of care, improving levels of adherence to medication (particularly in the treatment of HIV) and thus having a knock-on effect not only for public health but for social cohesiveness.
Online, on the phone
Likewise, the gap between formal and informal markets is decreasing due to exponential growth in smartphone use and internet access. Of South Africa’s 21 million internet users, the vast majority surf the web on their cellphones, with 40% of the population expected to go online last year says Arthur Goldstuck of World Wide Worx.
In financial services, digitisation means more competitive service offerings and more fulfilling jobs for clerical and branch staff, as routine tasks increasingly become managed through technology.
Organisations that don’t embrace innovation are losing out on enormous opportunities to grow their businesses and increase the bottom line – both financial and social – and at the same time drive more inclusive economic growth.
Education the crux of 21st century skills
Reform of the education system is essential to provide South Africans with the “21st century skills” necessary to thrive and remain employed in a knowledge economy. Our primary and secondary schools are weak and vocational colleges too small, with outdated curricula. Similarly, businesses will be required to invest in developing and supporting low- and semi-skilled staff to transition to the next level of jobs. We must equip people with the skills they need to flourish in this digital world, says Sim Tshabalala, Chief Executive of Standard Bank, and a Board Member of Business Leadership SA.
There is no doubt that the Fourth Industrial Revolution will redefine our world of work and our societies. A profound sea change is ahead of us and, as trend and innovation strategist John Sanei says in his book What’s your moonshot?, it’s up to us to seize opportunities, to reinvent ourselves and prepare for this new world by understanding the digital, networked age and learning how to future-proof ourselves and our businesses. The first step is to become the architect of your future, not a victim.