ANALYSIS: Why is business against Labour Amendment Bill?

23 Aug, 2015 - 00:08 0 Views
ANALYSIS: Why is business against Labour Amendment Bill?

The Sunday Mail

For the past four years, business was engaging in the Labour Law reform exercise with a view to improving economic activity. Primarily, this was to make our labour regime more attractive to investors who see the rigidity in our labour laws as detrimental to business operations. We were, therefore, most concerned about liberalising our labour laws in line with what is available in the rest of the region so as to level the playing field as far as investment destination status is concerned.

GRRAPHCThe discussions culminated in the 13 principles to inform the amendment of the Labour Act, which we agreed to on August 4, 2014 at the Tripartite Negotiating Forum.

These principles were to be the ones that – once accepted by Cabinet – would go to the Minister of Justice, Legal and Parliamentary Affairs, and the Bill would be drafted on those principles.

We critically analysed the Bill of June 30, 2015 and submitted the outcome to the Ministry, expecting a TNF meeting to negotiate the final outcome.

Unfortunately, this was not to be and to our surprise, out came House Bill 7.

HB7 of 2015 falls far short of the original objective for Labour Law reform.

We are also concerned about the constitutionality of the Act, as pointed out by the Parliamentary Legal Committee.

Is cutting labour costs the answer to Zimbabwe’s economic problems?

No, it is not.

If you look at the World Competitiveness and Doing Business reports, labour ranks low on both scales.

There are much bigger issues that we must attend to before we can get to the labour aspect.

However, you are now looking at a situation where for a man whose only tool is a hammer, every problem, naturally, becomes a nail, isn’t it?

We are, as employers, faced with a situation where because all the other issues that need to be addressed are outside our control, all we can do is control costs to try and survive.

We have sat as the TNF and in the Kadoma Declaration – which was created in 2001 and launched by His Excellency on February 29, 2012 – identified policy inconsistency as one of the largest contributors to Zimbabwe’s Country Risk Factor.

This is corroborated by both the World Bank’s Doing Business and World Economic Forum’s Competitiveness reports.

Investors look for a consistent policy framework where there is respect for the rule of law and property rights.

A case in point is this Labour Act we are looking at now.

Controlling manning levels

Business has to control manning levels because wages and salaries are a statutory obligation that accrues even when there is no production and income.

It is not something that employers do happily.

To make money, you need employees – because if you are going to be in business, each employee is producing more than you are giving that employee.

This is how the company makes a profit.

So, naturally, the more employees you have, the greater the margin you are going to make.

Hence, when you find employers cutting down on labour, things are tight – really tight.

That’s why we are in agreement that cutting labour is not the best thing to do. Cutting labour is actually a symptom. We must look at the disease – the country risk factor.

Why contract employment makes sense

Contract employment allows the enterprise to be optimally manned at all times.

Trade unions look at contract employment as casualisation of labour, but business points out that the world of work has moved on from life-long employment to life-long learning, which results in multi-skilling and short term to do specific assignments at different host organisations.

In HB4, we had agreed that there was going to be a discussion at NEC to decide at what point contract workers would enjoy the same benefits as permanent workers.

This was because although business wants flexibility on the market, it did not want to take advantage of Labour.

Now, HB7 says once you agree on how long it is going to take, at that point, the contract worker becomes permanent.

This defeated the whole business objective.

It does not make sense for an employer to keep a large workforce because salaries are a statutory obligation. Whether you are working or you are not working, your salaries will accrue as long as they are not paid.

A time will come when these accrued salaries are more than the net worth of the company.

The wage bill to revenue ratio

This differs from sector to sector. For instance, for those sectors working at 100 percent capacity utilisation like the soft drink manufacturers and others, it can be as little as 30 percent.

In those sectors whose capacity utilisation is 10 percent, it can be as high as 60 percent.

This ratio is, therefore, inversely proportional to capacity utilisation, all other things remaining constant.

Workers are widely assumed to be the best assets an employer can have. This is dependant on whether each is bringing in more than they are taking out of the organisation.

If they are, they are creating wealth and they are assets.

Where workers are now taking out more from the organisation than they are bringing in, they, by definition, become liabilities to be worked out as soon as possible.

In terms of regional labour costs, we compare very badly, indeed.

I hasten to add that it is not Labour’s fault.

You are looking at capacity utilisation of say, 10 percent. Labour costs there will be completely haywire because you are comparing yourself with companies in the next country operating at 120 percent capacity utilisation.

The notion that top management is living large while paying peanuts to workers is a misinformed position.

No shareholder will allow a situation where their company is driven to the ground by a profligate executive. They will fire that executive.

And where you have a situation where executives do what they want without shareholders blowing the whistle, then something is absolutely and terribly wrong.

The usual situation in the private sector is that one would rather put their money in a company instead of the bank because they anticipate to get better dividends than the interests a bank can pay.

If investing that money in a bank becomes the better alternative, this is exactly what private sector shareholders will do.

So, there is no question that a chief executive will waste shareholders’ money. They will simply not allow it.

The second misinformation is that workers are walking away with nothing.

The ladies and gentlemen of the press are really bleeding this story of HB7 to the extreme.

“Here are poor, unsuspecting workers who are sent away with nothing. They are just sent away with nothing. After 20 years of service, a worker is just given three months’ notice and told to go away with nothing.”

Gentle reader, you know as well as I do that is incorrect.

When a contract of employment is terminated, there are what are called statutory obligations. These are your salaries, pensions, leave days and everything else that the company owes you statutorily.

Those are payable whether you go away on notice, retrenchment or any other manner.

Now, look at the emotions that the press is arousing around this Bill.

Claims that somebody who has been working for a company for 20 years was asked to walk away with nothing.

Let’s take that 20 year work relationship first.

ln February 2009, this country started afresh, all liquid capital disappeared.

This means the reserves, bank balances, everything disappeared.

So, you are now saying, “I worked for you for 20 years. You must give me compensation for the 20 years that I have worked.”

And yet, we only really started in February 2009.

What is going to fund the years lost to hyperinflation?

You know, like everybody else, that your bank balance was zeroed. The company’s bank balance was zeroed as well.

Do you want the company to go back to the people it did business with for the last 20 years and say, “Can you please pay us a little extra so that we can pay our employees who are leaving us?”

Is that possible?

It does not help the country if we whip up emotions over these issues through misinformation.

The situation on the ground is that the company is in as desperate a situation as you are going to be when you go and tell your domestic help that “you will have to go because my employment has been terminated”.

Transparency about the company’s condition

We cannot speak for every single one of our members, but we have held several workshops where we made it clear to our members that workers must know the financial state of the company.

Communication is a skill; some have it, some don’t.

But this is the reality on the ground and this is why we are now appealing to the press to disseminate accurate information.

Businesses are pained by letting workers go.

We are aware that some companies had not paid their workers for the past year, all that still has to be paid.

By giving an employee that three months’ notice, the company does not absolve itself of clearing the unpaid salaries.

Rationale behind terminations on notice

Companies were not sure whether it was still possible to exercise their common law right to terminate on notice. Workers have always exercised that right, but companies had always been somehow, shall I say, forced to accept a situation where they actually thought they didn’t have that right. But this one employer plucked enough courage to say, “If you can give me notice, I can also give you notice.”

As a result, thousands of employers are now out of employment.

Looking at the retrenchment route, both parties have to agree on a package. When you do not agree on that package, retrenchment does not take place.

Therefore, many organisations had just accepted that they were stuck.

The Supreme Court judgment was like a straw to a drowning man. He instinctively grabs it and that’s why there were so many people given the notices.

Doing a poll toll of our members, the private sector has not sent more than 5 000 employees on notice therefore l cannot tell if the figures of 20 000 to 25 000 being quoted in the press are accurate.

This Labour Bill if signed into law sort of reverses the Supreme Court ruling.

In my opinion, the Labour Bill is saying that all these people should come back to work as soon as the President signs it into law.

Business has two concerns on this matter:

1. Companies have already reorganised; what are these people going to do when they come back?

2. How are the state enterprises, whose financial status is public knowledge, going to fund the extra liability?

Terminating on notice was not an act of cruelty; it was an act of survival.

The workers coming back will be akin to drowning people as they clutch each other to drown together.

You cannot do anything else; the worker is no longer an asset, but a liability and that’s why you must cut that liability off as quickly as possible.

Sustainable way forward

1. We would like Government to address the country risk factor

The moment we address that we will become a rich country, investors will fall over each other to come and invest here.

2. Let us create a consistent policy framework.

We really need to ask, “How do we convince the outside world that we are faithful partners?”

3. This is our country. What we must want is what is good for this country. In our opinion as business, HB7 is not good for this country.

Retrenchment packages

The money is not there. If business could not afford to pay an employee’s monthly wage, how is it going to be able to pay, not only the arrears for all the time they didn’t pay, but the notice pay as well, plus the retrenchment package?

Capacity is zero.

Someone raised the point that big companies are also giving notice, yet they can pay.

Again, this is a serious misunderstanding.

Walmart – the global trading giant – is actually cutting jobs.

Walmart has an annual budget of US$230 billion, but is cutting employees because its profit forecasts for the first and second quarters show it will not meet this year’s budget.

They have started cutting costs, and part of that cost-cutting is shedding labour. If an organisation with an annual budget of US$230 billion can do that, what of most Zimbabwean companies? It is a complete fallacy to pretend that all is well and employers are simply firing people because the employers are bad people.

Yes, we do not deny that there are some bad apples amongst us.

You can never find a group of angels.

There will be one or two bad apples but that is not the reason behind all this.

As Labour alleges, if an employer is living large while at the same time refusing to pay employees, this is a bad apple as well.

If such employers are there, they are not Emcoz members. If someone raises such a complaint about an Emcoz member, the organisation investigates and takes action.

The other issue I must mention is that sometimes we get the feeling that workers want to have an equal say in the running of companies.

Another important point is that though there must be democracy at the workplace, the employer must have more say in the running of the business, especially considering that they have their investments in the organisation.

Most importantly, all we want is what is best for Zimbabwe.

 

◆ John W Mufukare is the Executive Director of the Employers’ Confederation of Zimbabwe.

His views are taken from an interview he had with The Sunday Mail News Editor Morris Mkwate on August 19, 2015.

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