Wage subsidy is ‘not free money’

Johannesburg - The government continues to prop up the labour brokering industry even while new labour laws take their toll on the industry.

Workforce Holdings, the largest listed labour broker after Adcorp, revealed this week the still-rising importance of the Employment Tax Incentive to its finances.

The group received R30.8 million from the incentive in a half year in which it declared profit of R29.4 million.

However, chief financial officer Willie van Wyk said the “net benefit” was probably closer to R11 million because the incentive had unleashed a competitive adjustment across the sector.

“It’s basic economics. Everyone else also gets the Employment Tax Incentive, so there was a lot of undercutting. It’s not free. You need to employ the youth, which involves more work. So there are direct costs as well.”

As the maximum Employment Tax Incentive benefit per worker is R1 000, the six-month figure implies Workforce has, at the very least, one-fifth of the roughly 25 000 placed workers on the subsidy. Smaller subsidy amounts for some workers could mean this proportion is higher.

The group, majority owned by the family of its chairman, Ronny Katz, released financial results showing better Employment Tax Incentive-fuelled earnings for the first half of the year, one characterised by apocalyptic claims of the industry’s demise.

Amendments to the Labour Relations Act also kicked in this year. They “deem” contract workers permanent after three months in a placement, unless the job is tied to some fixed-duration activity. Clients were “stalling” decisions until there was a court interpretation of what exactly that meant, Workforce told shareholders.

Such an interpretation will probably come from a labour court appeal against two recent rulings – one at the CCMA and one in a bargaining council – which gave the “deeming” provision a much stricter interpretation than labour brokers had expected.

Workforce’s revenue grew 4% to R905 million compared with the first half of 2014, with staffing and recruitment providing the bulk at R772 million.


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