Volume 9, No.3 - September 2000

Trade Unions and the Informal Sector

Congress will be presented with a challenge - how to organise workers outside the formal economy. These are some key points from the document being presented to delegates.

COSATU is concerned with all workers whether employed, unemployed or underemployed. Because of its origins, COSATU has paid attention mainly to the needs of wage-workers - the majority of them men - in formal enterprises. But COSATU must be concerned with workers beyond the formal labour market - with unregulated wage-workers, the self-employed and home workers.

What do we mean by the 'informal sector'?

The term originates from the International Labour Office (ILO). It was used for the first time in reports on Ghana and Kenya, prepared under the World Employment Programme at the beginning of the 1970s.

One of the conclusions highlighted in these reports was that the principal social problem in such countries was not unemployment but the existence of a large population of 'working poor', struggling to produce goods and services without their activities being recognized, registered or protected by public authorities.

The term 'informal sector' has since been used to cover a multitude of characteristics specific to the urban 'non-modern sector' of developing economies. In the Report of the Director-General to the International Labour Conference in 1991 the term referred to:

"…very small-scale units producing and distributing goods and services, and consisting largely of independent, self-employed producers in urban areas of developing countries, some of whom also employ family labour and/or a few hired workers or apprentices; which operate with very little capital, or none at all; which utilize a low level of technology and skills; which therefore operate at a low level of productivity; and which generally provide very low and irregular incomes and highly unstable employment to those who work in it.

" They are informal in the sense that they are for the most part unregistered and unrecorded in official statistics. They tend to have little or no access to organised markets, credit institutions, formal education and training institutions, or to many public services and amenities. They are not recognised, supported or regulated by the government.

They are often compelled by circumstances to operate outside the framework of the law, and even when they are registered and respect certain aspects of the law they are almost invariably beyond the pale of social protection, labour legislation and protective measures at the workplace.

But the term 'informal sector' is not to be used to encompass criminal and socially undesirable activities such as drug trafficking. The term is increasingly used to describe a process of general informalisation of the modern economy taking place in both developing and industrialised countries, which involves the growth of casual, part-time, contract and other forms of precarious work undertaken by workers for enterprises operating in and outside the formal economy.

What are the advantages for employers?

This type of employment has not come about only by chance or the lack of alternative employment opportunities. Powerful vested interests have collaborated to drive down the conditions that protect the rights of workers and minimise exploitation. Maximise profits at all cost is the mantra of the new employer.

Many casual, temporary and contract workers receive lower wages and benefits than regular full-time workers. They may work longer hours on shorter notice and under dangerous and dirty conditions. They have little employment security and less likelihood of access to training, with limited career prospects.

Undocumented migrants in particular face all these conditions, under even more precarious circumstances, given both their illegal status and their lack of effective rights. In the context of heightened competitive pressures resulting from trade liberalisation, deregulation and past conditions of recession, employers have reverted increasingly to casual, temporary and contract labour to reduce labour costs, achieve greater flexibility and to exert greater levels of control over labour. This allows the de-politicisation of hiring and firing and makes it easier to avoid labour legislation and the rights won by trade unions. It also avoids potential union disruption and productivity losses associated with a retrenchment process. And many companies attempt to avoid 'militant unionism' through the use of more casualised forms of labour. This often exerts downward pressure on wages and conditions for regular workers, disciplining their demands and labour action.

Many temporary workers do not receive paid holiday leave, sick leave, maternity leave, medical aid, retirement funding, severance pay or bonuses, displacing the burden of these costs onto workers themselves or the state, as employers attempt to maintain or increase their profitability. Nor is it likely that these employers contribute to UIF.

Productivity and job insecurity

There are claims that the use of casual, temporary and contract labour increases productivity. If correct, this relates to high levels of job insecurity, with workers exerting themselves beyond any regard for matters affecting health and safety, simply to ensure continued employment.

In some sectors productivity gains result from a combination of long hours and low wages, in many cases through piece or task rates. These dubious productivity improvements really only translate into short-term profit improvements subsidised by SA workers, with no consideration for broader developmental issues.

Legislative considerations to improve environment for atypical workers

There are categories of workers who appear to be excluded from the protection provided by the employment relationship and the law governing this relationship, but who in fact carry out their work within the framework of concealed or disguised employment relationships.

At present labour legislation covers 'employees' and excludes 'independent contractors'. The test as to whether a person is one or the other is complicated and obscure. We need to define which service-providing relationships should be regarded as 'employment' and give the Minister of Labour the power to determine others by way of regulation, for example:

Casual workers, sometimes referred to as 'stand-by workers', are employees who have separate fixed-term contracts normally for a day at a time. They are offered employment on an intermittent basis.

Temporary employees are those employed for a specific period, usually for a short-term need. The contracts of employment are fixed-term.

Part-time employees are those employed on a continuous basis although not full-time. The contracts of employment are indefinite but for a shorter period than a full-time contract.

What the unions should campaign for:

Employees who work less than 24 hours in one month for an employer are excluded from the Basic Conditions of Employment Act (BCEA). This should be reduced to say 20 hours over 3 months. More workers, especially those working from home, will then fall under the ambit of the BCEA. Casual or Stand-by workers should be:

o Guaranteed a minimum amount of pay for each time they are called in (eg a minimum of 5 hours wages each time they are called to work) even if they are called in for less.

o Entitled to be paid for any period that they would have worked but could not because they were sick.

o Entitled to UIF benefits.

After being used as casuals for more than 3 months, all workers should be paid a basic minimum, stipulated in legislation, irrespective of whether they are utilised or not;

Probationary periods should be no longer than 3 months and in the case of fixed-term contracts of not longer than 2 years, no longer than one month.

Probationary periods should not be able to be extended more than twice If an employer enters into a number of consecutive temporary employment contracts, then it should automatically covert itself into a permanent contract.

If the employee had a reasonable expectation of continued employment, the failure to renew the contract should still constitute a dismissal. This is already contained in section 186 of the Labour Relations Act (LRA).

The above should apply even where the employee is provided through a labour broker, ie the employment becomes permanent, once it has been renewed a number of times or endured for more than 6 months.

Specific rules should apply to labour brokers:

They should be outlawed from charging temporary workers for giving them work;

They should not be allowed to send temporary workers to workplaces where there is a strike or lock-out;

The broker or the employer must pay temporary workers in accordance with any collective agreement for the industry covering the employer;

The broker and the contractor should be jointly and severally liable for performing the obligations of the employer.

Where a business has been subcontracted out, the subcontracted business should still fall into the scope of the industry of the primary contractor and workers working for the subcontractor should get the benefits given to workers in the industry of the primary business.

There must be proper mechanisms to monitor compliance with the above. The benefits that accrue to these vulnerable workers should be monitored and enforced through the courts or the CCMA in non-expensive dispute resolving procedures.

Summary recommendations

1. COSATU should adopt a dual strategy to organise informal / home workers. A legal approach should be combined with union strategy. The campaign could be roughly divided into four stages: Reach informal workers, find out their pay and conditions and publicise the results. Part of the aim should be to win public support, both nationally and within the communities concerned, for legal protection of the informal workers.
2. Take cases forward as new regulation on informal work could be established through legal precedents.
3. Try to win new legal rights for informal workers and work closely with a tripartite working party made up of union, government and employers.
4. Ensure that the new provisions are implemented. Claims should be taken up by the union on behalf of informal workers as a way to recruit them into the union.

What have the unions done thus far in Cosatu?

Many workers in this industry now work from their homes in the informal sector, repairing cars. Already these workers would fall under the discipline of the Bargaining Councils. The advantage of being organised is that they would be able to access the training in the industry and formalise the skills they presently possess. The only area lacking is the political will in the organisation to pursue these areas.

NUM

A number of areas in this industry have been outsourced, from blasting to the maintenance functions in the engineering and other sectors. The NUM has organised these workers and represent them on matters related to their employment conditions.

SACTWU

In the textile industry, the home-work sector has become part of the flexible supply chain, being used by manufacturers to fill orders during peaks in the seasonal production cycle of the industry.

More recently, as a result of the lowering of trade barriers in South Africa, the informal production and distribution sector has become more visible. Increasingly, retailers are sourcing directly from the home-work sector and from unregulated micro-enterprises housed in large outbuildings in backyards of entrepreneurs.

Workers in the sector are primarily women, and because of the low unionisation rate and the lack of effective regulation, they are vulnerable and unprotected.

Sactwu should revisit its benefits structure and offer a set of carefully selected benefits to people in the informal clothing sector, covering housing, bursaries, access to clinics and death benefits. This can be the start of developing a national register of workers in the informal sector.

At the level of union strategy, we must focus on ways of reducing the unit cost differential between the formal and informal sector, to avoid a huge commercial incentive developing for companies to contract work out to the informal sector.

We should use our access to policy-making forums to obtain funds and support for efforts to modernise the operations of companies in the informal sector as part of the overall objective of formalising their activities.PUBLIC SECTOR UNIONS The state is in effect reducing its role in a whole range of areas related to social services and contracting out many of its historical functions, partly as a result of the neo-liberal agenda. Various initiatives to organise this new areas of employment, but a whole lot more work needs to be done.

SACCAWU

The retail industry has been reduced to a situation where the majority of workers are casual or piece workers and it is also the one area where we have seen relative increases in the number of jobs. The union has done extensive research in the area of organising this new trend in employment relationships in this industry.

Organising the unemployed

The unemployed now make up 37% of eligible workers - 4.5 million workers. They largely depend on employed workers for any income through some form of remittance. Their interests are disregarded in the broader social agenda and need to continue to be prioritised through campaigns, as COSATU continues to establish its hegemony in society and revives its old resolution on organising the unemployed COSATU locals should organise and build unity with unemployed workers to counter divisions developing between employed and unemployed.

COSATU must lead a process towards the building of a progressive and autonomous unemployed movement, which could include organisations of the 'under-employed' or self-employed. We must learn from past attempts to organise in this sector and ensure that there is effective organisation and a clear role in terms of advice and assistance to unemployed people and practical job creation projects.

We have seen attempts to incorporate these sections of the working class into the neo-liberal project and use unemployment as a weapon to divide COSATU from the unemployed (eg the case of Malamulele). We have also seen an increase in xenophobia and the dangers of such developments to the work of the federation are very great.

Conclusion

Organising and influencing workers who are employed in co-ops, the informal sector and self-employed are important if we are to engage with some of the difficult social issues that confront us Conclusion Unions that are already organising atypical workers need to be encouraged to continue and those that are not need to be encouraged and helped to do the same.

Further steps should be taken to avoid, stop or reduce the rate of retrenchments. Workers need to be trained, to equip them with the necessary skills before retrenchments, to ensure that they have something to rely on for survival. Most of these workers do ultimately join the informal sector and need to be trained to equip them with entrepreneurial skills.

Some unions have experienced problems in servicing atypical workers. This matter needs immediate attention to make sure that organised workers are not discouraged by this, while pushing away those that are not organised. The question is no longer whether we organise a- typical forms of work but rather when and how we do this. The attack is an attack on all workers, so the slogan 'An injury to one is an injury to all' is more relevant than ever.