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Herald Reporters
Cabinet has resolved to review the Labour Act to address, among other things, the situation whereby employment constitutes up to 70 percent of the cost of doing business.Finance Minister Patrick Chinamasa said on Tuesday that after a systematic and thorough examination of the malaise in the public sector, Government saw the need to review labour regulations.
The Cabinet Committee on State Enterprises and Parastatals Development also found that the private sector took a cue from the public sector when setting pay scales.
It was also established that most public sector debts related to outstanding salaries.
Minister Chinamasa said public sector employment costs were adversely impacting on national economic competitiveness, resulting in the current situation “where the country operates on a typically high cost, but low production”.
As such, Minister Chinamasa said the Government approved a review of labour laws to eliminate obstacles constraining companies’ viability.
He said Government sought to deal with constraints in retrenchments, terminal benefits, downsizing, working hours and the arbitration awards system.
“The high levels of employment costs in public entities and local authorities adversely impact on national economic competitiveness, which has resulted in the current situation, where the country operates on a typically high cost, but low production economy,” said Minister Chinamasa.
“There is therefore urgent need to address this state of affairs to ensure the success of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation,” he said.
Analysts have long expressed concern that current labour laws made it difficult to reduce staffing costs and align them with business realities. This in turn increased production costs and thus weighed down on the wider economy.
“Honestly, if a company can afford to raise such an amount to retrench, it can always spend that money on recapitalising the business than letting workers go,” Proserve Human Resources Consultants managing director Mr Emmanuel Jinda said in an interview.
He said there was need for a remuneration model that took productivity into account.
“Under the current model, people are just being paid to be at work with no relationship with what one achieves at the end of the day. Salaries are not related to productivity. Just look at what has been happening in State enterprises,” said Mr Jinda.
Industrialists welcomed the pending review of labour laws, saying most of the relevant legislation was instituted in the 1980s and thus out of touch with today’s requirements.
Confederation of Zimbabwe Industries president Mr Charles Msipa said high retrenchments costs pushed companies to liquidate rather than lay-off workers and continue operating.
“There was a lot of social protection when the retrenchment regulations were put in place during the Zimbabwean dollar era, but this has become impractical under dollarisation,” he said.
“We are then ending up in a situation whereby companies cannot afford to retrench even if it is the only viable option to save the company and avoid liquidation.”
African Sun Hotels chief executive Dr Shingi Munyeza added: “We must have laws that are pro-productivity. The relaxation is a most welcome gesture as long as they will not flout employment contracts.
“In the event that the companies come back on line, they should prioritise ex-employees.”
NMB Holdings chief executive Mr James Mushore recently said labour laws adopted in the ‘80s weighed down business.
“On retrenchment costs, we have these ridiculous labour laws from the 1980s that are now coming to bite us, we need to review them and move with time,” he said.
Mr Mushore cited the example of Bindura Nickel Corporation where retrenchment costs were higher than the company’s value.
Retrenchment costs include notice pay of three months, 12 months’ severance pay, 24 months’ salary multiplied by length of service, service pay of six months per completed year of service, and a one year medical aid cover.
The Labour Relations Act makes dismissals and retrenchments a long process, and failure to abide by it has often come back to haunt companies in the form of huge awards given to workers in lieu of reinstatement.
This is money that could be put into production, thereby boosting economic growth and development and employment creation.
Wage negotiations are done at industry level and Government largely does not have a regulatory role.
Prior to enactment of the Labour Relations Act Amendment (Chapter 28:01), Government played a part in wages, setting salaries using a grading system.
But this fell away with the rise of sector-specific national employment councils.
In South Africa, severance pay of at least one week’s remuneration per completed year of service is paid out. Remuneration is calculated inclusive of basic salary and benefits.
Outstanding leave is also paid in full, while notice pay varies according to the specific employment contract.
Depending on the employment contract, workers may be entitled to a pro-rata payment of annual bonus, and the balance of any pension or provident fund benefits.
According to the World Bank, labour costs are relatively low in Botswana and this allows the country to remain economically competitive in comparison to others the multilateral lender classifies as middle-income.
An employee who has completed 60 months of continuous employment at one company gets “severance benefit” calculated at the rate of one day’s basic pay for each month of service, and two day’s basic pay for each additional month of continuous employment.
However, this benefit does not apply to employees due to receive a gratuity/pension at the end of their contract of employment.
Further, Botswana has a National Policy on Incomes, Employment, Prices and Profits to regulate the four stated areas.
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