legislation. Shifting the focus to the concept of labour flexibility, more specifically the tree types of labour flexibility which are defined as numerical, temporal and financial flexibility. I would like to explore how your organisation goes about dealing with each of these operational requirements.
133 6.1 Numerical Flexibility
Should your operational demand require a shift in the number of direct employees, be this an increase or a decrease, how would you go about implementing such a change today?
Interviewee: If we were to increase the number of employees, I would be hesitant to do it outright and permanent. I would still bring the employees in on a contract basis and monitor not only their performance and their ability to perform the job, but also whether the reasons why we require the increase in the number of employees is sustainable. In other words, are the volumes being sustained, do we truly need that many people, and whether the upward shift is the right decision for the business. If after three months it is still the right decision, then we would then obviously have to make them permanent. In saying that, it is with great reluctance in today’s climate as we don’t know what is going to happen next in motor industry.
A shift down is more challenging and I think what I would do, or what we have done and are currently doing is to declare short time. In other words, physically take out the time. It is probably more temporal and obviously, you would like to take the heads out on a temporary basis, but we would declare short time for a period of time and again establish if this reduced working pattern satisfies the needs of the business. If it is, then we would take the decision to permanently reduce the headcount by means of a formal restructuring process. We would firstly look at voluntary retrenchment to ease the way we reduce the headcount, thereafter we would look at permanent or forced retrenchment.
Interviewer: In the cases where you require an increase in direct employees, does this pose any challenges in terms of skills and training requirements? The literature referred to pools of employees with the required skills and training, does these pools still exist and what is the impact this has on productivity and quality?
Interviewee: I think one statement I need to make is that depending on how big the requirement for this upward shift is, one would first consider the possibility of
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overtime. I would say a 10 - 15 % increase in volume or hours overtime would be the first option, depending on how you measure it.
Interviewer: We are talking about numerical flexibility, but what is interesting is that even when we say we require additional heads you would rather opt to increase the hours through overtime as oppose to bring in additional heads?
Interviewee: Yes, absolutely. As they are very closely linked you almost have the option to jump between the two possibilities. With regards to the skills and the training, a lot of businesses are still bringing people into the organization and training them up over a period of time and then basically sending them on their way again knowing that they now have established contact with these employees and can contact them as and when they are needed. Businesses are prepared to take that risk, certainly we are, and the risk is that this person finds alternative employment and you lose that skill that you have invested in, but it is the only way to quickly bring skilled labour into the organisation. You are actually creating your own small pool of skilled workers out there.
6.2 Temporal Flexibility
Should operational demand require a shift in the number of working hours required, be this an increase or a decrease, how would you go about implementing such a change?
Interviewee: Maybe slightly different, if we are purely looking at hours work required we would look at overtime immediately. It will be interesting to see the responses you get from other businesses, but I think even up to levels of 20% to 25% businesses would probably prefer overtime and just put in the hours if possible before they look at any increase in the headcount. Whether this is cost effective or not, I think it is easier to compensate with overtime as opposed to bringing in additional heads.
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Interviewer: You refer to whether it is cost effective. I'm assuming you are referring to the cost of overtime. So historically you would have brought in more people?
Interviewee: Yes, definitely. You would have tried to keep hours worked at normal time to save costs. But then again, we had the pool of skilled workers available.
Interviewer: What I understand from this, you are saying there is definitely an increase in cost for your organisation in having to upscale or to work more hours.
Interviewee: The thing is with hours, it is easy to increase or decrease. You can decide tomorrow if you want to work overtime because of additional volume required so you effectively just throw more hours at it. It is at a cost premium because overtime is paid at time and a half, versus bringing in an additional head and working the hours at normal time but it is easier to do in terms of what we are facing with the legislation change. Unless you obviously have skilled workers available that you can bring in at short notice and have maintained loyalty to your organisation, but it would be interesting to see how many businesses are getting this right.
6.3 Financial Flexibility
Labour costs are a key focal point in any manufacturing operation, and the ability to influence the cost of labour or the levels of payment could have substantial financial benefits. How can you influence the cost of labour or the levels of payment in your operations today?
Interviewee: We try and stick to the bargaining council’s main agreement because we know as soon as you start playing with some standards it becomes something that can be bargained on and then you lose control of it. We don’t like to be flexible on that all and we pay the rate that the bargaining council dictates. It would be nice if we could pay our employees a premium that could result in increased motivation
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and better levels of productivity, absolutely it would be first prize but because of the collective bargaining problem we have in South Africa those become things you can then bargain on.
Interviewer: Let’s say you did pay them more, can you then go and reduce this as and when you want?
Interviewee: No, you cannot, because as I said it now becomes an item to be bargained on and becomes part of your agreement.
Interviewer: It will be interesting to know if there is any way that you can influence the cost of payment in any way. We know you can pay a premium, but why would you do that as it will only increase the cost of labour to your organisation.
However, is there any way that you can influence the cost of your labour in a way that it gives your organisation a cost benefit? Could your labour have cost less before the amendments?
Interviewee: I think there is. If there are organisations that are paying a higher rate than that outlined in the main agreements, they will have the benefit to pay employees coming in through TES at the minimum rate. So maybe companies that do pay a premium can have a cost benefit in utilising labour through TES, but this will depend on the rate of pay to their permanent employees prior to the amendments coming into effect. But again, to a business like ours that pay minimum rates there are no benefits or room to play with.
Interviewer: The entire topic is really about costs, whether it comes in the form of numbers, hours, or flexing pay, it is still about the total cost of your labour and whether you have flexibility in the total cost of your labour. Following what we have just discussed, I think there is a lot of information that can be linked to this concept of labour flexibility.
137 Interviewee: Agree
7. What is the significant influence the amended legislation to section