Report on the investigation into a Sectoral Determination for the Civil Engineering … · Web...

2010

Department of Labour

Report on the investigation into a Sectoral Determination for the Civil Engineering Sector

Sectoral Determination for the Civil Engineering Sector 2010

TABLE OF CONTENTS

TABLE OF CONTENTS.........................................................................................................................................1LIST OF TABLES...................................................................................................................................................2Background............................................................................................................................................................23Collective Bargaining Structure for the Civil Engineering Industry......................................................................23Terms of reference.................................................................................................................................................25Methodology..........................................................................................................................................................25Structure of the report............................................................................................................................................27Chapter One...........................................................................................................................................................28Sector Profile..........................................................................................................................................................28Chapter Two.........................................................................................................................................................214Wages and annual increases.................................................................................................................................214Minimum wage increases for years 2 and 3.........................................................................................................219Other basic conditions of employment issues......................................................................................................224Family Responsibility Leave................................................................................................................................224Views of the employees.......................................................................................................................................224Severance package...............................................................................................................................................225Views of the employees.......................................................................................................................................225Annual leave.........................................................................................................................................................226Maternity leave.....................................................................................................................................................226Views of the employees.......................................................................................................................................226Hours of work......................................................................................................................................................227Chapter Three.......................................................................................................................................................228EVALUATION IN TERMS OF ECC CRITERIA..............................................................................................228The impact of the proposed minimum wage on the cost of living and poverty alleviation.................................228Wage differentials and inequality........................................................................................................................229The likely impact of the proposed wages on current employment and the creation of employment...................229Chapter four.........................................................................................................................................................231RECOMMENDATIONS OF THE ECC.............................................................................................................231Wages...................................................................................................................................................................231Minimum wage increases for years 2 and 3.........................................................................................................231Family Responsibility Leave................................................................................................................................232Annual leave.........................................................................................................................................................232Maternity leave.....................................................................................................................................................232

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LIST OF TABLES

Table 1:Schedule of public hearings, site visits, dates, venues and attendance......................................................6

Table 2:Employment contraction levels in the construction sector........................................................................9

Table 3: Percentage change in main indicators………………………………………………………………….12

Table 4:Current wages…………………………………………………….……………………………………..14

Table 5: Setting out increases in the general worker for Johannesburg and for Northern Cape………...............15

Table 6: Minimum hourly rate proposed by NUM...............................................................................................16

Table 7: Minimum hourly rate proposed by the Department................................................................................18

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Introduction

The Employment Conditions Commission (ECC) has the pleasure of presenting its report on

the investigation into the Civil Engineering Sector.

Background

The current civil engineering sectoral determination was published on 25 August 2009. The

wages component of the determination was implemented on 01 September 2009 and lapses

on 31 August 2010. The wage dispensation, including annual increases, was fixed for a

period of one year; hence the new wage dispensation must be in place by 1 September 2010.

Most of the terms contained in the sectoral determination, including wages were informed by

and mirror the collective agreement reached by the employers and trade unions in the sector

in their last round of wage negotiations last year. Indeed, this has been the norm in the sector.

Collective Bargaining Structure for the Civil Engineering Industry

The Civil Engineering sector does not have a bargaining council, but has a National

Negotiation Forum (NNF), which consists of one employer’s organisation and two trade

unions. The employers are represented by the South African Federation of Civil Engineering

Contractors (SAFCEC) and employees are represented by the National Union of Mine

Workers (NUM) and the Building and Construction Allied Workers Union (BCAWU).

In its submission to the Commission, SAFCEC indicated that a task team had been set up to

investigate the possibility of establishing a bargaining council for the Civil Engineering

Industry (BCCEI). The process was expected to take approximately 18 months to finalise.

Wage negotiations in the sector

The parties to the NNF have been bargaining collectively on wages as well as terms and

conditions of employment since 1996 and have always concluded collective agreements

which have always been forwarded to the Department as an input document in the reviewing

process of the sectoral determination. The Department has always encouraged parties, in line

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with the spirit and aims of the Labour Relations Act 66 of 1995, to strive for self-regulation

in their working arrangements, including terms and conditions of service. Hence collective

agreements, such as those concluded by the parties in the NNF, have always been endorsed

by the ECC in its recommendations. In 2009, minimum rates as agreed by the parties to apply

to all employers and employees in the civil engineering sector were promulgated and

implemented on 1 September 2009. The rates will remain in operation until 31 August 2010.

In 2010, the first round of negotiations in the sector commenced on the 21 June and an

agreement was reached on the 4th of August 2010.

The 2010 agreement deals with a number of issues, some of which have relevance to and

impact on the sectoral determination. The issues are listed below:

1. Scope of application of the collective agreement;

2. Promulgation of collective agreement(s) in the Sectoral Determination: Civil

Engineering Sector, South Africa;

3. Period of operation of the agreement;

4. Across the board increase;

5. Minimum wage;

6. Hours of work;

7. Annual Leave Days;

8. Maternity Leave Days;

9. Family Responsibility Leave;

10. Mourning of Fatal Accidents;

11. Upgrading of permanent Hostels;

12. Appointment of a sub-committee to investigate the following issues:

job grading, basis for setting of targets for training of employees, collective

bargaining levels);

13. Appointment of a working group to investigate the establishment of a bargaining

council, the funeral cover for LDC Employees, Medical Aid, provident fund

contribution;

14. Living Out Allowance;

15. Sleep-Out Allowance;

16. Housing subsidy;

17. Severance pay;

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18. Payment during period of Lay-Off.

Terms of reference

The terms of reference for this investigation as published in the Government Gazette No.

32976 notice no. R.147 dated 24 February 2010 was as follows:

“to review wages and the conditions of employment in the Sectoral Determination 2, Civil

Engineering Sector, South Africa”.

Methodology

A four-phased project framework was developed for the investigation:

Phase One – Administrative aspects

A notice was published in the government gazette on 24 February 2010 inviting interested

parties to make written representations within 30 days to the Director-General on their views

about a review of the conditions of employment and wages in the civil engineering sector.

In response to the notice, four (4) written submissions were received from the following

organisations:

1. SAFCEC ( Employer Representative)

2. NUM (Employee representative)

3. Dada Civils (Civil Construction Company)

4. Henra (Civil Construction Company)

Phase Two – Consultation with stakeholders

Public hearings and site visits were scheduled in five provinces as set out in the table below.

Site visits were also conducted at South Africa’s first new Greenfield coal-fired power

station, Medupi power station, where there are about 166 contractors employing 7500

employees. Hearings were scheduled to take cognisance of the areas where civil engineering

activities were more prevalent.

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During the public hearings, SAFCEC and NUM representatives informed the Department that

they had not yet started with their wage negotiations. However, for the benefit of the public

hearings the parties made their individual submissions on behalf of their constituencies.

Table 1 below indicates places visited together with the attendance profile of stakeholders for

each hearing.

Table 1: Schedule of public hearing dates, venues and attendance

Province Dates Venues Employers/ Employer Org

Employees/ Employee Reps

Western Cape 19/04/10 Public Hearing 5 020/04/10 Site Visit 0 20

Kwa-Zulu Natal 21/04/10 Public Hearing 14 0

22/04/10 Site Visit 0 43Mpumalanga 21/04/10 Public Hearing 0 0

22/04/10 Site Visit 0 17Gauteng South 19/04/10 Public Hearing 2 1

20/04/10 Site Visit 0 24Limpopo 21/04/10 Public Hearing 3 1

22/04/10 Site Visit 0 20Lephalale 28/04/10 Medupi Power Station 7 20TOTAL 31 146

As reflected in Table 1 above, public hearings were not well attended, especially the

employee representation. Subsequent to the public hearings, site visits were arranged where

interviews in form of a questionnaire administration were conducted. The questionnaire

process yielded better results as the secretariat managed to visit civil engineering sites and

interviewed a total of 107 employees and 7 employers.

There were areas such as eMalahleni in Mpumalanga where, despite having arranged

meetings there was no attendance. In total, the hearings and site visits provided information

from a total of 177 attendees, which included employers or employer representatives, and

employees or employee representatives.

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Phase Three – ECC Process

During this stage the Commission engaged with the different proposals made by stakeholders

and prepared its recommendations to the Minister.

Phase Four – Publication of the amended sectoral determination

This phase will see the publication of amendments to the sectoral determination, once

approved by the Minister, in the Government Gazette and subsequent awareness-raising

measures.

Structure of the report

The report consists of the following chapters:

Chapter 1 of this report outlines the state of the civil engineering sector;

Chapter 2 discusses the findings of the investigation and resultant proposals;

Chapter 3 discusses the proposals in light of the criteria that the Commission has to

consider and

Chapter 4 summarises the recommendations by the Commission.

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Chapter One

Sector Profile

EmployersThe main employer role-player in the industry is SAFCEC, which reportedly represents 330

contractors, employing approximately 90 000 employees. There are 25519 civil engineering

contractors (employers) registered with the Construction Industry Development Board

(CIDB), of whom SAFCEC says it represents 12.4%1.

According to SAFCEC’s first quarter report released in March 2010, the South African

economy shrunk by 2% during 2009 compared to 2008.The worst time was the middle part of

2009, when at one stage the quarter on quarter drop was close to 7. 5%. The general

economic growth forecast is for subdued growth in 2010 and a little better during 2011.

Forecast for 2010 indicates that the South African economic may grow by 2.3% and by 3.5%

in 20112.

Employees

In terms of a Quarterly Labour Force Survey for 1st quarter which was released by Stats SA in

May 2010, the construction industry reported an annual decrease of 50 000 employees (-

10.9%) at March 2010 compared with March 2009. There was also a quarterly decline of

7000 employees (-1.7%) at March 2010 compared with December 2009, primarily due to the

completion of major construction projects and cancellation or postponement of projects due

to the recession.

Employment services company Adcorp’s latest Employment Index also showed a marked

decline in employment in the construction sector during April and May 2010. Between April

and May, the Adcorp index recorded a 10.2% decline in employment in the construction

sector.

1 Information provided by SAFCEC 2 Information provided by SAFCEC

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The graph below indicates how employment contracted in the construction industry from

2008 to 2010

Table 2: Employment contraction levels in the construction industry

In its submission to the Commission on 08 April 2010, SAFCEC mentioned that the industry

was in a severe downturn and was expected to decline by nearly 25% in 2010.It also

indicated that several projects larger than R20 million were cancelled or postponed to future

dates, and that the small and medium size companies would be the ones to be more severely

affected by the private sector developments coming to an almost dead stop due to high

interest rates and the uncertainty of electricity provision.

With regard to employee representatives, the NUM submitted that it represented 63 000

members and BCAWU claimed to be represent 35 000 active members currently. The unions

have indicated that union membership within the civil engineering sector is often difficult to

estimate as employment is largely based on limited duration contracts (LDC’s).

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Bargaining in the sector

Since 1996 SAFCEC has negotiated with the unions on wages and other conditions of

employment in order to create some stability in the industry. Attempts to establish a

bargaining council were made but failed due to lack of sufficient representivity on both sides.

Labour has argued that it is always difficult to organise workers in the sector due to the

duration of the projects, which is normally short.

The industry is largely dependent on projects awarded on a limited or temporary contractual

basis, and the duration of such projects in turn affects employment levels. SAFCEC is the

only employers’ organisation registered in the sector and BCAWU and NUM are the two

major unions representing the majority of unionised workers.

The position of the civil engineering industry

The members of the civil engineering sector have been intimately involved in the creation of

the high quality network of public and private infrastructure in the economy since 1994.

These endeavours enhanced infrastructure from dirt roads to excellent highways and urban

networks, from limited rail infrastructure to dedicated bulk export/import lines, the

development of the most modern bulk/container ports, from grass airfields to the busiest

airports in Africa and from pit latrines to extensive waterborne sewerage networks which are

environmentally friendly3.

South Africa has also enhanced its infrastructure in the form of the 2010 Soccer World Cup

Stadia, Gautrain, the Gauteng Freeway Projects, Airport development and Eskom power

station. However, with many construction projects having been completed for the 2010 FIFA

World Cup, the construction industry may face growth challenges. This may be worse for the

smaller companies in the rural areas which were not exposed to the projects taking place

around the FIFA World Cup4.

Despite this decline in the industry, SAFCEC estimates that the industry should recover

toward the end of 2012 and projects such as the Gauteng Freeway Improvement project and

the State-owned Trans-Caledon Tunnel Authority’s water infrastructure projects are most

likely to mitigate the decline over the next few years.

3 www.safcec.org.za4 The First National Bank quarterly report on the state of the civil construction industry in South Africa

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The following five indicators (summarised in Table 3) reflect actual figures compiled by

SAFCEC on their state of the civil industry report for the 1st quarter of 20105

1. Confidence index6

Confidence amongst contractors reached a higher point in the first quarter 2007, with a

substantial slide starting in the third quarter of 2008 and ended with a decline of 48.5% in

2009. Since then it has dropped by 70%.The sharp and sustained decline in the confidence

index, points towards lower industry activity levels during 2010. Confidence amongst all

sizes of companies is pretty fragile as it stands. SAFCEC expects that confidence levels will

start showing signs of improvement during the latter part of 2010, mainly based on an

expected recovery in mining demand for civil engineering works and some recovery in

private sector developers’ demand for civil works.

2. Tenders

The cumulative number of tenders during 2009 declined by nearly 18% compared to

2008.The second half of 2009 was 24% lower than the first half. What makes the situation

worse is that not only did the number of tenders decline but very few were larger than R150

million. This is reflected in the value of contracts awarded dropping by nearly 50% (2009

compared to 2008).This all indicates a massive and abrupt slowdown in general activity.

3. Employment

As noted above, annual employment started to show signs of contraction (-1%, 2009 on

2008), but not as severely as the estimated turnover declines, mainly due to the hopes that the

situation will change and/or reluctance to let go of the high cost investment companies made

in staff over recent years. SAFCEC is certain that there will be an increase in frictional

unemployment over the next 18 months as a result of the lull in the project pipeline.

5 SAFCEC 1st quarterly report 2010

6 Confidence index relates to the general business outlook amongst the companies within the sector. Below 50 indicates pessimism; 0 equals total negativity and 100 indicates absolute optimism.

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4. Contract awards

A massive downturn is currently experienced across all sizes of projects.Gautrain started the

trend with the time of award delayed by 2 to 4 years, which then overlapped with the

resources/mining boom worldwide and expansion domestically. Shortly afterwards the stadia

for 2010 were awarded as well as massive airports projects. Not unrelated to the preparations

for the 2010 World Cup, the Gauteng Freeway Improvement Project was awarded in early

2008. Electricity generation expansion operates in 20-year cycles, which meant that the year

2000 should have seen the start of the build program; this was delayed until the beginning of

2008. The age and capacity constraints around the coast-to-inland oil pipeline infrastructure

were evident for several years (and incidentally refining capacity) but that was also only

awarded in early 2008.

5. Turnover

The latest data suggests a decline of 11% during 2009 which is expected to decline further by

nearly 25% in 2010.According to SAFCEC, civil engineering has experienced double digit

growth from 2005 to 2008, double digit decline from 2009 to 2010 and the real possibility of

yet another massive increase in demand for construction services starting in 2011 resulting in

unpredictability in prices and employment again.

Table 3: Percentage Change in main indicators

Indicator

6 Months To 12 Months To

2008.q4 2009.q4 2008:q4 2009:q4

Confidence* -35%(118) -46% (64) -19.4% (303) -48.5% (156)

Tenders 20.5% -23.7% -11.5% -17.6%

Contract

Awards** -22% -40.3% 36% -48.7%

Employment 7.9% -1.5% 9% -1%

Turnover 30.3% -24% 25% -10.7%*Confidence index measured as percentage change in cumulative net improvements.

**Contract Awards based on contracts awarded in the RSA only.

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According to SAFCEC, possible future activities amongst different clients suggest that the

massive decline expected could be followed by an equally massive upturn again, starting in

2011. SAFCEC points to; inter alia, the following activities:

Eskom’s capacity generation, such as the Medupi power station

South African National Roads Agency Limited (SANRAL) publications suggest that

the N1/N2 toll road will commence in early 2011. The Wild Coast toll road may

happen soon afterwards, and the second phase of the Gauteng Freeway Improvement

Project (GFIP) program may also start during 2011/12.

It is common knowledge that SA is a water scarce country and that the pollution of

our water resources is a major problem (whether coming from historical mining

activity or sewerage systems failure).Trans-Caledon Tunnel Authority (TCTA) is

playing a more and more prominent role featuring as an implementation agent for

Department of Water Affairs and Forestry. The municipal recovery plan driven by the

Department of Cooperative Governance and Traditional Affairs may also start to

show results in the medium term.

Our harbour capacity must be expanded and Transnet is on course to do major

expansions. They confirmed that they have a R20 billion annual budget that fluctuates

between more or less civil engineering works in the program.

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Chapter Two

The focus of the investigation, in line with the terms of reference, was to review minimum

wages and conditions of employment in the civil engineering sector.

This chapter deals with the current dispensation in the sectoral determination around

minimum wages and other related conditions of employment. In addition, it also deals with

the inputs received during the public hearings, written inputs submitted to the Department,

proposals by the Department and recommendations of the Commission.

Wages and annual increases

The current wages in the sectoral determination are reflected in Table 4 below

Table 4: Current Minimum Hourly Wages in Civil Engineering

Grade 2009 % 2010

1 14.00 12% 15.682 14.40 12% 16.133 14.80 12% 16.584 15.30 12% 17.145 18.30 12% 20.506 20.80 12% 23.307 23.80 12% 26.668 26.70 12% 29.909 30.15 12% 33.77

In order to maintain stability in the sector, the above grades were provided by the sector to

the Department to publish in 2009. The grades range from a general worker as grade 1 up to

an artisan as grade 9. The current minimum rate of a general worker (grade 1) is R15.68 and

artisan (grade 9) is R33.77 per hour.

It should be noted that previously the civil engineering sector had two sets of minimum

wages, one for employees in the rural areas and another for employees in the urban areas. The

sector has since narrowed the gap between rural and urban wages in the country and came up

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with a single minimum wage for the entire sector.The sector also agreed on the grades which

were ultimately published as part of the sectoral determination.

Views of the employers

In its submission, SAFCEC urged the Department to note the historic changes in wages and

conditions of employment that have been published in recent years. They submitted that

major increases were granted in the past, even much higher for the rural areas in order to

rectify certain disparities but that future increases should not exceed the rate of inflation.

The table below gives an indication of how increases in the minimum rate for a general

worker in the rural area and in the urban area were established in order to reach parity.

Table 5: Minimum Wages for a General Worker for Johannesburg and for Northern Cape:

1998-2009

SAFCEC indicated in its submission that the increase set as shown above was therefore

substantially higher than the increase in CPI and the impact of those increases, particularly on

the smaller contractors and emerging BEE contractors has been negative.

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Setting out increases in the general worker for Johannesburg and Northern Cape

R 0.00

R 2.00

R 4.00

R 6.00

R 8.00

R 10.00

R 12.00

R 14.00

R 16.00

R 18.00

Johannesburg

Northern Cape

Johannesburg R 5.17 R 5.25 R 5.25 R 6.12 R 6.60 R 7.29 R 0.00 R 7.97 R 9.02 R 10.27 R 11.09 R 14.00 R 15.68

Northern Cape R 3.95 R 4.14 R 4.14 R 4.83 R 5.21 R 5.75 R 5.75 R 6.45 R 7.40 R 8.45 R 10.27 R 14.00 R 15.68

1998 1999 2000 2001 2001 2002 2003 2004 2005 2006 2007 2008 2009


Employers therefore proposed that wage increases and annual wage increases should not

exceed the Consumer Price Index (CPI). Employers also proposed that consideration should

be given to the fact that the non-wage demands are also further increasing the total

employment cost, thus affecting the viability of the civil engineering industry. SAFCEC

argued that the implication of total cost of employment to company, as per collective

agreement or determination, should be used as the basis to evaluate the impact that these

processes have on the overall employment cost.

Some employers in Johannesburg proposed an increment of 13%, while employers in

Lephalale were divided on this issue, with some proposing CPI +2% for employees in grades

1 to 4 and CPI + 1% for employees on grades 5 to 9, and others proposing CPI only.

However, in most of the areas visited employers cautioned against a double-digit increment,

arguing that it would have an adverse impact on the sector, resulting in major layoffs and

closure of many businesses.

In Durban employers proposed an increase of CPI only for the first year, while subsequent

years’ increase would depend on the future economic climate.

Views of the employees

NUM’s submission to Department of Labour was that the minimum wages should be

amended as follows:

Table 6: Minimum hourly rates proposed by NUM

GRADE CURRENT RATE NEW RATE

Proposed

% Increase

Proposed

1 15.68 18.82 20%

2 16.13 19.47 20%

3 16.58 19.90 20%

4 17.14 20.57 20%

5 20.50 24.60 20%

6 23.30 27.96 20%

7 26.66 31.99 20%

8 29.90 35.88 20%

9 33.77 40.52 20%

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Some employees in Polokwane, Cape Town, Witbank and Durban proposed R18, 00 to R35,

00 as a minimum hourly rate for general workers. Some employees in Polokwane proposed

an increase of 12% across all grades.

Employees argued that the work they do is labour-intensive and does not match the rate of

pay they receive in reality and most of them move to other provinces with their employers for

projects, which means more costs. They also cited the rising cost of food, transport, school

fees and the cost of living in general as the reason for their proposal. They also mentioned

that increases on electricity also add more financial burden on their budgets, which affect

affordability.

Agreement by the national negotiating forum

The parties within the negotiating forum have agreed on a three year wage deal, which is as

follows:

For the first year, covering the period 1 September 2010 to 31 August 2011, the wage for

Task Grade 1 will be R3 400.00 per month or R17.43 per hour, which amounts to an

increase of 11.2%.

For the second year, covering the period 1 September 2011 to 31 August 2012, the wage

for Task Grade 1 will be R3 700.00 per month or R18.97 per hour, which amounts to an

increase of 8.8%.

For the third year, covering the period 1 September 2012 to 31 August 2013, the wage for

Task Grade 1 will be R4 000.00 per month or R20.50 per hour. , which amounts to an

increase of 8.1%.

All other grades(Task Grade 2 to 9) will receive increases of 9.5% across the board for the

first year and CPI plus 3% or 8% (whichever is greater) for the second year. For the third

year, wage increases will be negotiated during the second year.

Views of the Department

The Department wishes to point out the following:

The Department is mindful of the current credit crunch and of the fact that the demand for

civil engineering jobs is diminishing, particularly given that most of the projects related to the

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2010 FIFA World Cup have been completed. We are also optimistic, however, that the sector

will recover starting in 2011 due to projects in the pipeline such as the Eskom’s capacity

generation (Medupi power station), the N1/N2 toll road which will commence in early 2011,

the Wild Coast toll road may happen soon afterwards7.Therefore setting the minimum at a

reasonable level might be sensible in order to ensure that companies do not shutdown,

downsize or retrench employees.

In order to maintain stability in the sector and to promote collective bargaining, the

Department has always supported the sector’s collective agreement by using it as an input

document in the reviewing process of the sectoral determination and promulgating the

minimum rates as agreed by the parties. The Department is proposing that the new minimum

wages be aligned to the agreement signed by the parties at the national bargaining forum.

The table below represents the proposal by the Department on the new minimum wage levels:

Table 7: Minimum hourly rates proposed by the Department in relation to the

agreement by the negotiating forum

Grade

Current

Rates

01/09/2010 -

31/08/2011

Proposed

New Rates

DoL

01/09/2011 -

31/08/2012

01/09/2012

–31/08/2013

1 15.68 17.43 18.97 20.50

2 16.13 17.66

Previous

year rate

+CPI (eoer)

+ 3% or 8%

(whichever is

greater)

Wage

increases to

be

negotiated

3 16.58 18.15

4 17.14 18.77

5 20.50 22.45

6 23.30 25.50

7 26.66 29.20

8 29.90 32.74

9 33.77 37.00

7 Information provided by SAFCEC

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Duration of the sectoral determination

Views of employers

Employers indicated that the new minimum wages should be determined for two or three

years period based on the fact that the increases for the second and third years usually take

into consideration the CPI rate for that particular year and determining wages for a period of

three years would eliminate the need of consulting employees each and every year.

Views of employees

The unions indicated that they wanted minimum wages to be determined for one year and

other conditions to be determined for two to three years based on the fact that they should

able to negotiate the wages based on economic conditions of that particular year. They also

indicated that if the CPI rate was above 10%, they can agree that the wages be determined for

two to three years.


The parties at the negotiating forum have agreed that the new minimum wage dispensation be

set for a period of three years which will lapse on 31 August 2013.

Views of Department

The Department notes that sectoral determinations are normally reviewed after three years.

The parties at the NNF have also agreed to a three year wage deal. Therefore the Department

recommends that the new minimum wages be determined for a three year period as agreed in

the national bargaining forum.

Minimum wage increases for years 2 and 3

Views of employers

Employers indicated that the position of the industry needs to be carefully considered

particularly in the light of the global and local economic recession and also the fact that there

has been a decline in the industry. They argued that an increase of 2% above the CPI could

lead to more employers retrenching and businesses closing down, more especially the smaller

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ones in the rural areas that did not benefit from the projects taking place around the FIFA

World Cup. They also pointed out that even though increases would improve the income of

employees, high increases would also place a significantly increased burden on employers

and the potential viability of their businesses. They therefore proposed that an increase of 1%

above the CPI would be an ideal level which would at the same time provide for some real

and meaningful income growth for employees.

Views of employees

Employees proposed increases of between 2% and 4.5% for years 2 and 3. They indicated

that the wage increase should improve their living conditions and aligning the increases to the

inflation rate would improve their living conditions.


Parties within the negotiating forum agreed that the wage increases for years 2 and 3 be

determined as follows: wage increase for Task Grade 1 in year 2 and 3 shall be 8.8% and

8.1% respectively. For other grades, wages shall be increased with CPI plus 3% or 8%,

whichever is greater, during the second year. On the third year wage increases for Task Grade

2 to 9 will be negotiated.


The Department proposes that annual wage increases should be dealt with as per the

agreement by the national bargaining forum. However it should be noted that the CPI referred

to is the CPI (excluding Owner’s Equivalent Rent). Furthermore the CPI to be utilized in

determining wage increases shall be the figure as published by Statistics SA six weeks prior

to the wage increases.

Other issues discussed in the public hearings.

(a) Job Grading

(b) Sleep-out allowance

(c) Industry medical aid

(d) Industry provident fund

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Job Grading

The current sectoral determination has grades that range from 1 to 9, with different skill

levels and different job categories.


The employers indicated that they did not have a problem with the job categories but

sometimes felt that the job grading does not recognise the seniority of employees because all

employees, irrespective of their experience, earned the same salary prescribed for that grade.


Employees indicated that even though they appreciated the process of job grading, they were

dissatisfied with the way the process worked based on the fact that the job grading system

does not take into consideration the experience that a particular employee has. A general

worker who has five years experience earns the same salary as a general worker employed for

less than two months. Most of the employees indicated that they usually perform duties for

two different grades and are paid for one grade.


Parties at the negotiating forum agreed that Job Grading should be reviewed, but decided to

maintain the status quo until their reviewing process has been completed.

Proposals by the Department

The issue of job categories was agreed by the parties at the National Negotiating Forum and

the agreement signed by the parties in 2009 indicated a need to appoint a task team to address

how they could improve the job grading system. The Department therefore proposes that the

issue of job grading be left as is in the sectoral determination, at least for now.

Sleep Out Allowance

This is the allowance that is paid by an employer to compensate the employees for being

away from home and is sometimes described as S&T allowance (subsistence & travelling

allowance). Currently the sectoral determination does not cover the issue of sleep out

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allowance but, as stated earlier, SAFCEC has indicated that a task team has been appointed to

address issues such as this.


Employers indicated that an agreement was reached by the parties that people in the same

area as the project should be utilized to work on the projects so as to empower the community

and to create employment for that area. They also agreed that in instances where people work

away from home, they should be provided with food and accommodation.


Some employees proposed R1500.00 as sleep out allowance whilst others proposed R2500.00

in order to cater for their needs such as transport costs, food, accommodation and electricity.

Employees also indicated that the conditions of employment differed according to the type of

contract they have with their employers, For instance core employees (permanently

employed) get an allowance and are transported home four times during the duration of their

contracts, whereas those employees employed on a limited duration contract (LDCs) do not

have an allowance and are transported twice during the duration of their contract.


Parties agreed that this matter be left for the parties to negotiate at plant level.


As SAFCEC has indicated that there is a task team appointed to investigate amongst other

issues, the issue of sleep out allowance, the Department proposes that the issue be left to the

task team to investigate and come up with an agreement.

Industry medical aid

In terms of the agreement signed the parties in 2009, employees who have been employed for

eighteen months or longer continuously on one project by the same employer will be entitled

to medical aid for the industry.


There was no input received from the employers on this issue

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Employees were divided on the issue of medical aid, with some proposing that medical aid be

provided to assist them when they are injured at work and others against it, arguing that it

would be expensive for some employees such as the general workers to have medical aid.

Unions at Medupi power station indicated that they met with a service provider to discuss the

matter and felt that the premiums would be affordable to the employees, but also emphasized

that the medical aid should be optional and should take into account the nature of

employment contract. They indicated that employees on contracts of less than 6 months

should be exempted from the medical aid scheme because they might end up forfeiting their

contributions when their contracts ended.

NUM suggested that the Minister should promulgate BICIMA as the medical aid scheme for

the civil engineering sector as agreed between NUM, BCAWU and SAFCEC.


The Department proposes that the issue of medical aid be left to the parties to decide based

on the fact that it should be voluntary. For employees who may be injured whilst at work, the

Occupational Health and Safety Act prescribes that it is the duty of the employer to ensure

that the employee gets medical attention at the expense of the employer. Forcing the medical

aid scheme on employees would not be the right thing to do given the fact that some of them

do not earn enough to pay for it. Furthermore, the nature of the job performed in the sector is

generally fixed-term and could negatively affect employees in the event they do not claim

during the period of the contract.

Industry provident fund

In terms of the agreement signed the parties in 2009, employees who have been employed for

eighteen months or longer continuously on one project by the same employer will be entitled

to an industry provident fund.


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Employers submitted that this issue is covered in the agreement that they signed with the

unions in 2009 and have even increased the contributions to the fund from 7% to 9%, so it

should be left as it is in the agreement


Employees indicated that they were already covered by the provident fund and for those that

were not covered, they felt that it should be included in the sectoral determination. Unions on

the other hand indicated that the qualification for membership must be amended to include all

employees employed in the Civil Engineering Sector and that the Construction Industry

Retirement Fund (CIRBF) must become the Civil Engineering Industry Fund.


The Department proposes that the status quo be maintained with respect to the provident

fund.

Other basic conditions of employment issues

During the public hearings employees submitted other inputs on a number of issues. The

issues include the following:

(a) Family responsibility leave;

(b) Severance pay;

(c) Annual leave;

(d) Maternity leave; and

(e) Hours of work.

Family Responsibility Leave

In terms of the sectoral determination, employees who have been in employment for longer

than four months with the same employer are entitled to three days family responsibility

leave per annum.


Some employees proposed three (3) days family responsibility leave per occurrence and

others five (5) days. They argued that they have bigger families, therefore three days per year

is insufficient.

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Parties agreed that the family responsibility leave be increased to 4 days paid leave during

each annual leave cycle.


The Department supports the agreement reached at the national bargaining forum to increase

family responsibility leave to 4 days.

Severance package

In terms of the sectoral determination, employees are entitled to one week’s remuneration for

every completed year in the event of termination of employment based on operational

requirements.


Employees proposed an additional one week’s severance pay. They argued that the sector is

amongst the lowest paying sectors in the country and one week of severance pay is not

sufficient.


At the national negotiating forum, parties agreed that the one week provision currently in the

sectoral determination should apply to those employees who have ten years or less

continuous service with the same employer. For employees who have more than ten years

continuous service with the same employer, two weeks’ salary should be applicable in

determining the severance pay.


The Department supports the agreement by the national bargaining forum to increase

severance pay entitlement to two weeks’ salary for employees who have more than ten years

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of continuous service with the same employer and to retain the one week’s salary for

employees with ten years or less continuous service.

Annual leave

In terms of the sectoral determination, employees are entitled to 15 working days’ of annual

leave per annum.


Employees proposed 30 days of annual leave or four weeks per annum. They argued that the

current provision is insufficient since they do not reside with their families, so they need extra

days.


In terms of the agreement signed, annual leave days should be increased as follows:

16 working days leave in year 1;

17 working days leave in year 2; and

18 working days in year 3.


The Department supports the parties’ agreement to increase annual leave days as follows:




Maternity leave

In terms of the sectoral determination, employees are entitled to four consecutive months’

maternity leave.


Employees proposed six months’ maternity leave with full pay. They argued that the industry

has started to employ more women, but maternity provisions in the sectoral determination do

not make conditions conducive for women.

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Parties agreed that an employee on maternity leave must receive 20% of her normal weekly

wage for the first four months of maternity provided that she has been continuously in service

for two years before the expected date of birth and must remain in service for 1 year after the

birth.


The Department supports the agreement by the parties in relation to the maternity leave

provision.

Hours of work

The sectoral determination provides for a maximum of 45 ordinary working hours per week.

Views of employees

Employees proposed that ordinary hours of work should be reduced to 40 hours per week.

They were of the view that the work they perform requires a lot of strength. They argued that

if they worked fewer hours, fatalities in the industry would be reduced and more people

would be employed in order to meet deadlines.

View of EmployersIt should be noted that on the issues listed above, i.e. family responsibility leave, severance

pay, annual leave, maternity leave and hours of work, employers were of the view that the

current sectoral determination provides ample rights and protection and therefore there was

no need to change these. Furthermore, some of the issues mentioned above would be covered

in the investigation by the task team that has been established by the parties to the National

Negotiating Forum (NNF).


Parties agreed that the status quo should be maintained.

Proposal of the Department

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In relation to all other basic conditions of employment as raised by employees, the

Department is of the view that the conditions in the current sectoral determination are

adequate and therefore no proposal is made in relation to amending the determination on

these issues.

Chapter Three

EVALUATION IN TERMS OF ECC CRITERIA

Ability of employers to conduct their business

The civil engineering sector in South Africa has currently experienced growth due to the

significant projects surrounding the FIFA 2010 Soccer World Cup stadiums, the Gautrain, the

Gauteng freeway upgrades, the Harbours and Airports developments as well as the

development of Eskom’s power station.

With projects related to the 2010 FIFA World Cup having been completed and the rescoping

of work available from some public corporations such as Eskom, which had fallen behind

with its capital expenditure programme owing to funding problems, construction activity

would be declining. In the previous report the confidence levels were down by 51.2% but

now it has dropped by 70%. SAFCEC expects that confidence levels will start showing signs

of improvement during the latter part of 2010, mainly based on an expected recovery in

mining demand for civil engineering works and some recovery in private sector developers’

demand for civil works.

Given the government’s commitment to infrastructure projects and the mitigating contracts in

the pipeline such as the Gauteng Freeway improvement project, the industry is expected to

recover during 2012 and 2013. The Commission is optimistic that its recommendation will

not impede the ability of employers to conduct their businesses successfully.

The impact of the proposed minimum wage on the cost of living and poverty alleviation

The sectoral determination has consistently proposed increases above inflation. The CPI

reflects the prices of commodities, and the higher the CPI increases, the faster the decrease in

the purchasing power of individuals. In essence, if wages are increased by CPI, the buying

power of workers does not change.

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The Commission is of the view that the proposed increases will not only assist in job creation

and reduce staff turnover in the industry, but they will also have a major impact on staff

retention. The increase is intended to improve the lives of workers. Considering the current

rise in food prices, electricity, and transport, the proposed increases and also the annual

increase pegged at inflation rate plus additional three or eight percent will attempt to address

concerns faced by those earning low wages which reduces their standards of living. It should

however be noted that the new wage level is higher the current CPI level which is 4.9% and

this has been proposed considering the effect which the global economic meltdown had on

the buying power by the employees.

Wage differentials and inequality

The previous sectoral determination introduced a grading system, which was long overdue in

the sector. The grading system, although it creates a wage gap between the employees, is

aimed at recognising the skills and the contribution of each employee. The current

Commission recommendation promotes just that, although different categories of employees

have different responsibilities and skills, and this gap might seem excessive.

The likely impact of the proposed wages on current employment and the creation of

employment

The increases as recommended are not likely to have a significant impact on employment

levels, especially on small businesses. The May 2010 Quarterly Labour Force Survey

released by Stats SA has indicated that the construction industry reported an annual decrease

of 50 000 employees (-10.9%) at March 2010 compared with March 2009. There was a

quarterly decrease of 7000 employees (-1.7%) at March 2010 compared with December

2009. This is mainly due to the completion of construction projects.

There will be in increase in frictional unemployment over the next 18 months as a result of

the lull in the project pipeline8, but not as a result of minimum wages. During the recent, big

infrastructural projects such as the Soccer City stadium, in Soweto, people from the

surrounding areas were trained and employed on projects, which also made them more

employable for the future. Given the increase in government infrastructure spend, increase in

municipal spend; the country is optimistic that jobs in the construction industry will be

8 Information provided by Engineering news,12 February 2010

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retained until 2014. The sectoral determination as proposed will therefore not have a

significant impact on employment creation; instead, it will assist in job creation. However, it

should be noted with caution that the long lead times in awarding tenders and infrastructural

development cost increases, including increased cost of employment, may have a negative

impact on small businesses.

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Chapter four

RECOMMENDATIONS OF THE ECC

Wages

The ECC recommends the following in relation to new minimum wages

Grade

Current

Rates

01/09/2010 -

31/08/2011

Proposed

New Rates

DoL

01/09/2011 -

31/08/2012

01/09/2012

–31/08/2013

1 15.68 17.43 18.97 20.50

2 16.13 17.66

Previous

year rate

+CPI (eoer)

+ 3% or 8%

(whichever is

greater)

Wage

increases to

be

negotiated

3 16.58 18.15

4 17.14 18.77

5 20.50 22.45

6 23.30 25.50

7 26.66 29.20

8 29.90 32.74

9 33.77 37.00

Minimum wage increases for years 2 and 3

The ECC recommends that annual wage increases should be dealt with as per the agreement

by the national bargaining forum. However it should be noted that the CPI referred to is the

CPI (excluding Owner’s Equivalent Rent). Furthermore the CPI to be utilized in determining

wage increases shall be the figure as published by Statistics SA six weeks prior to the wage

increases.

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Duration of the sectoral determination

The ECC recommends that the new minimum wages be determined for a three year period

starting from 2010 to 31 August 2013.

Family Responsibility Leave

The ECC supports the agreement reached at the national bargaining forum to increase family

responsibility leave to 4 days.

Annual leave

The ECC recommends that annual leave days should be increased as follows:




Maternity leave

The ECC recommends that during maternity leave an employee must receive 20% of her

normal weekly wage for the first four months of maternity provided that she has been

continuously in service for two years before the expected date of birth and must remain in

service for 1 year after the birth.

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