Labour laws must change

The arguments of the trades unions against labour market flexibility proposals by Finance Minister Patrick Chinamasa are quite interesting. For starters, they say that touching the Labour Act would mean a return to the draconian Master and Servant Act of 1901 which allowed employers to hire, fire and retrench at will.


They also argue that the move will violate Section 65 of the constitution, which says “every person has the right to fair and safe labour practises and standards and to be paid fair and reasonable wage.”

In order to understand why labour market flexibility is necessary, let us consider the following scenario: an employee earns $300 per month and uses it to buy goods worth $300.

Suppose prices of goods have gone up to the extent that the employee now needs $500 to buy the same amount of goods he used to buy for $300. What does he do? You will all agree that he will have to cut out some of the goods he used to buy.


This is exactly the situation facing the business sector right now. Organised Labour should not pretend that it doesn’t understand this. If a company when operating at 100 percent capacity employs 1,000 employees, should it maintain the same number of employees when capacity falls to 10 percent? Can a company survive without the flexibility to customise its resources in accordance with fluctuating business cycles?

If the company is to remain with 1,000 employees at 10 percent capacity it will go bust. High production costs will be dominated by labour costs, and then all the employees will be jobless. That is the alternative to labour flexibility.

We need labour laws that give business the ability to optimise operations. Jobs can only grow if the business sector is allowed to grow its companies. Section 13 of our people-driven constitution actually says that the state “must take measures to foster the development of industrial and commercial enterprises,” while Section 14 directs the state to “ensure that adequate measures are undertaken to create employment for all Zimbabweans.”

Basically these the two clauses are saying that jobs don’t come from closure of companies but rather from development of industries. Jobs are not created when there is no flexibility.

Locking the door

Making it difficult to rationalise human resources is making it difficult to hire. The government itself is a very good example of the impact of labour law rigidity on job creation. Government’s labour expenses account for more than 70 percent of its total income. Because of that it has been forced to freeze recruitment in the public service. It is now more than half a decade since government has frozen recruitment. So, by opposing labour market flexibility, Labour is actually not only threatening the existence of their very own jobs, but also locking the door on job creation.

Let’s not deter government when it is fighting to remove barriers that hinder companies from growing and being in a position to create more jobs. The current Labour Act has so many barriers to employment. This is against the dictates of our constitution, which says, in Section 24, that the State must foster “the removal of restrictions that unnecessarily inhibit or prevent people from working.” It is actually the current Labour Act that is holding jobseekers at ransom.

The current labour laws do not give figures for retrenchment, which means employers cannot budget for the exercise. They are ambushed eventually and that brings distress to their cash flow. Since the envisaged retrenchees remain employees of the company until the end of the negotiation process, even if it takes forever, it means the employer will have to continue paying them every month. This obviously has a negative effect on viability.

We need to link remuneration to productivity, and remodel the unrealistic awards. We need to bring flexibility in contracts, working hours, wages and dismissal laws – by aligning them to the performance of industry. That way we can ensure growth with decent jobs. Our people should not work like a roadrunner in Soweto.

The man selling airtime in First Street appears to be watching a tennis match, the way he moves his head checking for police. That is not a decent job.

Post published in: Business Analysis

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