Wage agreement is ‘killing jobs’ in Cape construction sector
An agreement that pays above industry average wages is being strongly contested by small building companies and sub-contractors who argue that it is unaffordable and will put them out of business. Big players and trade unions want everyone to pay the same wages to ensure a ‘level playing field’.
The minister of labour recently extended a collective bargaining agreement signed between employers and trade unions in the Western Cape’s construction sector to all sub-contractors and other parties that were not signatories to the original agreement.
This binds these parties to the wage agreement that kicked in on November 1, 2019.
Small contractors and sub-contractors believe that the agreement discriminates against them, the non-parties, and if enforced, will accelerate the decline of the industry witnessed over the last 18 months.
At the very lowest pay grade, employers must pay R299.79 a day for a labourer. Of this, R240 is paid directly to the employee, while the employer pays the balance to the Building Industry Bargaining Council. The balance, R59.31 per day, covers pension contributions, sick pay, holiday pay, bonus pay, and the Building Industry Bargaining Council (BIBC) levy.
The employee is also expected to contribute R23.94 per day, which includes a pension contribution, BIBC levy and trade union/collective bargaining/sick fund levy.
Employer costs rise to R680.76 per day for tradesmen like glaziers and carpet fitters and R884.72 per day for artisans like stonemasons, carpenters and joiners.
These wages are higher than those in the rest of the country, acknowledges Allen Bodill, director of the Master Builders Association (MBA) Western Cape:
“But one has to consider other factors such as transport in their take-home pay.”
The “non-parties” argue that these wages are unaffordable.
“This wage agreement is a win-win for big companies and trade unions,” says Grant Herrmann, regional manager, Western Cape, for the National Employers’ Association of South Africa (Neasa). “It gives big business certainty, massive projects can go ahead, but it’s terrible for small companies.”
Smaller builders are often occupied with home building and renovations, where the margins are lower.
Sub-contractors have their own problems.
“We are sub-contracted by the bigger contractors,” says Cheslyn Nero, speaking for the soon-to-be-registered Building Society of Subcontractors (BSOS), which represents more than 205 small employers, employing over 2,800 people in the region.
“We are price-takers, the contractors operate on a take it or leave it principle and the wages they pay us are not enough to pay the wages in the agreement.”
The BIBC argues that sub-contractors must not accept these wages. It will not negotiate on the subject, he says.
“In addition, if the BIBC walks on to a building site and finds us non-compliant because our employees are not registered with the BIBC, or not being paid the correct amount, we are fined. If we don’t pay, they send the lawyers after us, attach our assets, so our members borrow money to pay the fine. It becomes a vicious circle.”
Neasa and BSOS argue that the agreement should not have been extended to non-parties.
“The Master Builders Association has about 300 members… this is not representative of the industry as a whole,” says Herrmann.
However, the BIBC sees matters differently.
“The aim is to have a level playing field and to ensure that all contractors and sub-contractors operate within the same set of labour rules. This ensures that there is labour peace, and proof thereof is that there has been no major strike in the building industry for plus-minus 30 years,” says Michael Caldecott, operational manager of the BIBC.
The Master Builders Association’s Bodill insists that the agreement is an attempt to keep the playing fields level, which is difficult considering the number of people who are prepared to work under the radar. He urges employers – including smaller builders and sub-contractors – to consider the challenging circumstances under which people live.
“Your basic labourer is taking home R220 a day after deductions. Your skilled labourer, who has broken his back in the industry for decades, is earning much less than a junior in a bank. When you consider the cost of transport and other factors, this is not much.”
However, he recognises some members of the MBA in the Western Cape prefer to sub-contract, rather than employ people, and that in many cases rates are squeezed.
“There are companies that drive ruthless commercial agreements, and the smaller players are not equipped to tear those agreements apart.”
For this reason, he says, the MBA is offering courses to emerging builders to educate them on pricing and contractual risks.
It is worth noting that of the nine regional MBAs, just one other – in the Free State – has a mandatory wage agreement. “There are other wage agreements in place,” Bodill says, “but these are voluntary.”
This begs the question, in whose interest is the minister of labour acting, by extending the wage agreement to non-parties? After all, the minister of labour can only extend the agreement under certain circumstances.
This happens if one or more of the trade unions (whose members make up the majority of union members on the bargaining council), vote in favour of such an extension.
Or similarly, if one or more of the employer organisations (who employ the majority of employees within the bargaining council), vote in favour of such an extension.
The wage agreement, and its extension, is supported by the Building, Wood & Allied Workers Union Of South Africa (Bwawusa), which says it is the majority trade union at the BIBC.
“We are very concerned about the exploitation of labour in this industry, in particular by sub-contractors, and see the agreement as a way to protect workers,” a spokesman says.
“We strongly disagree that the numbers favour the MBA,” says Herrmann. “We have requested this information from the Department of Labour, but they are stonewalling and insist that we apply through the Promotion of Access to Information Act.”
The numbers do not add up, Herrmann says. There are 5,605 small employers listed on the BIBC website, while the Master Builders Association members number a few hundred.
For the better part of a year, the sub-contractors have been lobbying the BIBC to be excluded from the wage agreement. When their requests fell on deaf ears, they lobbied the Department of Labour, and Parliament.
Their concerns culminated in a meeting in November 2019 with the Department of Labour where it was agreed that the wage agreement would not be signed until the bargaining council, the Department of Labour and the BSOS sat together to negotiate.
“Two weeks later, the collective agreement was signed between BIBC and the Department of Labour, without our knowledge,” says Nero. “The only concession is that the agreement is for a year, and not three years.
“This re-establishes that we, as subcontractors, have no say, yet we are the working force.”
The discussion is not quite over. The Department of Labour has agreed to a meeting on Thursday 6 December. BM