Adcorp Employment Index, February 2011

Release date: Thursday, 10 March 2011

Salient features

Employment in the formal sector remained in the doldrums in February, rising marginally at an annual rate of 1.4%. The figures indicate that, despite a broadening pattern of growth in economic activity, employment remains weak.

Temporary work grew by 6.1% during the month, much of it in the agency work sector which grew by 3.2%, while permanent work declined by 1.3%. Temporary employment has increased in 17 of the past 24 months (or 71% of the time), whereas permanent employment has declined in 19 of the past 24 months (or 80% of the time).

Interestingly, growth of temporary employment does not appear to be adversely affected by recent proposed labour law amendments and may have even increased as a result of the proposed laws as employers are reluctant to employ people on a permanent basis pending clarity on these proposed legislative amendments.

The biggest increase in employment occurred in the government sector (5.5%), particularly in local and provincial government, and the biggest declines in employment occurred in the manufacturing and financial services sectors (-3.4% and -3.0% respectively).

Demand for high-skilled professionals remains strong, with 135,540 new jobs created on a net basis during February. Demand for manufacturing-related jobs (such as machine operators and assemblers) remains weak, with 72,991 jobs destroyed during February.

In this month's analysis, we take a close look at a new technology that is revolutionizing the matching of skills and job vacancies in the temporary staffing industry. The case study shows the widespread use of technology, not only as an alternative to human resources, but also as a facilitator of productivity improvement and cost reduction in labour-intensive environments. Technological innovations of this kind are at least partly responsible for the rapid growth of temporary jobs in South Africa and around the world.

Adcorp Employment Index

Source: Adcorp Holdings Limited

Analysis

Analysis

Many South African companies make extensive use of temporary staff, which are known by various names: contract staff, flexible staff, contingency staff, "temps", and so on. Temporary staff collectively represent 29.6% of South Africa's workforce, and agency workers (i.e. temps provided by employment agencies or "labour brokers") represent 7.6% of the total formal sector workforce. Historically, the management of temporary workforces has been subject to various challenges.

Temporary workers, who are typically paid per hour and not per month, do not easily fit into companies' standard payroll systems, requiring extensive system configuration and re-design related to monitoring temps' working hours through elaborate timeand-attendance systems. Temporary workers tend to have variable reporting lines, since they are often moved from one area, shift or assignment to another, with the result that specialized performance management systems are usually required for temps.

As a result of these challenges, many companies did not know such simple metrics as the number of temps employed, the average temp pay rate, the average agency charge rate, and so on. These challenges limited the potential growth of temporary work. Technological advances in the management of temporary workforces have played a significant role in facilitating the rapid growth of temporary work around the world.

Since 2000, South Africa's temporary/part-time workforce has grown by 11.9% per annum, compared to an average annual decline of 1.5% in the permanent/full-time workforce. For example, Europe's most advanced vendor management system for temporary workers, Skillstream, allows companies to track, monitor and report on progress of temporary employees throughout the entire hiring cycle, allowing companies to track in real time the cost per hire. In a typical environment, Skillstream is able to reduce administration and other costs by 11% of the total payroll, or roughly a cost saving of R11.38 million per annum for every 1,000 entry-level white-collar workers employed.

By contrast, technological innovation in permanent staffing has not kept pace. Permanent staff are managed in much the same way as 75 years ago when adoption of mass production techniques became widespread. As a result, we expect temporary staffing to continue to grow at a rapid pace in future, despite the South African government's regulatory attempts to curtail the practice.

Additional Data

Employment by Type

* Annualized

Employment by Sector

* Annualized

Employment by Occupation

* Annualized

Issued by Adcorp, March 10 2011

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