1. 1 PCC flexible labour strategy implementation update Date:19 February 2013

2. 2 Agenda The journey Commitments made to the Committee Progress to date How do we strengthen SAPO’s capabilities Financial implications for SAPO and the employee Risks and mitigation

3. 3 Background and introduction During August 2012, SAPO presented its flexible labour strategy to the Committee The Committee raised the following:  Cost implications  Risks  Proposed model to be implemented  Benefit to employees The presentation will provide a progress update

4. 4 Originally the journey suggested: 1)Exit or terminate the outsource quadrant 2)If SAPO believes it does not have internal capability, then “co-source” for limited time by selecting strategic partner 3)Build internal capability so as to insource this critical function Agreed strategic framework for flexible labour models suggests journey map of options for SAPO: 2) Co-Source 3) Insource 1) Outsource d) Contract in/ Supply out d) Contract in/ Supply out Organisatio nal Risk Internal Capability Hi Lo The journey to date: 1)Exit or terminated the outsource quadrant 2)SAPO has insourced this critical function Reasons: Alignment to Cabinet position on decent employment Create additional economic benefit to the employee Journey taken by SAPO: 2) Co-Source 3) Insource 1) Outsource 4) Contract in/ Supply out 4) Contract in/ Supply out Organisatio nal Risk Internal Capability Hi Lo The journey

5. 5 Commitments made

6. 6 All labour broking firms were served with 3 months notices of termination starting from 1 June 2012 The final termination date of the last broker company was 23 September 2012 Progress with commitments made All previous labour broking employees were given 12 months fixed-term contracts from 1 Sept 2012 and the last group by the 25 September 2012 As at 31 January 2013 a total of 7 911 people had been appointed on 12 months contracts Reason for 12 months: 6 months not acceptable to employees Counter offer of 12 months to end strike Completed

7. 7 SAPO has biographical and demographical information for each on record which still needs to be further validated through a formal vetting process SAPO has concluded the contractual process with each employee Need to increase the number of permanent support staff by 10 people Employee relations Recruitment Implement same vetting process as for permanent employees Successfully vetted employees will be appointed as permanent part timers Permanent part-timers will receive preference for permanent full-time appointment Will continue to use external supplier for vetting In progress Completed Progress with commitments made

8. 8 Financial benefits Current one year contract implications Permanent part time contract implications over next MTEF period Current one year contract Full amount inclusive of the labour brokerage fee is paid to the individual Job security Statutory deductions eg UIF and tax is collected Employees qualify for the following benefits as per BCEA Vacation leave Sick leave Permanent part time contract (successful vetted employees) will now qualify for the following contractual benefits amongst others: Vacation leave Sick leave Maternity leave Family responsibility leave Study leave 13 Th cheque Medical aid Pension fund Housing allowance Funeral cover

9. 9 Possible riskMitigation Possible illegal strikes by employees with one year contracts, to demand permanent full-time appointments Anticipate labour law amendments may require that all staff appointed for a period of six month after promulgation Reputation risk Possible labour unrest from those employees that did not pass the vetting process Increased staff cost A sound communication and change management intervention to communicate the strategy to all stakeholders SAPO’s strategy is to appoint on a permanent part-time basis, inline with the procedure previously explained, irrespective whether the amendments gets promulgated or not. Solid pro-active communication plan to inform all stakeholders Clear communication plans to inform the employees of the requirements for permanent part-time employment. Continuous crewing to determine optimal staff numbers Risks and mitigation

10. 10 Conclusion