Domestic workers are not formal, permanent employees of households. Trying to force this fiction onto South African households threatens to wipe out all the jobs that this industry has created for countless South Africans. If regulations are strengthened and enforced, life won’t improve for domestic workers. Rather, they will find themselves contributing to the rising unemployment rate.
The Unemployment Insurance Fund (UIF) recently expressed its disapproval over many employers not complying with UIF regulations. The UIF is already a problematic institution. In theory, it could be a useful stopgap to help the unemployed survive while they find gainful employment; in practice, it is an additional tax levied on workers and employers. A tax that is often looted by corrupt officials, and very seldom helps anyone.
Even the unemployed it does temporarily help are unable to benefit substantially, as the state of the country’s economy due to overregulation, lack of trust, and the scourge of criminality mean they won’t find gainful employment in time – ensuring that their UIF payment will soon need to be replaced by a SASSA grant.
But it isn’t just formal businesses that the UIF is trying to force compliance from. The UIF is insisting that households must pay UIF for their domestic workers.
What lunacy is this? Households are not businesses. You can’t expect every household to go through the laborious process of registering for UIF from the Department of Employment and Labour, and then keeping up with the administrative migraine that is ensuring monthly contributions are made, reported, and recorded. Domestic workers will also see themselves getting less and less take-home pay, as a portion of their salary will be going to the grandiose waste of time and money that is UIF.
Businesses with full-time accountants struggle to keep up with UIF bureaucracy. How can someone expect a household with employed individuals to act as if they are a formal business just because they’ve hired a single individual to enact a clear service?
Domestic workers are not formal employees of households. And households are not businesses. You don’t expect a household to get VAT registered. You shouldn’t expect it to comply with complicated labour laws that are not relevant to them.
Domestic workers are self-employed. It doesn’t matter if they have a single client, or many. Domestic workers thrive as informal workers who enter malleable contracts with individuals and households. In essence, domestic workers are freelancers, being hired on a contractual basis. This gives them the freedom they need to shape their schedule, and also allows them to avoid the costs inherent in being a permanent employee of a larger company.
The ease and efficiency of these case-by-case agreements between domestic worker and household beats out hiring large cleaning companies – allowing individuals with few resources to compete with big businesses.
A similar comparison would be Uber drivers, freelancer graphic designers, handymen and such. If someone repeatedly ends up hiring the same Uber driver, graphic designer or handyman over and over, should they start paying them UIF? No. The nature of their working relationship is built on a very particular contract and trust. And if you baggage that contract with unnecessary regulatory hurdles, you destroy why people want to hire their services in the first place.
If you dramatically raise the costs and regulatory burden of hiring domestic workers, and somehow enforce such a foolish notion, households will stop hiring domestic workers. They will opt instead to hire larger cleaning companies. Or, worse yet, put more strain on their busy schedules by doing their cleaning themselves. Productivity will drop across the board, while also leaving many people unemployed.
The real loser in this situation will be domestic workers, who will lose their clients and livelihoods. Not all of them will be able to find employment in larger businesses and formal cleaning companies. Labour regulations discourage employment. And even those domestic workers who do find employment with a company will likely find their income going down, as now they must share their income with a formal employer.
Instead of overregulating domestic workers into unemployment, or stealing money from hard-working individuals through UIF, rather encourage private saving by teaching economic literacy across the country to adults and school students and deregulate the labour market to make it easier for employers to hire, fire and take their chances on workers.
The deregulated nature of the informal sector should be something to admire, not resent. The fact that the informal sector can’t be regulated has been the very thing keeping this country from collapsing entirely. Unregulated work has kept food on the table of countless South Africans.
The more we try to bring unregulated traders, domestic workers, spaza shops, hawkers and a host of other informal industries under the thumb of the government, the more we will see the unemployment and stifled growth that affects the formal economy spread to all parts of our society.
We need less regulation. No UIF. And a lot more freedom. That’s the solution to South Africa’s unemployment crisis. Not busybody, corruption-enabling lunacy.
Author: Nicholas Woode-Smith
Nicholas Woode-Smith is a political analyst, economic historian and author. He is a Senior Associate of the Free Market Foundation and writes in his personal capacity.
This article was first published by BusinessDay.
