The impact of labour laws on small firms : a study of employer perceptions of the Labour Relations Act (66 of 1995) and the Basic Conditions of Employment Act (75 of 1997) in Grahamstown, Port Alfred and Port Elizabeth

This study sought to explore and explain the impact of labour laws on small firms, focusing on employer perceptions of the Labour Relations Act of 1995 and the Basic Conditions of Employment Act of 1997 in three towns of the Eastern Cape. It is important to focus on this impact of labour laws on these firms because of the high unemployment that faces the country. In this regard, it must be emphasised, firstly, that small firms are central to job creation; therefore, they contribute to a reduction in the unemployment rate; hence, the strategies created by the government to reduce any burdens (including regulatory burdens) on small firms. It is therefore important to study the impact of labour law on small businesses in order to assess the regulatory burden on small firms. The theoretical framework which underpins this study on the impact of labour law on small firms arises from the neo-corporatist critique of neo-liberalism. The two frameworks maintain the extent to which the government should intervene in the industrial relations system. Liberalism maintains that there should be a minimum role of the government, which involves only the facilitation of a framework for negotiations between employers and employees. Corporatism, however, maintains a social democratic approach, and holds that there should be an active role of the government in the industrial relations system with business, labour and the state working co-operatively (Klerck, 2009). This theoretical framework therefore shapes the extent to which employers perceive labour laws or state’s regulatory role impacts small businesses. The data was collected through the qualitative inquiry; using face-to-face, semi-structured interviews. The findings in this study included negative employer perceptions of labour laws. More specifically, many of the employers that were interviewed claimed that labour laws were burdensome on their businesses. They claimed that labour laws imposed financial and administrative costs to their firms, negatively affected the employer-employee relationships in these firms as well as the employing decisions of the employers. As a result, the employers saw labour laws as undermining flexibility and imposing unfair rigidities on small firms. Furthermore, employers perceived South African labour laws as not addressing the unique iii circumstances of small firms. They maintained that labour laws treated small firms similarly to large firms. Even though the employers held these perceptions of labour laws, it was evident that these subjective perceptions did not reflect the objective impact of labour laws on small firms. This was firstly related to the fact that many of the employers that were interviewed had negative views of labour laws but these views were not substantiated by particular events in their firms. Secondly, it was revealed that the employers’ perceptions of labour laws were based on their misconception or misunderstanding of labour law. Thirdly, it was revealed in this thesis that small firms were not affected in the same way to big firms by labour regulation. This was related to the fact that many of the small firms’ employers that were interviewed tended to be less concerned by regulation. Specifically, although many employers that were interviewed claimed that labour laws were burdensome on their firms it was evident that regulation was avoided because of the informality that characterised these firms. Consequently informality mediated the impact of labour laws on these firms, and labour laws imposed less ‘costs’ on these firms. However, it cannot be argued that small firms are isolated from the sphere of labour laws. Rather, although these firms were governed by regulation it was found that the extent to which employers complied with regulation depended on the extent to which organisational practice already reflected similarity with the legislative objective