Proposed labour law changes must be carefully weighed to prevent limitations for SMEs, says analyst

Publication: Eyewitness news

Author: Paula Luckhoff

Photo: Gig economy, delivery. Pexels/ Artem Podrez 

Luncedo Mtwentwe, MD of Vantage Advisory, outlines why South Africa should be cautious about the well-intentioned changes being considered.

It's often said that small business is the engine that drives the economy of South Africa.

Right now, government is proposing changes across multiple pieces of legislation to modernise our labour framework.

But with the attempt to modernise labour laws comes the risk that "we solve one problem and create another", cautions Luncedo Mtwentwe, MD of Vantage Advisory.

Mtwentwe highlights one of what he says are the most consequential changes in the Labour Law Amendment Bill of 2025 - an expanded definition of what constitutes "an employee", alongside new protections for workers who have historically fallen outside formal labour structures.

"We know that South Africa has huge unemployment and usually while people are trying to get a job they become freelancers or contract workers, and most of the time they would not have the rights that traditional employees would typically have. That's what this Bill is trying to address, saying that they have to somehow fit into that definition of being 'an employee'."

While the intention is good, the question now is how these changes plays out in practice, Mtwentwe says.

He uses the example of small and medium enterprises (SMEs) to illustrate the point.

"SMEs will have to comply fully with some of the labour legislation, and that usually comes at a cost. These businesses want flexibility... with freelancers, contractors and project-based workers allowing small firms to scale work up or down, manage cash flows and access skills they could not otherwise afford on a permanent basis."

Rather than imposing blanket complexity across the entire labour market, targeted regulation on large platform businesses where the risks of exploitation are highest, may be a more effective approach (as suggested by Ravi Naidoo from the Youth Employment Service), he says.