The Portfolio Committee on Labour, having conducted a fact- finding mission to Chile from 30 September to 4 October 2002, reports as follows:
Table of Contents
Topic Paragraph
Terms of Reference A
Background B
Procedure C
Logistical arrangements D
Findings E
Conclusion F
A. Terms of reference
The Committee resolved to undertake a fact-finding mission to Chile. The objectives of this trip were to:
1. Find out about compliance with labour legislation.
2. Strengthen bilateral relations between the two countries.
3. Share experiences on some of the issues which Chile has managed to succeed in addressing, for example, reducing unemployment.
4. Look at how Chile manages to link labour with social security.
5. Share some experiences as countries which brought some reforms to their labour systems.
The Committee agreed that a report would be compiled after all the information had been collated and analysed.
B. Background
Like South Africa, Chile attained democracy after several years of dictatorship. The governments of both Chile and South Africa are pressed by the need to attain better employment growth rates. In addition, in both countries, labour market interventions by the state are constrained by fiscal discipline. Chile has succeeded in reducing the levels of unemployment. Also social and labour policies that had previously contributed to the expansion of internal consumption were to be redefined. The Ministry of
Labour in Chile has managed to accomplish labour reforms from both an economic and social perspective. All reforms were a subject of debate and planning at national level and had a high content of social dialogue. It is against that background that the Committee resolved to undertake a fact-finding mission in order to share experiences with Chile.
C. Procedure
Communication on the proposed visit was conducted both verbally and in writing with the Department of Foreign Affairs and the South African Mission in Santiago de Chile.
The delegation interacted with a wide spectrum of the Chilean society, which amongst other included the ministers of labour and social security, government officials from the ministry of labour, parliamentarians, union leaders, employers associations, academics, judges and management of the mining council.
D. Logistical arrangements
The multi-party delegation consisted of the following persons:
Mr D A A Olifant (Acting-Chairperson) ANC
Mr G G Oliphant ANC
Ms E Thabethe ANC
Mr N J Clelland-Stokes DP
Mr J Durand NNP
Ms P Jayiya (Committee Secretary)
E. FINDINGS
1. Ministry of labour and social security
The ministry of labour and social security combines both the portfolio of labour and social security. It has two deputy ministers. The directorate of labour is responsible for monitoring compliance with labour laws and enforcement of labour law standards. The directorate of social security is in charge of managing the distribution of social security funds. The social security fund is administered by the superintendency of social security, and there are regional superintendents in all the regions.
2. Senate of labour commission
The Chilean parliamentary committee on labour only focuses on developing norms and standards of the labour market. The judiciary and labour courts are responsible for settling labour disputes. Parliament also ensures that legislation is clear and interpreted correctly.
The representation of women in decision-making structures in Chile is improving. There are five women cabinet ministers. The head of the chamber (Speaker) is also a woman. The house has 12% women, although only two serve on the labour commission.
3. Labour market
Chile has a total population of 15 million people. A significant number of the population are indigenous people who were ignored by government policies in the past. Of the 15 million people, 11 million are of working age. Six million are economically active individuals, and five million are employed. 500 000 people remain unemployed. This represents a 9% unemployment rate. The labour force consists of people between the ages of 18 and 65. Labour indicators reflect that the labour force in Chile consist of three million people who work in the private sector. Workers are classified: minor 18, domestic, pensioners, public and private.
Women make up 37% of the Chilean labour force. Representation of women has improved in the police force. Possibilities are envisaged in the army, where women can become generals.
The average remuneration is US$450 per month. Each worker has an average of four years in a permanent job. The turnover rate per year is 25%.
In terms of salary distribution, 70% of the population earn less than the average salary.
80% of employment in Chile is in the small and medium sector and 20% in big companies. Small and medium companies tend to be owned by people with a low level of education.
Chile has a confederation that represents private entrepreneurs in different fields such as agriculture, mining, banking, transport, etc. The confederation has 180 members, which is almost 9% of private entrepreneurs. However, the role of the confederation is to promote jobs through its branches and membership.
4. Subsidised employment
In Chile the state directly subsidises employment in the private sector by paying the wages of participants partially or totally, or offers tax advantages to firms who hire and provided work experience. The programmes of subsidised private sector employment are linked to training schemes. For example, Chile has a programme that is co-financed by the government and the inter-American Development bank. This programme is co-ordinated by the state unit and is run through private institutes. It is mainly targeted at the young unemployed, preferably between the ages of 15 and 24, who are out of the schooling system.
This programme has a number of subprogrammes- training and work experience in firms, work training to become self-employed and training for young workers. Most of the training programmes are geared towards producing skilled labour, especially for private sector demands.
5. Labour flexibility/adaptability
Chileans believe that the labour market should be flexible for the economy in order to create more job opportunities, and that the market should determine labour legislation.
One labour specialist expressed the view that Chile uses terms such as adaptability and modernity because labour flexibility solicits a strong reaction from the trade unions. He gave an example of countries such as South Korea, which, after the Asian crisis, was experiencing high unemployment, but after implementing labour flexibility, jobs were created.
The labour reforms passed have no obligation to make minimum working hours flexible.
6. Unions/workers rights
One of the benefits of the Chilean Labour Reform Act of 2001 is that it allows for the formation of multi-industry trade unions. It also recognises the rights of workers to organise themselves in a manner that benefits their interests. A general rule in the formation of a union requires a minimum of 25 workers in the workforce. However, a special norm established is that eight workers can form a labour union in companies with less than 50 workers, on the understanding that within one year, the quota required by law is fulfilled. In companies with less than 50 workers, the requirement is 10% of the total workforce.
The Labour Reform Act also prohibits employers from using scab labour during strikes and dismissals because of union involvement. It further obliges employers to provide unions with a policy and financial statements, as well as company objectives, projections and planned technological or organisational changes.
As from 1 January 2005, normal working hours will decrease from 48 to 45 hours per week. For example, in the catering and commercial industries, workers will be entitled to two free Sundays a month, while workers in the fishing industry will be entitled to 12 instead of 10 hours'leisure time.
Overtime will only be used for temporary needs, and must be agreed on in writing for a maximum of three months, after which it must be renewed.
Studies conducted by researchers indicated that although some rights of workers have been re-established, 95% of women workers are ignorant of their rights. This results in them being exploited.
Although unions'autonomy has been increased, they remain weak. One of the senators expressed the view that workers' rights are best served by workers themselves through the vigilance of trade unions, and that, although legislation can be passed, if unions are weak they are useless.
Recent studies conducted by CENDA, an institution which conducts studies on workers rights and training of trade unions, identified some deficiencies in the salaries of workers that are employed in the agricultural sector. CENDA has made a commitment to work together with the unions and the ministry of labour to ensure that all conditions are captured in the new law.
CENDA also conducted research in respect of the fishing industry. The findings were that workers put in more working hours- they are paid overtime. Excessive working hours affect the health conditions of all workers.
7. Law enforcement
As indicated the directorate of labour, is responsible for monitoring compliance with the labour laws. This directorate has a staff complement of 1 600 public servants, and each of the 13 regions has a director. Also, there are 78 inspector offices throughout the country. It is envisaged that by the end of 2004, almost 2 000 posts will be filled. The responsibilities of the directorate of labour include the following:
(a) Monitoring the collective bargaining process.
(b) Enforcement of compliance with labour standards.
(c) Conduct studies on phenomenal processes that emerge in the labour market.
(d) The legal unit (within this directorate) is composed of lawyers who are responsible for interpreting the law. The lawyers also carry out defence of the institution before the court when a sanction has been approved.
(e) They resolve conflicts, be it individual by or through collective bargaining.
(f) The mediation unit specialises in conciliation and mediation at no cost.
(g) Training of union leaders forms part of the daily activities of the department.
8. Training
Most of the training programmes are carried out within companies, with tax incentives. For Chile training is linked with education and labour. Almost 20% of the labour force will be trained once a year within a period of five years, with an emphasis on subjects such as English and Information Technology.
In Chile most companies prefer not to have disabled people on the workforce. This is seen as a cultural problem.
9. President's social programme
(a) Poverty alleviation
On 20 June 2002 the Chilean President announced a "Solidarity Chile" project. This programme has a set of policies that are oriented to the poor sector of people. This project is aimed at assisting 56 000 indigent families in Chile. All programmes that are attached to this project will start operating in November 2002, and will include the following elements:
* Personalised psycho-social support for 24 months, with the provision of a bonus for family protection, starting at US$15 per month.
* Provision of guaranteed subsidies for family members under 18, and senior members to have access to health, housing and education.
* Training and labour inspection programmes.
* Labour and provisional benefits for unemployed family heads.
* 10 000 houses will be built at the beginning of 2003.
* The State in partnership with the private sector and NGOs will offer daily programmes that will allow for hiring of people in real jobs. These people will be assisted in finding jobs in the private sector.
(b) Education
The President has announced his intention to reform the current system of education. This will include increasing school hours. Families who already have an education savings account, will be rewarded by the State by receiving the equivalent of the accumulated interest or even double that, depending on the family's income. University scholarships and loans would be increased. There will be a 12-year compulsory school education system.
Child labour is not a problematic issue in Chile. The country has a strong policy, which prevents this.
2. Social security: Pensions and other employee benefits
Chilean Social Security gives benefits to the poor section of the population. In terms of the UN Human Development Index, Chile was placed in a favourable position, although the country still occupies a low position in terms of distribution of income.
The social security indicators show that in 2000 the total working contributors was 278 254. It is estimated that by 2009 non-working contributors will amount to 985 190.
(a) Pension System
The old Chilean pension system had a series of difficulties which had to be resolved in order to achieve reform. Among these was that that system had a multiplicity of pension agencies with their own different systems, which in turn offered different benefits. Hence it was necessary to introduce reforms which would be uniform and rationalise the ruling system.
The old system was administered by a government entity and provided health and other social security benefits. Employers were obliged to withhold a certain fixed percentage of the total remuneration and pay it into the pension fund.
The new private pension system established in 1980 is for workers who have joined the labour market since then. Worker contributions are also subtracted from monthly pay-cheques at a fixed percentage. Currently, almost three million workers contribute to the new private pension system.
However, there are still 870 000 pensioners from the old system, 200 000 of whom are active. They are seen as an important part of the country's labour force.
(b) Health care benefits
In Chile a worker or self-employed individual has a mandatory contribution of 7% towards health insurance. Labour health has a system that is enforced and registered by the Superintendency of Social Security.
Companies may choose to insure their workers under two alternative schemes, namely mutual insurance companies for workers or the delegated system of administration.
Mutual insurance companies are non-profit entities, financed through legally defined contributions, for which the employer is responsible. The basic contribution is 0,9% of worker wages.
Companies with 2 000 workers and more, with capital and reserves above 7 000 vital annual ? salaries, and which meet the requirements set by law, are entitled to be named delegate administrators of the insurance. The number of workers covered by this scheme is almost 0,72% of the labour force.
The State offers another alternative for labour accidents and professional illnesses. This is aimed at small business enterprises and domestic workers. The regulation and supervision of the institutions which manage this programme is a task of the Superintendency of Social Security.
3. Work-related accidents
All employees have to pay a 0,95% premium on remuneration towards workmen's compensation. Such funds go to the system in which they participate.
4. Unemployment Insurance Fund (UIF)
As from 1 October 2002, an obligatory unemployment insurance fund has been established. These funds remunerate workers wgo have been laid off. The UIF operates on a combination of individual account per employee (savings) and the solidarity fund.
(a) Features of UIF
* All resources will be imbursed in the capital market at a fixed rate.
* Increased growth for internal savings.
* Temporary workers are included.
* Automatic incorporation of all employees who started working since enforcement of the law.
* It is optional for workers with older contracts. This is done according to the employee's decision.
(b) Individual accounts
With an individual account, the employer contributes 1,6% and the employee 0,6% of his or her salary towards the account. Benefits depend on the savings level or resources accumulated, and are always granted. This is a savings account of the worker, where he or she earns 5-6% interest at a fixed rate. Benefits in this type of account are paid in up to five decreasing amounts. The number depends on the period of contribution.
(c) Solidarity fund
The fund acts as a complement to the employee's individual account, once resources are finished. In terms of this fund, the employer contributes 2,4% to the salary of each employee. The 2,4% is divided - 1,6% to the individual account and 0,8% to the solidarity fund. The employer is obliged to save this 2,4% for private workers only.
In the case of dismissal, the worker can apply for a warranty amount from the solidarity fund. The latter grants five decreasing withdrawals, and has limited access, i.e twice every five years. The general rule is that if a worker is fired, there are 12 contributions. He or she can apply to the solidarity fund for 50% of his or her last salary.
(d) Administration of UIF
The UIF in Chile is administered by a private administrator. This is done with efficiency, and without corruption and political influence. It is handled by a sole operator and is granted for a fixed period.
The selection of the administrator was done through a tender process - compensation associations, banks and insurance companies could participate. However, selection was based on the quality of the offer in respect of financial, technical and economical aspects. The winner of the bid offered 6,6% per year and 0,5% per month. The administration contract will last for a period of 10 years.
(e) Severance indemnity payments
Chilean labour law provides for severance indemnity payable to workers if they are dismissed for reason other than serious misconduct. The benefit is equivalent to one month's salary for each year of service, for a maximum of 11 months. It is based on the worker's most recent pay level.
The possibility of dismissal without cause has been eliminated. Workers may be dismissed due to modernisation and economic needs of the company. Also, workers may be dismissed if they are considered not suitable for the job's requirements. In such cases, they are entitled to compensation. The cost of lay-off compensation in Chile was increased, benefitting only workers with five years' service and more.
3. Mining sector in Chile
The Committee visited to Codelco, a state-owned copper mining company. It has joint venture mining programmes with South Africa and other private companies. All natural resources in Chile are in the hands of the State, and mining is the most important export commodity. The total investments which South Africa has with Chile, amounts to US$27 million.
About 70 000 workers are employed in the mining sector. The average age of workers in the mines is 38. This industry uses a lot of technical-oriented skills. Chileans are of the view that, with the introduction of new technology and new ways of management, there is a necessity for more skilled workers who are able to adapt to these.
However, workers in the coal mining sector have less of an education. It is difficult to introduce them to new challenges.
Gender representation in the mining industry is still not adhered to. There are more men than women. One of the obstacles is access to protection grants for women so as to enable them to be part of the sector and the economy.
Mining sector companies invest heavily in training. Workers are also trained in self-protection on the mines.
4. Regional integration
Although Chile has a small market, it is good base for the South American region. Fruit and fish are main export products. Chile has signed a free trade agreement with the European Union. This will offer the country a huge market for certain goods. Chile is the second largest producer of salmon in the world. This gives the country a comparative advantage over other countries. Currently, the country is negotiating with the United States for a free trade agreement because of US interest in the South American region.
F. Conclusion
The delegation's final conclusion was that the trip was both informative and beneficial. Many of the differences, both in policy and practice experienced, have provided the delegation with new and fresh insights. Chile and South Africa have many similarities. Both countries have similar histories and approaches to their post-oppression regimes. Both have statutory bodies like the UIF and the CCMA.
The experience of examining and engaging with the application and administration of these bodies and Chile's general approach to its economic growth and development will provide lasting benefits to the Committee in its future endeavours.