Labour legislation hampers job creation

NAMIBIA is considered to have some of the most restrictive labour legislation in the world, which in turn hampers job creation.

This was revealed in an exclusive report compiled for Republikein by the Namibian Employers Federation (NEF) in conjunction with the International Employer?s Federation.

Employers throughout the world are directly influenced by labour legislation in their decisions to hire or not to hire new staff and Namibia is in no way immune from this key global determinant of job creation.

According to the report there are various ways in which labour legislation impacts both the capacity and appetite of employers to hire more staff.

Firstly, employment carries an inherent ?risk? for an employer. Judging and managing the risk lies at the heart of doing business and of employment decisions. Employers always take a risk when they hire, and labour relations legislation can exacerbate these risks when set wrongly and either encourage or discourage taking a risk to create a new job.

Ideally legislation should have as its main goal to lower the risk of employment.

A second consideration is cost. How any labour market is regulated and how complex a regulatory system is to administer, carries inherent costs for the employer. These costs determine whether it is economically sound to create new job opportunities.

Direct cost factors, such as wage levels (both minimum and market rates), combine with indirect administrative cost and labour market restrictions to determine the extent to which it is economically viable to create jobs.

A third consideration, which combines with cost, is the reward employers can reap from job creation. Critical to this is the relative productivity the labour relations system supports, the hours that can be worked and skills new employees bring to their work. This determines the extent to which it is rewarding to create jobs.

Restrictions on hiring and firing, and excessive employment protection as prescribed by the current Labour Act, multiply the risk to employers and further discourage job creation. This in turn determines the extent to which it is prudent to create jobs and the risk appetite of employers (and indeed of investors and those determining job creation, and economic growth).

Namibia currently ranks 69th on the World Bank Doing Business Index, with positive indications on security of contracts and access to credit. However, the capacity to create jobs will be a further critical determinant of Namibia?s future competitiveness, particularly with other African nations ranked above it on the World Bank scale.

Countries throughout the region are making significant advancements in delivering the fundamental foundations for doing business across borders, access to credit and starting and registering businesses.

According to the NEF, this is critical and long overdue.

The report continues to say that greater consistency and reliability in the financial and legal underpinnings of doing business across Africa will lead to even greater attention being paid to considerations such as how work is regulated and how this successfully balances competing interest considerations.

The NEF predicts that Namibia?s performance in regulating its labour market and supporting the doing of business and creation of jobs, will become even more critical to Namibia?s future investment performance and growth.

NEXT week: Red tape and the rigmarole of terminating employment.

NAMIBIA is considered to have some of the most restrictive labour legislation in the world, which in turn hampers job creation.

This was revealed in an exclusive report compiled for Republikein by the Namibian Employers Federation (NEF) in conjunction with the International Employer?s Federation.

Employers throughout the world are directly influenced by labour legislation in their decisions to hire or not to hire new staff and Namibia is in no way immune from this key global determinant of job creation.
According to the report there are various ways in which labour legislation impacts both the capac i ty and appe t i t e of employers to hire more staff.

Firstly, employment carries an inherent ?risk? for an employer. Judging and managing the risk lies at the heart of doing business and of employment decisions. Employers always take a risk when they hire, and labour relations legislation can exacerbate these risks when set wrongly and either encourage or discourage taking a risk to create a new job.

Ideally legislation should have as its main goal to lower the risk of employment.
A second consideration is cost. How any labour market is regulated and how complex a regulatory system is to administer, carries inherent costs for the employer. These costs determine whether it is economically sound to create new job opportunities.

Direct cost factors, such as wage levels (both minimum and market rates), combine with indirect administrative cost and labour market restrictions to determine the extent to which it is economically viable to create jobs.

A third consideration, which combines with cost, is the reward employers can reap from job creation. Critical to this is the relative productivity the labour relations system supports, the hours that can be worked and skills new employees bring to their work. This determines the extent to which it is rewarding to create jobs.

Restrictions on hiring and firing, and excessive employment protection as prescribed by the current Labour Act, multiply the risk to employers and further discourage job creation. This in turn determines the extent to which it is prudent to create jobs and the risk appetite of employers (and indeed of investors and those determining job creation, and economic growth).

Namibia currently ranks 69th on the World Bank Doing Business Index, with positive indications on security of contracts and access to credit. However, the capacity to create jobs will be a further critical determinant of Namibia?s future competitiveness, particularly with other African nations ranked above it on the World Bank scale.

Countries throughout the region are making significant advancements in delivering the fundamental foundations for doing business across borders, access to credit and starting and registering businesses.
According to the NEF, this is critical and long overdue.

The report continues to say that greater consistency and reliability in the financial and legal underpinnings of doing business across Africa will lead to even greater attention being paid to considerations such as how work is regulated and how this successfully balances competing interest considerations.

The NEF predicts that Namibia?s performance in regulating its labour market and supporting the doing of business and creation of jobs, will become even more critical to Namibia?s future investment performance and growth.

NEXT week: Red tape and the rigmarole of terminating employment.