Imraan Mahomed, Director; & Thato Makoaba, Associate; Employment Law at Cliff Dekker Hofmeyr

Background to the complaint

The complainant, Mr Khumalo, worked from 1 July 2018 to 30 April 2025. He was placed at his workplace by a labour broker, Procare Outsourcing (Pty) Ltd, but the client company, San Michele (Pty) Ltd, was the entity that had registered him with the Old Mutual Superfund Provident Fund as the participating employer. He was registered with the fund from 1 June 2020, and upon his exit he received a withdrawal benefit of R29,885.13.

Khumalo complained that the employer had registered him late, underpaid his salary (resulting in lower contributions), and failed to provide him with a benefit statement.

The TES and section 198: The employer identification question

A preliminary issue arose that is familiar to many employers operating in TES arrangements. San Michele argued that Khumalo was the broker’s employee and that the complaint should be directed to the broker.

The Adjudicator rejected this and undertook a detailed analysis of sections 198 and 198A of the LRA. The reasoning is instructive for funds and employers.

The key provisions operate as follows:

• Section 198A(3)(b) introduced by the 2014 LRA amendments provides that where a placed worker is no longer performing a genuinely “temporary service”, defined as work lasting no more than three months, the client is deemed to be the sole employer of that worker.
• The Constitutional Court confirmed this interpretation in Assign Services (Pty) Ltd v NUMSA [2018] ZACC 22. For the first three months, the TES is the employer. After that, the client becomes the sole employer. There is no dual employment relationship.

Khumalo had been placed at San Michele for years, well beyond the three-month threshold, meaning San Michele was his deemed employer for purposes of the LRA.

Why the deeming provision does not shield the labour broker (or the client)

This is where the determination carries its most significant compliance message. Even though section 198A(3)(b) deems the client to be the sole employer, the triangular relationship between the TES, the client, and the employee persists. The labour broker typically continues to remunerate the worker under its commercial contract with the client, and that ongoing relationship has legal consequences that both parties must appreciate.

Section 198(4A) of the LRA affords the employee a broad enforcement remedy. It provides that where the client is jointly and severally liable or is deemed to be the employer under section 198A(3)(b), the employee may:

• institute proceedings against the TES alone;
• institute proceedings against the client alone; or
• institute proceedings against both the TES and the client.

Critically, any order or award made against one can be enforced against the other.

The practical implication for employers and funds is clear: the deeming provision does not extinguish the employee’s right to pursue the TES for pension fund claims, nor does it limit the employee to claiming only from the deemed employer. Both the TES and the client remain exposed to claims, and neither can deflect liability by pointing to the other.

In this matter, Khumalo chose to pursue San Michele, the participating employer in the fund, and the Adjudicator confirmed that this was entirely permissible. Employers who participate in pension funds on behalf of TES-placed workers should be aware that they may be the first port of call for complaints to the Pension Fund Adjudicator, regardless of the commercial arrangements with the broker.

Findings on the merits

On the facts, Khumalo’s complaint failed. The fund rules required membership only where fund participation formed a condition of employment. The Adjudicator found no evidence that membership had been a condition of the complainant’s employment before June 2020. In the absence of such evidence, the complainant could not establish that his registration had been delayed. The Adjudicator further found that all contributions required by the fund’s rules had been paid and that the withdrawal benefit had been correctly calculated.

Action points for funds and employers

• Understand where liability may lie: Where a TES employee has been placed with a client for longer than three months, the client may be regarded as the employee’s deemed employer for purposes of section 198A of the LRA. However, section 198(4A) preserves the employee’s right, in certain circumstances, to pursue claims against the labour broker, the client, or both. Employers and TES providers should therefore not assume that responsibility rests exclusively with the other party.

• Align fund participation with contractual arrangements: Where labour broker arrangements are in place, employers and funds should ensure that the identity of the participating employer, the applicable fund rules, and responsibility for contributions are clearly established and consistently applied.

• Regularly review contribution compliance: Clients and TES providers should periodically verify that contributions are being deducted and paid in accordance with the fund rules to minimise the risk of disputes when members exit the fund or claim benefits.

ENDS