How Adcorp bounced back After government amended the Labour Relations Act, recruitment company Adcorp found itself in a tough spot a year ago. We talk to CEO Richard Pike about how the group restructured to regain a positive position going forward.
ayear ago Adcorp, the country’s largest workforce management company, was staring down the barrel of a gun. Last year the government amended the Labour Relations Act (LRA) so that employees placed by labour brokers are deemed permanent after three months.
The amendment, heavily pushed by trade unions, created uncertainty in the market, according to Richard Pike, Adcorp’s CEO. “The reaction from companies that rely heavily on temporary workers was either to engage many of them on a permanent basis, or stop hiring altogether.”
This impacted Adcorp, which generates 65% of its business worldwide from contract workers. “We jumped into action immediately in an effort to recover these lost volumes, and by the end of the financial year, we managed to recover 82% of profits lost due to the uncertainty created by this new legislation,” says Pike.
“We introduced a programme to cut costs and recover volumes from new areas of the business. We emerged much stronger as a result of this and we engaged more with our clients, which was a positive development.”
The LRA amendments were clarified in a Labour Court ruling in September last year. The court ruled that after the initial threemonth contracting period, the labour broker retains the employment contract and that the client becomes a concurrent employer. This means the employee has recourse against both the labour broker and employer in the event of any disputes under the LRA. The initial uncertainty surrounding the new legislation cost Adcorp 20 000 lost placements, of which it managed to recover 7 000 by the end of the year. “We plan to get this number back to 20 000 as quickly as possible,” adds Pike. “Contract workers form a vital part of any modern economy. You need that flexibility. In the US, roughly 40% of all workers are now contracted, as opposed to 30% 10 years ago. Many people, particularly in sectors such as IT, prefer to work on a contract rather than a permanent employment basis. They do not want to contribute to the company medical aid and other funds because they believe they can arrange their affairs better on their own.” Adcorp recently released its results for the year to February, posting a 17% increase in revenues, which tallied R15.6bn for the 12-month period. Normalised earnings per share (EPS) were 365.3c, 4% better than the previous year. Headline EPS were flat at 299.6c. Pike has been largely responsible for driving Adcorp’s international expansion.
Pike has been largely responsible for driving Adcorp’s international expansion.
Adcorp’s head office in Johannesburg