Mon, May 20, 2024

The official Financial Regulation Journal of SAIFM

The challenge of setting a new national minimum wage


By Lauren Salt, Senior Associate, Employment & Compensation, Baker McKenzie Johannesburg

Recent strikes and protests regarding South Africa’s new national minimum wage have brought to the fore the challenge faced by those who were tasked with setting it. If it was too low, to avoid job losses in the lower paid sectors, it would have had little impact on the higher paid sectors. If it was too high, it could lead to job losses across all the sectors.

In February 2017, agreement was reached between the parties at the National Economic Development and Labour Council (Nedlac) and it was decided that as of May 2018, the national minimum wage in South Africa would be R 20 per hour. An employee working 45 hours per week would earn approximately R 3 500 per month. The initial national minimum wage agreement also committed parties to avoid job losses that may arise, included a “code of good practice for collective bargaining, industrial action and picketing” and provided measured that aim to mitigate violent and lengthy strikes.

While some are happy with the new minimum wage, others want it to be much higher. This week, workers affiliated to the South African Federation of Trade Unions (Saftu) took to the streets to demand a higher minimum wage and vowed to keep protesting until the wage was increased to around R 12000 per month. However, some unions, the Federation of Unions of South Africa (Fedusa) and the Congress of South African Trade Unions (Cosatu), support the minimum wage.

This month, the South African Department of Labour said that legislation and amendments governing the national minimum wage –  the National Minimum Wage Bill, the Labour Relations Bill and the Basic Conditions of Employment Bill – were currently passing through parliament, and the date of implementation of the new wage would be rescheduled.

Up until now there has been statutory national minimum wage.  However, section 51 of the Basic Conditions of Employment Act, No 75 of 1997 (BCEA) provides that the Minister of Labour may make a sectoral determination establishing basic conditions of employment for employees in a sector and area, which includes minimum wages.  Sectoral determinations are in place in areas of economic activity where labour has been deemed vulnerable. There are eleven sectoral determinations governing vulnerable workers, in various sectors of the economy, that have been established. These are Forestry, Agriculture, Contract Cleaning, Children in the Performance of Advertising, Artistic and Cultural Activities, Taxi Operators, Civil Engineering, Learnerships, Private Security, Domestic Workers, Wholesale and Retail and Hospitality.

Once finalised, legislation will be promulgated to give effect to the national minimum wage agreement. Sectoral agreements, collective agreements, bargaining council agreements and employment contracts will need to comply with and be aligned with the minimum wage act, once enacted.

The Basic Conditions of Employment Amendment Bill also makes provisions for exemptions of up to 12 months from the national minimum wage for start-ups and small and medium-sized enterprises who would battle to pay the higher wage.

Further, the national minimum wage is set to be reviewed annually by a new National Minimum Wage Commission, based on considerations such as cost of living, inequality, health and safety considerations and inflation.

Meanwhile, public consultations on the national minimum wage are also taking place in Nigeria. Eight public hearings are taking place across the country, giving stakeholders a chance to comment on Nigeria’s minimum wage, with organised labour reportedly demanding that it be increased to N66, 500 per month (around ZAR 2300). Nigeria’s Minister of Labour and Employment, Dr. Chris Ngige, has said that the new national minimum wage will be implemented in Nigeria this year.

An increase in the national minimum wage is likely to have a knock-on effect on an employer’s cost of labour. While this may be good news for employees, it may be worrisome for employers who might currently be struggling to make ends meet. Employers should put the necessary plans in place to absorb the extra labour costs and to avoid any possible negative commercial consequences of a higher monthly wage bill.

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