On the 1st May 2018 South Africa will introduce a new minimum wage. The minimum wage will be set at R20 per hour with the following three exceptions:
- Farm workers will be 90% of R20 per hour (R18 per hour);
- Domestic workers will be 75% of R20 per hour (R15 per hour); and
- Workers on an expanded public works programme is R11 per hour.
For a 40-hour work week, the minimum wage of R20 equates to R800 per week or R3500 per month. For any company remunerating staff above the minimum wage level this does not apply.
Are you ready for the May 1st 2018 deadline?
The deadline for the implementation of the minimum wage in South Africa is fast approaching. The legislation marks a big change in terms of payroll management for many employers in South Africa and failing to meet legislation could have a negative impact on your business.
In preparing for the deadline to pay the minimum wage there are two ways forward:
- For those who cannot afford the minimum wage; and,
- For those who wish to proceed without questions.
I can’t afford to pay the minimum wage
In this case an application for exemption from paying the minimum wage must be applied for and submitted to the Department of Labour. Because the new minimum wage will more than likely have many applications for exemption, there will be a waiting period for application documentation. In order to apply for exemption from paying the minimum wage you must prove the following:
- Your business in under considerable financial pressure and does not have capacity to pay the minimum wage.
- Your business has no alternative course of action or method of recovering the additional amounts for a higher wage bill.
- Your business has credible reasons for your exemption application to be approved.
Further to providing the above evidence, your accounts and financial records must be made available for audit.
I can afford to pay – what next?
Get your hands dirty now! There are three recommendations to consider when going ahead with minimum wage in an organisation.
Inform and educate staff
Advanced information about implementing the minimum wage in your organisation is vital. Just telling a select few employees is not recommended. Evidence shows that this can have a negative impact through misunderstandings that might result in breakdowns in labour relations, grievances and even industrial action. Paymaster People Solutions recommends informing and educating all employees as soon as possible.
Inform trade unions
As part of the education process it is advised to include trade unions from the outset. It is better to be proactive with trade unions and let them know that your organisation is compliant with the new minimum wage legislation. Failure to engage or by engaging in a reactive manner can lead to negative impacts for your company.
Pay now or split the increase
Some companies will implement the wage increase before the 1 May deadline. For these companies, compliance must be in place from the date of increase or at inception of the minimum wage. At first, a number of companies may struggle to pay the minimum wage and thus they may implement a double-payment increase by allocating the increase in January and processing an adjustment in May. With this, either the increased pay date can be brought forward or it can be split.
Perfect time for salary and process reviews
Implementation of the new minimum wage presents the ideal opportunity to review the salary scales within your organisation and take a close look at the implementation processes. It is likely that once the minimum wage comes into effect that Department of Labour inspectors will conduct checks on its implementation. With these checks, audits on policy implementation of equal-pay-for-equal-work principles will most likely also be undertaken. This shake-up of wages in South Africa represents the perfect time to review your entire employment strategy and perhaps overhaul your processes to improve your business on many levels.
Should you have any questions around the new minimum wage legislation, please contact Paymaster People Solutions.