Paymaster Magazine

Minimum wage decisions—Ignoring them will not make them go away

Author: Ian Hurst — Managing Director, Paymaster People Solutions

The minimum wage will be introduced on the 1 August 2018. The minimum wage will be set at R20 per hour. This means that an employee who works a 40-hour week will earn R800 per week, which equates to R3500 per month. (Calculation: R800 multiplied by 4.33)

Preparing for this eventuality—Make the first key decision

Exclusion: The advice being offered in this article does not apply to organisations that are remunerating their staff at rates that exceed the basic minimum wage.

Article - New minimum wageIf you are a business owner that hires employees, in order to be certain that your business is ready for the 1 May 2018 deadline, you need to decide upon one of two possible course of action. Failure to do so may lead to a likely negative impact on your business.

The first key decision is this: Do I wish to remunerate my employees at a rate that equals the basic minimum wage threshold? If your business cannot afford to pay the basic minimum wage, then an application for exemption needs to be submitted to the relevant authorities at the Department of Labour.

Option 1—applying for minimum wage exemption

When applying for a minimum wage exemption, you will in all likelihood have to wait on the department of Labour to issue the prescribed application documents. To qualify for an exemption, you will need to prove that your business is under severe financial strain; prove that no alternative recourse to recover the additional amount is possible; make your business’ accounting records available for audit.

Bottom-line tip: When you decide to exercise the option of applying for a minimum wage exemption, be doubly sure that you have accurate accounting records which must be accompanied with credible reasons why your application for exemption should be approved.

Option 2—paying your employees the minimum wage

Article - New minimum wageOnce you have decided to pay your employees in accordance with the basic minimum wage legislation, a further three decisions need consideration:

  1. If your company implements the wage increase before May 2018, then minimum wage compliance must be fully operational from the date of increase. Alternatively, you must commit to processing a double-payment increase. For example, this can be done by allocating an annual increase in January, followed by the processing of a further adjustment-payment in May. In this regard, you need to decide whether you are going to bring your increase date forward or whether you would prefer to split the increase.
  2. Do you need to negotiate this process with your employees’ trade union? If yes, then the sooner you start this process the better. Tip/advice: Be proactive in order to minimise the chances of an unfavourable reception by the trade union.
  3. Decide whether you wish to inform your entire workforce about these impending changes. Industry experience proves that there are negative risks involved when only communicating such changes to a select portion of an employee workforce. Negative risks include: labour relations misunderstandings, grievances and industrial action. Tip/advice: start educating all your employees now.

Review salary-scales

Article - New minimum wageOnce you’ve reached this stage in the decision-making process, now may be an opportune time to comprehensively review your organisations’ salary scales and how they have been implemented. Rumour has it that labour inspectors from the Department of Labour will not only be checking minimum wages, but will also be conducting audits on policy implementations of the equal-pay-for-equal-work principle. Additionally, whilst you are going to busy with the planning for minimum wage changes, you may also wish to revisit your organisation’s entire employment strategy. A good overhaul thereof may do your company significant good in the long-run.


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Ian Hurst

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