The new National Minimum Wage: Almost officially with us

The minimum wage in South Africa is almost officially with us. The minimum wage was recently passed by the National Assembly. It is aimed at improving the lives of South African workers at the lowest end of the pay scale. The rate was set at R20 per hour or R3,500 per month for a 40-hour week.

There’s been a fair amount of dispute over the minimum wage with unions such as the South African Federation of Trade Unions (SAFTU) protesting that it is just not enough to live on. Recent fuel price hikes and further predicted hikes are expected to have a ripple effect on the cost of living. It is easy to understand why many think the new proposed minimum wage is not high enough. However, there are those who will say that while the minimum wage is not anywhere close enough to live on, it is nonetheless a step in the right direction. Whatever your take on the minimum wage is, the fact is that it is here to stay. As such, it is anticipated that favourable wages can only improve with time. At least future rounds of wage negotiations now have a starting point for the lowest paid employees.

The minimum wage bill was finally debated on May 29th and the implementation date of the new minimum wage has been moved out to 1^st August. The bill was narrowly passed with just one more than the 201 votes requirement.   The implementation process may have been temporarily paused, but the minimum wage implementation is now back at full steam ahead.

The Facts

Politics and social dialogue aside, understanding the minimum wage in a business is something that does need some discussion.  The brief halt in proceedings may have come as some light relief for many companies who were struggling with the implementation, but it now seems that there can be no holding back. The minimum wage may sound like an easy piece of legislation to implement, however, even with the delayed implementation date, many companies are still trying to get their heads around it.

For almost 2 years, Paymaster People Solutions has been providing news, updates and advice on the implementation of the new minimum wage legislation. The information shared is well worth recapping. In October 2016 the debate and differences around minimum wage and equal pay was discussed. Business owners and management cannot bury their head in the sand any longer: as was the case back then, and as it remains at present, the need for the implementation of the minimum wage is clear. It will happen.

Way back in 2016 already, Paymaster People Solutions, sound advice and information was provided to readers. For example, how to cost (and plan) for the knock-on effect that the impending new minimum wage will have on your business, its bottom line and your organisation’s pay-scales. In 2016, the conservative estimate that the minimum wage would be set at between R3500 per month and R4500 was not wrong. Today, business owners and human resource managers one safely expect the new minimum wage to be set at R3500. Accordingly, with whatever planning you might be busy with right now, it is important not to forget the following related financial information:

• Medical Aid
• Pension Contributions
• Increase in UIF
• Increase In SDL
• Increase in WCA
• Increase in Overtime

Minimum Wage Plan of Action

In 2017, Ian Hurst, managing director of Paymaster People Solutions, was clear when making pronouncements that the new minimum wage would become legislated and—as such—could not be ignored. In his article entitled, Minimum wage decisions—Ignoring them will not make them go away, Hurst suggests that a solid and reliable plan of action be implemented. Since 2017, further debate around the proposed new minimum wage has resulted in a handful of additional changes, but the process outlined in Paymaster’s previous articles hasn’t change a great deal.

Under the revised bill, allowances for specific sectors will be reviewed and adjusted in two years’ time. These sectors or workers include farming and forestry that has a minimum wage set at R18 per hour, domestic workers at R15 per hour. Those employed on the Extended Public Works Program will be paid at 55% of the standard minimum wage or R11 per hour. Over the next 24 months, these rates will be debated and reviewed and this process will, no doubt, draw much attention.

Penalties

Penalties for dafaulters are among some of the other factors that are still being deliberated. It is anticipated that the penalties could be harsher for companies that deliberately avoid implementation. It is also anticiated that some companies, citing a variety of reasons, will do their best to avoid implementation of the bill. Be that as it may, there seem to be few legitimate reasons to delay the implementation or prevent the enforcement of the new minimum wage.

If a company believes that it has a valid reason for not implementing the new minimum wage, then it may take advantage of the current exemption window which still open. The exemption request process has been simplified thanks to an online tool provided by the South African Department of Labour (SA DoL). However, be advised that the requirements for an exemption to be approved remain stringent. A company that merely says that it cannot afford to implememt the new minimum wage is by no means a strong enough claim (and will almost certainly be declined).

Strict criteria needs to be met for those seeking exemption and some of the reasons are designed to ensure companies look at their salary structures and revise them for more sustainable employment. Criteria that needs to be provided when applying for exemptions includes financial information from the employer, household income, working hours and any reasonable or solid motivation that may be felt worthwhile.

Five Point Plan from Labour Department

With the new minimum wage being regarded as a significant step towards improving the employment landscape in South Africa, the SA DoL and several trade unions are taking its implementation seriously. The SA DoL has compiled a five-point plan to ensure a successful rollout once enforced.

1. Firstly the plan includes permitting employees and unions to report non-compliance.
2. Secondly, the SA DoL will encourage employers to be accountable for implementing what will be part of labour law. Assistance will be offered for those entities that might encounted difficulties doing so.
3. Thirdly, regular blitz-inspections are also included in the plan. These will be focused on industry sectors that are more notorious for bending or breaking labour regulations, particularly where low-payment rates (below the minimum wage) is known to be prevalent. Fourthly, as part of these inspections, inspectors have the freedom to withhold the issue a non-compliance order on condition that a company undertakes to implement the minimum wage with a further follow up investigation as part of the remedial action agreement.
4. And finally, the final fifth part of the plan affords the Commission for Conciliation Mediation and Arbitration (CCMA) full authority to handle compliance matters. In such cases, the CCMA will have the same legal authority as a labour court.

The minimum wage cannot be avoided. In past recent months Paymaster People Solutions has done well to proactively provided ample information to help all kinds of business implement the minimum wage.

Should the reader have any further concerns, questions or need assistance, do contact his/her HR consultant, or contact Paymaster People Solutions and one of their professional team members will be happy to assist.