THE BLOG
08/02/2018 13:56 SAST | Updated 08/02/2018 13:56 SAST

National Minimum Wage Raises Complicated Questions

South Africa’s economy has suffered significantly, with the unemployment rate showing a constant upward trend.

Michael Buholzer/ Reuters

According to StatsSA, more than 30.4-million South Africans were living in poverty in 2015. Since the global economic meltdown of 2008, South Africa's economy has suffered significantly, with the unemployment rate showing a constant upward trend.

To mitigate this and alleviate the plight of the poor Deputy President Cyril Ramaphosa introduced the national minimum wage (NMW), which would standardise the value of wages earned by everyone.

The agreement reached in February 2017 on the NMW states that "...all sectoral determinations, collective agreements, bargaining-council agreements and individual contracts of employment must comply with the National Minimum Wage Act at the time of implementation." This means that the NMW will supersede any agreements that have been previously reached regarding minimum wages.

The NMW is set at R20 per hour

This means that employees working a 40-hour week will earn R3,500 monthly. It has been recommended – by the NMW panel – that employees eligible for the NMW must be paid for at least a minimum of four hours a day, regardless of the number of hours worked. In addition, the panel has recommended that farm workers and domestic workers – who have been classified as vulnerable sectors – be set at the following percentages of the NMW for the first year:

  • 90 percent for farm workers, and
  • 75 percent for domestic workers.

Adjustments to the NMW will be made when and where necessary and most likely annually.

What usually happens is that once an act becomes law, you have some time to get your house in order and ensure that you comply with its provisions.

Potential problems with the NMW

The NMW appears to be straightforward. However, it raises quite complicated questions – including whether overtime, commission, tips and bonuses are included in the R20. Furthermore, how are Unemployment Insurance Fund (UIF), pension fund and union subscription deductions to be treated? The February agreement does not clarify these issues.

It seems that the R20 will be exclusive of payment of benefits and the like.

Penalties for non-compliance with the NMW

It is proposed that should you be found not to be compliant with the NMW, when the National Minimum Wage Bill is promulgated, you will be subject to the following procedure:

  • A labour inspector will secure an undertaking from you to comply with the NMW. You will have to comply within 14 days.
  • If you are not willing to comply, you will be issued with a compliance order within 14 days. This compliance order is the equivalent of an arbitration award issued by the Commission for Conciliation, Mediation and Arbitration (CCMA).
  • If you do not comply with the award, the matter will be referred to the CCMA, where the award will be certified.

What usually happens is that once an act becomes law, you have some time to get your house in order and ensure that you comply with its provisions. You do not have that luxury on the minimum wage, because at this stage implementation will be May 1 2018.