Ricochet News

That National Minimum Wage Bill

By Robert Niemand – Managing Director: Labournet EC - Mar 23, 2018
That National Minimum Wage Bill

This bill was published for public comment until 16 March which was the deadline to make representations to Parliament on the new bill. When it is introduced, it is expected that in excess of 6 million employees in South Africa will receive a higher wage.

Employers will have to pay their staff a minimum wage of R 20 per hour or R 3 500 per month. In the State of the Nation Address, it was noted that the plan for implementation was still on track (i.e. from 1 May 2018).Farm workers, domestic workers and those working on an extended public works programme will be excluded for now.

Purpose:

The purpose of this Act is to advance economic development and social justice by—

  • improving the wages of lowest paid workers
  • protecting workers from unreasonably low wages
  • preserving the value of the national minimum wage
  • promoting collective bargaining
  • supporting economic policy

Potential issues with the Bill:

  • The definition of “worker” is not fully inclusive – it does not include “Independent Contractor”
  • Sectoral determinations could disappear over time
  • There is no guaranteed annual increase
  • Certain parties are unhappy with the exclusion of farm workers, domestic workers and Public Works Programme workers.

Calculation of the minimum wage:

An employee is entitled to receive the national minimum wage for the number of hours that the worker workson any day. The Wage excludes the following:

  • any payment made to enable a worker to workincluding any transport, equipment, tool, food or accommodation allowance
  • any payment in kindincluding board or accommodation
  • gratuitiesincluding bonuses, tips or gifts
  • any other prescribed category of payment

i.e. this is a pure hourly wage, and can not include any other benefits or remuneration.

Exemptions:

An employer or an employers’ organisation registered in terms of section 96 of the Labour Relations Act (or any other law), acting on behalf of its members, may, in the prescribed form and manner, apply for an exemption from paying the National Minimum Wage.

An exemption must:

  • specify the period for which it is granted, which may not be longer than one year
  • must specify the wage that the employer is required to pay workers
  • may contain any other relevant condition.

Specific Exemptions:

  • Farm workers are entitled to a minimum wage of R18 per hour from 1 May 2018
  • Domestic workers are entitled to a minimum wage of R15 per hour from 1 May 2018
  • Workers employed on an expanded Public Works Programme are entitled to a minimum wage of R11 per hour from 1 May 2018.
  • Workers who have concluded learnership agreements contemplated in section 17 of the Skills Development Act, 1998 (Act No. 97 of 1998), are entitled to the allowance.

The impact:

The National Minimum Wage visible as well as “invisible” or not immediately apparent impact on payroll.

The obviouseffect:

  • In the event that a company employees individuals on a wage less than the specified rate, the salary bill will increase by the difference.
  • The above mentioned individuals overtime rates will increase, which will push the salary bill even further.
  • Bonus calculations(mostly based on basic wage)

The “not so obvious” effect:

  • Other statutory contributions will increase(UIF, SDL and COIDA)
  • Retirement Fundcontributions will increase
  • Higher paid employees could demand increasesalongside the increase to the lower paid employees seeing as one could face a situation where these two groups now earn the same wage, which could result in labour unrest.

What should you do:

  • Start the process of reviewing all employees rates, wage, benefits, etc. to ensure that you are in line with the requirement;
  • Extract data from your Payroll / HR system and start doing some “what if” scenarios;
  • In the event that you have a group of employees that are remunerated at less than the prescribed rate, it is important to check whether you have a collective agreement in placeor adhere to any industry specific regulations in terms of remuneration (e.g. Bargaining Councils). If so, consult with your representative.
  • Should the above not apply, you would need to start the review to understand the financial impact of this change(do not only look at the wage bill, but also UIF, SDL, COIDA, Retirement Fund Contributions etc.)
  • Start preparing the paperwork and your administrative procedures, e.g. Budget reviews (most likely this was not budgeted for), contracts of employment; payslip input, notices to employees, etc.