Two pieces of legislation are relevant to the new minimum wage law effective from 1 January 2019, namely the National Minimum Wage Act (2018) and the Regulations to the National Minimum Wage Act (2018). It has been estimated that approximately six and a half million employees will benefit from this legislation.
The minimum wage legislation coincides with a raft of amendments to many other labour laws including the introduction of paternity and adoptive parent leave, and strike secret ballots.
The purpose of the National Minimum Wage Act is “to advance economic development and social justice by, amongst other things “improving the wages of lowest paid workers”, “protecting workers from unreasonably low wages” and “preserving the value of the national minimum wage”.
The Act “applies to all workers and their employers, except members of the South African Defence Force, the National Intelligence Agency and the South African Secret Service”. Volunteers are excluded from the Act and need not, of course be paid any wage.
The applicable national minimum wage is R20.00 per hour, except for farm workers who have a minimum wage of R18.00 per hour, and domestic workers whose minimum wage is R15.00 per hour. “Workers employed on an expanded public works programme are entitled to a minimum wage of R11.00 per hour.
The minimum wages for farm and domestic workers will be reviewed and amended by 1 January 2021, whilst the general minimum wage is to be reviewed annually.
Importantly, an employer will commit an unfair labour practice if they “unilaterally alter wages, hours of work or other conditions of employment in connection with the implementation of the national minimum wage.
In calculating wages when applying the National Minimum Wage Act, “the calculation of a wage for the purposes of (the Act) is the amount payable in money for ordinary hours of work”. However, payment of the minimum wage excludes any payment for employee transport, equipment, tools, food and accommodation. It also excludes all gratuities including tips and bonuses.
Regulations to the National Minimum Wage Act (2018), on the other hand, primarily addresses all matters relating to employer applications to be exempted from paying the prescribed minimum wages. To begin with, the regulations stipulate that “an exemption may only be granted if the delegated authority (the Director-General of Labour) is satisfied that (a) the employer cannot afford to pay the minimum wage, and (b) every representative trade union representing one or more of the affected workers has been meaningfully consulted or, if there is no such trade union, the affected workers have been meaningfully consulted”.
If an employer is granted an exemption to pay the national minimum wage, will be for a maximum period of twelve months, and may not be less than ninety percent of the applicable minimum wage. Exemptions can be withdrawn if it is established that the employer “has provided false or incorrect information that has led to the granting” of the exemption, or “the employer is not complying with the exemption notice”.
The affordability test to be applied in assessing exemption applications the elements of profitability, liquidity and solvency. So-called ‘audit triggers’ have been identified in the regulations, include “discrepancies in depreciation”, “out of proportion net losses”, “discrepancies in reported revenue and reported total expenditure” and “discrepancies in total liabilities”.
Our firm has already received numerous enquiries from employers who are contemplating widespread retrenchments in response to the impact of the implementation of the new minimum wage.
You don’t need to look far to find highly charged sentiments on this legislation, both in favour of, and against its implementation.
Organised labour has already expressed its concern that the exemption process will enable many employers, in the manufacturing and construction industries for example, to successfully apply for exemption from payment of the minimum wage, given the parlous sate of the economy. Time will tell if this proves to be true. There is little doubt that the Director General of Labour will be inundated of exemption applications from employers.
The CCMA anticipates that disputes relating to the payment of minimum wages will increase its caseload by about fifteen percent. We think this is a conservative estimate, with a twenty percent case load increase being more likely.