Minimum wage problem for South Africa

 ·28 Jun 2022
South Africa Rand Money Notes Coins

A significant number of South African companies are still not paying minimum wage to their workers, despite mandatory changes and increases over the past year, says employment and labour minister Thulas Nxesi.

Responding in a recent written parliamentary Q&A, Nxesi noted that the legislated national minimum wage (NMW) is not R3,500 per month as is widely reported, but R23.19 per hour payable for the numbers of ordinary hours worked.

“The latest quantitative research shows that the average level of NMW non-compliance in Q1 2020, before the NMW was adjusted, was 35.8%, meaning that approximately 36% of all workers were paid below the NMW.

“A year later, in Q1 2021, this number remained much the same, at 36.2%. In 2020, the NMW was adjusted by 3.8%, and wages appeared to have risen by roughly this amount for those who remained employed in Q1 2021, meaning that the overall rate of non-compliance remained stable.

However, the researchers found that the depth of violation did fall over the period, suggesting that for those workers earning below the national minimum wage, wages increased in real terms, but not all the way up to the full amount, Nxesi said.

“The research report further shows that across industry categories there was a substantial variation in rates of NMW violation. Agriculture had the largest proportion of sub-NMW earners, and this appears to have increased over the period.

“Construction, Wholesale and Retail Trade, and Domestic Work, all had rates of violation close to 45%, and these remained relatively unchanged. Levels of violation appeared to have also risen in Finance, and Transport.”

Because the research looks at changes to working hours, employment, wages and non-compliance across different sectors, it is difficult to single out individual companies, the minister said.

New minimum wage

Discussions around a new minimum wage in South Africa are set to take place later this year, with a formal change set to be made in March 2023.

While the 2022 increase was above inflation, 2023’s minimum wage discussions will have to consider record-high fuel prices, growing grocery inflation, and the possibility that government could introduce a formal basic income grant in its 2023 national budget.

The National Minimum Wage Commission, which typically makes its recommendations in November, considers the following factors when determining the annual adjustment:

  • Inflation, the cost of living, and the need to maintain the value of the minimum wage;
  • Gross domestic product; wage levels and collective bargaining outcomes; productivity;
  • Employers’ ability to carry on their businesses successfully; the operation of small, medium, or micro-enterprises and new enterprises;
  • The likely impact of the recommendation adjustment on employment or the creation of employment.

The National Minimum Wage Act was first proclaimed in 2018, setting a historic precedent in the protection of low-earning (vulnerable) workers in South Africa and providing a platform for reducing inequality and huge disparities in income in the national labour market.

In terms of the law, it is an unfair labour practise for an employer to unilaterally alter hours of work or other conditions of employment in implementing the national minimum wage.

The national minimum wage is the amount payable for the ordinary hours of work and does not include payment of allowances (such as transport, tools, food or accommodation) payments in kind (board or lodging), tips, bonuses and gifts.

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