Government’s wage bill headache worsens as Constitutional Court battle looms

Public sector union, the PSA, says it will approach the Constitutional Court to overturn a Labour Appeal Court ruling which found that the state did not have to give public service workers the third year of salary increases as agreed to in 2018.

As part of the 2018 resolution, public sector workers would have received a CPI+1% salary increase in 2020. However, due to the dire state of South Africa’s finances, and the complications brought about by the Covid-19 pandemic, the government was forced to renege on the agreement, instead implementing a wage freeze.

Unions challenged the decision, with the fight going all the way to the Labour Appeal Court in December 2020, where the court ruled in the government’s favour, stating that the resolution was unlawful and therefore could not be implemented.

The last leg of the three-year salary agreement was thus not implemented by the state and the Labour Appeal Court indicated that it was not fair and equitable for the state to pay the salary increases amidst the current economic climate.

However, the unions said they were not done with the fight, and have decided to take the matter to the country’s highest court.

“The PSA is not satisfied with the judgement as it has severe repercussions for the future of collective bargaining in the country. The state must be held accountable for signing an agreement that it had no intention of implementing,” the PSA said.

“The rising costs of food, fuel, transport, medical aid and other living expenses coupled with the effects of the Covid-19 pandemic have taken a toll on public servants who have been at the forefront of this pandemic, rendering delivering critical services.

“Merely paying lip service and complimenting front-line workers is simply not enough to financially assist public servants who were due to receive salary increases in April 2020.”

The PSA is set to file papers at the Constitutional Court on 29 January 2021. The union has, in the meantime, also demanded that public service salary negotiations for the 2021/22-financial year should commence immediately at the Public Service Coordinating Bargaining Council.

Government’s wage bill headache

Government has allowed the public sector wage bill to bloat significantly over the last decade, to the point that it now accounts for over a third of total government expenditure.

With little room to grow the country’s tax base – and thus increase revenue – government has no choice but to look at cutting expenditure to balance the country’s books, and finance minister Tito Mboweni has promised to do so, including a massive cut to the wage bill of R160 billion over the next three financial years.

Following the 2020 mid-term budget policy statement, analysts and economists warned that government’s plans to cut spending and ease the burden on the economy hinged on the implementation of its promise to cut wages – which needs support from unions.

This was also flagged by ratings agencies in the weeks following the budget, as they noted that government’s track record with following through on budget cuts – particularly around the wage bill – was poor.

Other issues at play are the 800,000 public sector jobs government aims to create to combat lockdown unemployment – this will add even more wages to the country’s books – as well as the loss of economic activity and tax revenue due to no increases for the workers that are already part of the system.

Should the case proceed at the Constitutional Court, and should government lose and be forced to pay the back-dated wages, it could be on the hook for as much as R294 billion.

Read: To make the budget work, government needs unions on board – and they’re not

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Government’s wage bill headache worsens as Constitutional Court battle looms