South Africa’s first national minimum wage
1 January 2019 saw South Africa’s first ever national minimum wage come into effect.
Stakeholders first signed the national minimum wage agreement in February 2017, which was approved by Cabinet later in 2017 after which the bill was passed in May 2018. Other related legislation, being the Basic Conditions of Employment Amendment Bill and the Labour Relations Amendment Bill, were passed at the same time. President Cyril Ramaphosa signed the bill in November 2018 and in December he announced that it would come into effect on the 1st of January 2019.
This legislation enforces a minimum wage rate of R20 per hour within agriculture and domestic work sectors and are being phased in at R18 and R15 per hour, respectively. This wage will remain in force for 2 years until December 2020, whereafter the Minister of Labour will advise the adjustment applicable from 1 January 2021. Industries regulated by a bargaining council will still be bound by the provisions of the collective agreement applicable to that industry. However, if you have negotiated wages that are in excess of the minimum rates with an employee, then you are still bound by the terms of that agreement.
According to the Unemployment Insurance Contributions Act, 2002 (Act No. 4 of 2002), a domestic worker is a worker who performs domestic work in a private household and who is entitled to receive a wage. This includes a gardener, a driver or a person who cares for children or for the elderly, sick, frail or disabled in a private household. This does not include a person working on a farm.
Sectoral Determination 13 of the Basic Conditions of Employment Act No. 75 of 1997 defines a farm worker as a worker employed in any farming or forestry activities. Part A (1) (2) of the Sectoral Determination defines farming activities as follows:
Without limiting its meaning, ‘farming activities’ includes primary and secondary agriculture, mixed farming, horticulture, aqua farming and the farming of animal products or field crops excluding the Forestry Sector.
Furthermore, the Sectoral Determination stipulates that a farm worker includes:
(a) a domestic worker employed in a home on a farm;
(b) a security guard employed to guard a farm or other premises where farming activities are conducted, who is not employed in the private security industry.
Provision is made for exemptions, where an employer may in the prescribed form and manner apply for exemption from paying the national minimum wage. The exemption process is specifically created for employers who can prove that they cannot afford to pay the national minimum wage to workers. An exemption will only be granted if the following criteria are satisfied by the employer applying for exemption:
- the employer cannot afford to pay the national minimum wage; and
- representative trade union(s) of the workers has been meaningfully consulted or, if there are no trade union(s), the affected workers have been meaningfully consulted.
Affordability will be assessed during a rigorous process, that will be undertaken, to ensure that comprehensive information is submitted when applying for the exemption.
No exemption may be granted where the wage is below the following wage thresholds:
- 90% of the national minimum wage in respect of workers other than farm workers and domestic workers, which equates to R18 per hour;
- 90% of the national minimum wage in respect of farm workers, which equates to R16.20 per hour; or
- 90% of the national minimum wage of domestic workers, which equates to R13.50 per hour.
It is therefore only possible for an employer to be granted a 10% reduction of the national minimum wage through the exemption process. The exemption process is managed by the Department of Labour, by way of an online system called the National Minimum Wage Exemption System.
As 47% (6.6 million people) of the workforce in South Africa currently earns below the threshold, this new legislation benefits almost 50% of the working population directly. However, some are still critical of the minimum rate, as they feel it is still not a “living” wage, while others have warned that it may even further increase SA’s already high unemployment rate as it will become more expensive to hire workers.
Professional Accountant (SA)
Director – BVSA Port Alfred
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