What is the National Minimum Wage Act?
The National Minimum Wage Act (“NMWA”), as published in the Government Gazette on 27 November 2018 and promulgated with effect from the 1 January 2019, is in principle a piece of legislation designed to regulate and standardise the lowest possible wage of employees in the Republic of South Africa.
How will the law work?
The NMWA stipulates that the national minimum wage is increased to R20.00 per hour, or R3,500 per month, nationally and across all industries.
However, there are a few exceptions to the rule. A few industries will have a two year implementation “phase in period” to comply with the minimum wage. These industries are the farming and domestic sectors. The farming sector must comply to 90% of the new minimum wage, resulting in a wage of R18.00 per hour. On the other hand, the domestic sector must comply to seventy 75% of the new minimum wage, resulting in a wage of R15.00 per hour. The main reasoning behind this “phase in period” is to mitigate possible job losses in these industries.
In terms of the NMWA, every worker is entitled to payment of a wage in an amount no less than the NMWA and every employer must pay wages to its workers that is no less than the NMWA.
Domestic Workers must be paid at a rate of R15.00 per hour (as of 1 January 2019), despite the recent increase in December 2018 and Farm and Forestry Workers at R18.00 per hour. The rate/hour must be paid as indicated above, irrespective of hours worked by employees, except for overtime which will have to be paid accordingly.
Employers should take note of the following in this regard:
- the NMWA is enforceable by law and as such the Department of Labour will conduct inspections in order to monitor compliance by employers;
- the payment of a national minimum wage cannot be waived and the NMWA takes precedence over any contrary provision in any contract, collective agreement, sectoral determination or law, except a law amending the NMWA;
- the calculation of wages, in terms of the NMWA, is the amount payable in money for ordinary hours of work and may not include payment of allowances (such as transport, tools, food or accommodation) payments in kind (board or lodging), tips, bonuses and gifts;
- it is an unfair labour practice for an employer to unilaterally alter wages, hours of work or other conditions of employment in connection with the implementation of the NMWA, except if it is more favourable to the employee;
- The National Minimum Wage Commission will review the NMWA annually and make recommendations to the Minister on any adjustment;
- The impact of the NMWA will differ from industry to industry and employer to employer and we would therefore like to give some tips on how to deal with this:
- as employees are not allowed to work less than 4 hours per day, this would be the absolute minimum hours that will have to be paid to employees;
- normal working hours (before overtime) are 45 hours per week or 195 hours per month;
- employers who cannot afford to comply with the NMWA may apply for exemption from it, but exemptions will be regulated by the procedure for exemption, the obligation on an employer to consult with employees or their trade unions, the criteria for evaluating exemptions, and documents to be submitted among other factors. If an exemption is granted, it 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 its workers and may contain any other relevant condition;
- the only remedy available for employers who cannot afford the NMWA, excluding those granted exemption, would be to either consider retrenchment or to implement short time. In both instances, employers should take note that there are processes to follow in terms of Labour legislation.
Should you require more information or assistance regarding the above, please feel free to contact us.