Steps in preparation of the national minimum wage

Jan 4, 2022 | Latest in the industry

In terms of the National Minimum Wage Act (NMWA), the National Minimum Wage Commission annually assesses and reviews the national minimum wage. The Commission then submits a recommendation to the Minister of Employment and Labour to adjust the national minimum wage for the 2022/2023 period, which will come into effect on 01 March 2022.

The criteria the Commission uses to determine the proposed increase, is the consumer price index (CPI) plus 1,0%.  The CPI was 5,0% in September 2021 and the national minimum wage increase is thus calculated at 6,0%.  This means an increase in the current national minimum wage of R21.69 per hour to R22.99 per hour (based on September 2021’s CPI, available when this article was written).

IMPORTANT UPDATE: TAKE NOTE THAT THE MINISTER OF EMPLOYMENT AND LABOUR ANNOUNCED THE AMENDED NATIONAL MINIMUM WAGE ON 07 FEBRUARY 2022 IN THE GOVERNMENT GAZETTE 45882: THE WAGE PER HOUR WAS INCREASED TO R23.19 PER HOUR EFFECTIVE FROM 01 MARCH 2022 – READ THE COMPLETE UPDATE HERE (ENGLISH) OR HERE (AFRIKAANS).

Businesses operate in a challenging environment and the national minimum wage and associated increases puts additional pressure on employers, as there is no negotiating the payment of the wage. However, Section 15 of the NMWA stipulates that if employers cannot afford the national minimum wage, they can apply online for exemption (http://nmw.labour.gov.za). If exemption is granted, the employer will still have to pay at least 90% of the national minimum wage. Exemption is only valid for a maximum period of 12 months.
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What about exemption from the wage?

As part of the exemption application, the employer must provide a good reason for the exemption, as well as proof that there has been meaningfully consulted with employees and representative union(s) where applicable. The regulations further stipulate that such an application will not be granted if the employer does not meet the affordability elements with regard to profitability, liquidity and solvency. The calculations for these tests are further included as part of the schedules to the law. Exemption will only be considered if the employer is up to date with all legal payments, including the Unemployment Insurance Fund, the Occupational Injuries and Compensation Fund (Compensation Commissioner) and any other applicable levies.

The application is done online

Because the application is done online, the outcome is immediately available, unless the application is singled out for an audit (which will take place within 30 days from the date of application). The outcome will confirm the date of commencement of the exemption, the period for which it is granted, the wages that the employer is obliged to pay employees, as well as any other relevant conditions. If the exemption is granted, a copy of the exemption certificate must be displayed in the workplace, as well as provided to the relevant employees and representative trade union(s) where applicable. If the application is unsuccessful, the employer will receive a notice with the reasons for the refusal.

What about disputes?

A dispute over non-compliance with the NMWA can be referred either to the Commission for Conciliation, Mediation and Arbitration (CCMA), or to the Department of Employment and Labour. If an employer fails to comply with the NMWA, the employer can be fined as follows (whichever amount is the greater):

  • Twice the value of the amount paid to the employee below the prescribed minimum wage; or
  • Twice the employee’s monthly salary.

Restrictive labour regulations are considered as one of the most problematic factors when it comes to doing business in South Africa. Employers need to realise that by making a mind shift and proactively managing the business risk associated with labour law compliance, employers are positioning themselves for the employment relationship going forward, as well as any possible future disputes.

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