Minimum wage 2023: what to expect

Feb 10, 2023 | Latest in the industry

In terms of the National Minimum Wage Act (NMWA), the National Minimum Wage Commission (the 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 minimum wage. The current national minimum wage came into effect on 1 March 2022, and the highly anticipated review of this wage for the 2023/2024 period is almost upon us. This will likely be released and published in the Government Gazette by the Minister and come into effect on 1 March 2023.

The criteria the Commission generally uses to determine the proposed increase is the consumer price index (CPI) plus 1.0%.  The CPI was 7.2% in December 2022, and the minimum wage increase is thus calculated at approximately 8.2%.  This means an increase in the current national minimum wage of R23.19 per hour to R25.09 per hour (based on December 2022’s CPI as released by Statistics South Africa on 18 January 2023 – available when this article was written).

However, the Department released a media statement on 22 December 2022, which indicated that the Commission, in its preliminary report, was looking at an annual increase in the national minimum wage in the range of CPI + 0.5% and CPI +1% for 2023.

However, the Department released a media statement on 22 December 2022, which indicated that the Commission, in its preliminary report, was looking at an annual increase in the national minimum wage in the range of CPI + 0.5% and CPI +1% for 2023.

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Are there options for businesses that cannot afford to pay minimum wages?

Companies operate in a challenging environment, and the national minimum wage and associated increases put additional pressure on employers, as there is no negotiating the wage payment. In addition, if an employer fails to comply with the NMWA, the employer can be fined, and further non-compliance will also lead to more considerable penalties.

However, section 15 of the NMWA stipulates that employers can apply online for exemption if they cannot afford the national minimum wage (http://nmw.labour.gov.za).  The employer will still have to pay at least 90% of the national minimum wage if the exemption is granted.  In addition, the exemption is only valid for a maximum period of 12 months.

As part of the exemption application, the employer must provide a good reason for the exemption and proof that there has been meaningful consultation 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 concerning profitability, liquidity and solvency. The calculations for these tests are 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 outcome will confirm the commencement date of the exemption, the period for which it is granted, the wages that the employer is obliged to pay employees, and any other relevant conditions. If the exemption is granted, a copy of the exemption certificate must be displayed in the workplace and 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.

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