UNDERSTANDING MINIMUM WAGE

We take a look at what minimum wage is, why it’s important and what happens if employers don’t comply.


From 1 May, government hopes that South Africa will formally adopt a national minimum wage of R20 an hour. Currently the minimum wage varies by sector, but this new policy will regulate it across the board. The new wage works out at R3 200 a month for an eight-hour day, five days a week in a four-week month, but will vary depending on the number of hours worked per day, days worked per week and weeks in the month. It will also be reviewed annually to take into account cost-of-living increases and other factors.




THE REASONS
South Africa has one of the highest levels of inequality in the world. The top 10% of full-time employees made 82 times the income of the bottom 10% in 2014, according to a report by the National Minimum Wage Research Initiative at the University of the Witwatersrand’s School of Economics and Business Sciences. More than 50% of full-time workers earn below the poverty line of R4 125 a month – often less than they need for basic requirements. And while the minimum wage is still below this line, ‘it’s a step towards protecting minimum earnings of vulnerable workers’, says Ian Macun, director of collective bargaining in the Department of Labour.

THE BENEFITS
According to the Wits report, the introduction of minimum wages is to reduce inequality and help alleviate poverty in Latin America, Indonesia, Russia, China and India. It might even help grow the economy and achieve higher worker productivity. The report goes on to suggest the country’s economic output could be 2.1% higher with a minimum wage of about R3 500 per month, largely because there would be lower employee turnover, and employers would save money by not having to recruit and train people. Better wages could also boost economic growth by enabling workers to shop, spending money on goods or services instead of relying on public subsidies.

THE PROBLEMS
Some employers will not be able to afford the minimum wage, and might need to reduce the number of staff , introduce shorter hours or cut back on training or non-wage benefits (like live-in housing and food provision). Verlie Oosthuizen, associate partner in the employment law department at Shepstone & Wylie attorneys, says another option would be for these employers to save money by mechanisation (increasing the use of machines). This is most likely to affect employees of small farms as well as farm workers. Some employers might off set the extra cost by raising the prices of their goods or services, which could affect already cash-strapped consumers. And some might simply not comply with the new minimum wage.

THE SOLUTIONS
To ensure that employers abide by the law, Government might impose fines on those who don’t pay the minimum wage. They might also enforce payment by issuing certificates of compliance, as in the case of BBBE empowerment, where employers who don’t pay are sanctioned by, for example, not winning government tenders. Employers can also apply for an exemption, says Oosthuizen, but must prove why they can’t afford the minimum wage and that compliance would mean retrenchments. ere will also be a grace period for employers of farm workers and domestic workers to ‘ease into wage levels’, he adds.

THE VERDICT
So what does all this mean for workers on the ground? Durban domestic worker Thandeka Zondo* says she is excited but hesitant. ‘R3 500 is in fact what I asked for when I started work, but the boss said he could not afford it,’ she says. ‘I live in, I have a nice room and shower, but I get just R2 200. I have three kids and I help my mother who looks after them. She only gets a small pension. I am excited, but also scared. The boss once said if I want more money, he will have to charge me rent or let out my room. I’d have to catch buses and taxis each day. The extra pay would mostly go to that, and I’d be travelling in the dark, which is not safe. I hope I won’t have to choose!’


By Glynis Horning
*Not her real name


UNDERSTANDING MINIMUM WAGE UNDERSTANDING MINIMUM WAGE Reviewed by Michelle Pienaar on March 01, 2018 Rating: 5
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