Since 2018, the National Minimum Wage (NMW) Act has set about protecting the low-earning – and therefore most vulnerable – workers in South Africa with the aim of reducing inequalities and disparities in the labour market.
This year, effective from 1 March 2022 for each ordinary hour of work performed, the National Minimum Wage will increase from R21.69 to R23.19 (an average of 6.9%). This will make a difference in the lives of close to 6 million workers earning at a NMW level.
Unlike previous years, however, the new minimum sets a baseline across almost all sectors with very few exceptions as part of a planned move towards equalisation. Last year farmworkers received a substantial jump to bring their wages in line with the national minimum. Now it is the turn of domestic workers, who are effectively getting a 21.5% increase.
It places a tremendous expectation on most employers to rapidly adjust their wage payments to meet the new regulations. Especially homeowners with domestic workers, who may already be struggling to meet the household financial demands in a difficult economic climate.
Summary of NMW legislative changes effective from 1 March 2022
In terms of Section 6 (5) of the NMW Act, No. 9 of 2018, Thulas Nxesi, the Minister of Employment and labour has amended the national minimum wages contained in Schedule 1 and Schedule 2, published under Government Notice No. 44136 of 8 February 2021 as follows:
- the national minimum wage will be R23.19 for each ordinary hour worked; including
- farmworkers who are entitled to a minimum wage of R23.19 per hour; and
- domestic workers who are also entitled to a minimum wage of R23.19 per hour.
Exemptions are limited to:
- workers employed on an expanded public works programme who are entitled to a minimum wage of R12.75 per hour; and
- workers who have concluded learnership agreements in terms of the Skills Development Act, who are entitled to allowances as contained within Schedule 2.
And employers should note that:
- the NMW is the amount payable for ordinary hours of work and excludes payment of allowances (such as transportation, tools, food, or lodging), payments in kind (board or lodging), tips, bonuses, and gifts; and
- it is illegal and unfair labour practice for an employer to unilaterally change working hours or other employment conditions in order to implement the NMW.
To download the full official Review and Adjustment of the National Minimum Wage for 2022 click here.
Motivating the existence of the NMW and annual minimum wage amendments
Minimum wage laws are an important instrument in the support of economic justice and restitution, having become a standard feature of labour market policy in almost all countries around the world. In a country with a historic disparity in both income and equality like South Africa, the National Minimum Wage is designed to regulate the labour market in order to protect the most vulnerable low-income workers and their families.
Alleviating poverty and inequality
The specific sectors and groups of workers identified by the minister represent an ongoing effort to address poverty and the array of socio-economic issues that result from it. The most vulnerable need to be able to, in the very least, afford the basic necessities for survival: a home, food, water, clothing, electricity, and other essentials. Else they face the prospect of homelessness, starvation, or turn to crime in order to support their households. There are also factors like GBV, substance abuse, gangsterism, and a host of other outcomes that can be directly attributed to poverty.
Considerations in the determination of minimum wage
The National Minimum Wage Commission considers a vast number of factors the determination of its annual adjustment. These include, but are not limited to:
- inflation, the cost of living, and the need to maintain the value of the minimum wage;
- gross domestic product;
- wage levels and collective bargaining outcomes;
- productivity and an employers’ ability to successfully conduct business;
- the impact on the operation of small, medium, or micro- enterprises and new enterprises;
- and the likely impact of the recommendation adjustment on employment or the creation of employment.
Groups and sectors affected by the NMW changes
Agricultural sector workers
Farmworkers who support the production of the food supply chain that feeds the nation are ironically classified as one of the most vulnerable groups when it comes to hunger. Some permanent farmworkers have accommodation on the farms they work, but other need to budget for both accommodation and transport. Seasonal farmworkers are most impacted, as many cannot find employment outside of season.
Historically speaking, domestic workers have been the most underpaid labour. Considering that most are women, it can be argued that this amounts to gender exploitation and discrimination of an estimated 892 000 people. As most domestic workers do not live on the premises, accommodation and the basic cost of transport constitute the major monthly expenses to most. Rising fuel prices directly affect taxi fares and ultimately also drive up the cost of food and basic commodities.
Expanded public works programme workers
Almost a million previously unemployed people find upliftment from poverty through the expanded public works programmes that use labour-intensive methods to draw in the maximum number of people. They create work opportunities across multiple sectors, including Infrastructure, Non-State, Environment & Culture, and Social.
However, even at the increased minimum wage of R12.75 per hour, these workers will only earn slightly over R2000 per month if they work full-time. Sadly, this still means that they remain impoverished to a greater degree.
Contract cleaning sector employees
This sector employs almost 100 000 people and is split into different geographic sectors in terms of minimum wage ranging from R23,27 to R25,52.
Full details on areas and rates can be found in Schedule 2 of the amendments under Sectoral Determination 1: Contract Cleaning Sector. To download click here.
Wholesale and retail sector employees
This sector employs just under 3 million people, representing 22% of our workforce, and is split according to geographic sectors as well as job category. This means both low- and high-ranking employees, from entry level all the way up to manager, now qualify for a minimum wage determined in accordance with the amendments.
Full details on areas and rates can be found in Schedule 2 of the amendments under Sectoral Determination 9: Wholesale and Retail Sector. To download click here.
Impact on employers affected by the NMW changes
In short, employers have no choice but to pay the increased wage amendments according to the law.
This on top of the continuing petrol price increases and the knock-on effect that will be felt across all sectors and income brackets.
Agricultural sector employers
Farmers are hard-pressed to absorb these rising costs, with increasingly narrower margins. Especially where their produce is price-regulated and price increases are not an option.
Other options include staff reorganisation, mechanisation, or, worst case, exit of the sector entirely. Some surveys indicate that there may already have been a reduction of up to 24% in the employment of seasonal workers last year already, with another to follow.
Domestic sector employers
Households have been very hard hit by Covid-19 lockdowns, salary cuts, job losses, and inflation, with as many as eight out of ten homes surveyed are living on reduced budgets.
Reports indicate a decline of as much as 26% in domestic worker employment between the first and second quarters of 2020, with many unable to find new employment when the lockdown regulations eased.
With such a dramatic increase the minimum wage for domestic workers, there are likely to be more job losses in the sector and even lower prospects for new employment opportunities.
Employers in other sectors
Typically, businesses can only respond to price increases by increasing the prices of their own products or services. It takes time, however, and runs the risk of losing customers. This means businesses are likely to experience a shortfall between salaries and income, especially in the coming months. Retrenchments are a very real possibility.
Plotting a way forward
While a minimum wage is essential in protecting the vulnerable, raising the minimum wage by government at this time may not result in the expected alleviation of poverty and inequality.
As it is, the cost of living in South Africa remains unaffordable for a great many people and businesses are under increasing pressure during a period of slowed economic growth. This is especially relevant in the case of cash-strapped households, where a domestic worker is fast becoming a luxury that they can no longer afford.
Economists remain divided on the issue and only time will tell if good intentions ultimately prove to be a bad idea.