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The National Minimum Wage: Understanding and Applying it

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The National Minimum Wage Act (“the NMWA”) came into effect on 1 January 2019.

The purpose of the NMWA is to:

  • improve the wages of the lowest paid workers;
  • protect workers from unreasonably low wages;
  • preserve the value of the national minimum wage;
  • to promote collective bargaining; and
  • support economic policy.

The NMWA defines “workers” as any person who works for another and who receives, or is entitled to receive, any payment for that work whether in money or kind and excludes volunteers, members of the South African National Defence Force, the South African National Intelligence Agency and the South African Secret Service.

The current national minimum wage figures are R20.00 per hour for all workers excluding farm workers (R18.00 per hour) and domestic workers (R15.00 per hour). Those figures will remain in force until December 2020 whereafter the Minister of Labour will announce whether the national minimum wage will be adjusted.

The calculation of the wage due to an employee in compliance with the NMWA is the amount payable in money for ordinary hours of work excluding any payment which enables the employee to work (i.e. transport, equipment, tool, food or accommodation allowance), any payment in kind and / or any gratuity.

Section 15 of the NMWA, read together with the Regulations, provides for an exemption process for employers. The exemption process is created for employers who can show that they cannot afford to pay the national minimum wage to their employees. An exemption will only be granted if the employer cannot afford to pay the national minimum wage and representative trade union(s) of the workers have been meaningfully consulted or, if there are no trade union(s), the affected workers have been meaningfully consulted.

Elements of profitability, liquidity and solvency are taken into account when assessing affordability. The decision-making process is rigorous, and employers will need to ensure that they submit comprehensive financial and organisational information when applying for exemptions.

If an exemption is granted, the minimum wage payable will be limited to R18.00 per hour for all workers, R16.20 per hour for farm workers and R13.50 per hour for domestic workers.

The primary responsibility for the enforcement of the NMWA is with labour inspectors who have considerable powers, including powers of entry, powers to question and powers to inspect.

The labour inspector may not issue a compliance order in respect of any employee who earns above the threshold, which is currently R205 433.30 per annum.

An employer who pays an employee less than the national minimum wage may be fined. For a first offence, the amount of the fine will be the greater of twice the value of the underpayment; or twice the employees monthly wage. For a second or further offence, the fine will be the greater of thrice the value of the underpayment or thrice the employee’s monthly wage.

There is also a “name and shame provision” which provides that, every quarter, the Department of Labour must maintain and publish on its official website a list of employers who were issued with compliance orders.

Employers are accordingly encouraged to either ensure that all employees are paid the national minimum wage, alternatively to apply for an exemption in that regard or face the possibility of a fine and / or a compliance order which will be available to the public.

Jacqui Reed

Jacqui has a BA, Honours in English and LLB from WITS and an LLM from UJ. She was admitted as an attorney in 2005 after having completed her articles at Webber Wentzel where she rose to the level of associate in the Labour department. Jacqui subsequently joined Bell Dewar Hall (now Fasken) and Deneys Reitz (now Norton Rose) as an associate and ENS Africa as a senior associate in their Labour departments before moving to the Johannesburg Bar in 2012 specialising in Labour Law. She left the Bar in 2017 to focus on her consulting practice and joined Caveat in 2018.