3 January 2022
Under the National Minimum Wage (NMW) Act, the National Minimum Wage Commission annually assesses and reviews the minimum wage. The minister of Employment and Labour, Thulas Nxesi, then determines an adjustment based on these recommendations.
While the government has argued that the national minimum wage can be used as a tool to lift more South Africans out of poverty, businesses have warned that further hikes would be untenable and lead to additional job losses.
Nxesi introduced the most recent minimum wage adjustment for South Africa in March 2021, taking the current total to R21.69 for each ordinary hour worked.
As in previous years, the adjustment provides exceptions for several worker groups, including:
- Farmworkers are entitled to a minimum wage of R21.69 per hour;
- Domestic workers are entitled to a minimum wage of R19.09 per hour;
- Workers employed on an expanded public works programme are entitled to a minimum wage of R11.93 per hour.
The new recommendations
The majority of commissioners recommended that the national minimum wage be increased by 1% above inflation as measured by the consumer price index (CPI).
A minority recommended that the national minimum wage be increased by 1.5% above inflation as measured by the CPI.
All commissioners also recommended that the minimum wage for domestic workers be equalised to the national minimum wage in 2022, in line with a decision taken in 2021.
While the final totals would still need to be confirmed by labour minister Thulas Nxesi, this would take the minimum wage closer to R23/hour and see domestic workers earn a minimum wage of more than R20/hour for the first time.
Impact on businesses?
The National Minimum Wage Commission has acknowledged legitimate concerns about the impact of the annual national minimum wage adjustments on employment in the country.
The national minimum wage adjustment also coincides with the current Covid pandemic, making it difficult to evaluate and isolate the impact of an increase in the national minimum wage.
Given the current economic climate in South Africa, the effects of the Covid-19 lockdown, and the recent losses due to violent looting in mid-2021, an increase to the NMW would be catastrophic to businesses and the economy in general, the National Employers Association of South Africa said in an October report.
“In a country such as South Africa, which is already struggling with unprecedented rates of unemployment, extreme poverty, over-burdened employers and business owners, and a veneer-thin trust in the government and its ability to care for its most vulnerable citizens, and unaffordable NMW will completely maim the already crippled economy, leaving employers, business owners, their employees and their dependents destitute.”
If employers cannot afford an increase, they will have no other choice but to reduce working hours or retrench their employees, it warned.
“What government seems to fail to understand is that when one employee is retrenched, it is not only that employee who suffers. In South Africa, we live in a dispensation where one worker is generally the only income generator in a family of four or five people. This means that they would all suffer the consequences of that one employee’s retrenchment.”
The fact that an employer may not appoint a person at a rate below the minimum wage, even with the consent of such a person, robs a potential employee from earning at least some sort of living and condemns him to a life of abject poverty, Neasa said.
“It would behove the government to reconsider its future stance on increasing minimum wages and take heed of the employers’ objections to increases. Their focus should be the avoidance of catastrophic future economic implications for the country and the rise of unemployment.
“It is time for the government to take a critical view on all the legislative measures, of which the NMW is only one, and determine which deters employment.”