How to minimize the ramifications there of.

The purpose of this article will not be to complain about the current situation we find ourselves in but can be used as a tool to provide employers with a clear objective and unbiased legal framework to enable employers to minimize the ramifications of the increased Minimum wage within the legal framework of South African Labour Laws. 

The National Minimum Wage Act came into effect on 1 January 2019, when the President signed the National Minimum Wage statute into law. Employment and Labour Minister, TW Nxesi, announced that the National Minimum Wage for each ordinary hour worked has been increased from R21.69 to R23.19 for the year 2022 which has been in effect from 01 March 2022. Unlike in previous years, no specific worker groups have been provided exceptions, with the minimum wages for domestic workers and farmworkers now also set at R23.19 for each ordinary hour worked.

This has the result that employers who use to pay their employees R4 229.50 per month on average in the event of a 45-hour work week, will now be obligated to pay them R4 522.02 per month on average.  

Firstly how is the National Minimum Wage enforced?

The Director-General of the Department of Labour has been empowered to refer non-compliant employers to the CCMA directly, as opposed to the Labour Court. The CCMA may, as per the nature of the referral, render an arbitration award which can be made an Order of the Labour Court in respect of non-compliance with The National Minimum Wage Act.

The above has the implication that employers who fail to comply with the relevant legislation risk being caught up in unnecessary legal action and disputes as some employees and unions might see this as an opportunity to exploit the situation. Failure to comply with the National Minimum Wage might also lead to excessive penalties, whereby the back payments to the underpaid employees can be doubled, even tripled.

Minimizing the ramifications of the increased Minimum wage.

The increase in the Minimum wage will have a great impact on businesses and the economy, as a lot of business are still recovering from the impact of the Covid Pandemic.

Employers will have to look at the following alternatives and measures to minimize the impact on their businesses, which the increased Minimum wage will have:

Option 1: Exemptions from the new National Minimum Wage

If an employer cannot meet his/her employees remuneration based on the above standard, the Act further makes provision for an exemption process that can be utilised.

As per Section 15 of the Act, read with the enacted Regulations, an employer or an employer’s union, may apply for such exemption. However, such an application will not be successful unless the employer shows a good reason why the relief should be granted and that every employee or every employees’ union was meaningfully consulted with.

Should the employer be successful, the exemption will be granted for a period of no longer than one year. Furthermore, the exemption will allow the employer to remunerate his/her workers at a rate less than the required amount, but not less than 90% of the national minimum wage.

Option 2: The Retrenchment proses in terms of Section 189 of the Labour Relations Act (“LRA”)

Section 189 of the Labour Relations Act permits employers to terminate employees for operational requirements. These are defined as requirements based on economic, technological, structural or similar needs of the employer.

Section 189 of the Labour Relations Act prescribes a joint consensus seeking process in an attempt to reach consensus on the following appropriate measures topics:

·         to avoid the dismissals;

·         to minimise the number of dismissals;

·         to change the timing of the dismissals; and

·         to mitigate the adverse effects of the dismissals;

·         the method for selecting the employees to be dismissed; and

·         the severance pay for dismissed employees.

Alternatives to a dismissal may be raised by affected employees. These are some suggestion that may be made by affected employees in order to save or make more money for a business instead of having to retrench them. The employer must consider these suggestions. It must be remembered that the primary purpose of the joint consensus seeking process is to avoid dismissals and the employer must as such be open to workable alternatives such as:  

·         short time

·         reducing wages (by agreement)

·         measures to increase productivity

·         rationalizing costs and expenditure

·         increase or decrease in shifts and length of shifts

·         stopping overtime or Sunday work

·         gradual reduction of workforce by way of natural turnover

·         extended unpaid leave or temporary lay-off

If none of the above is a viable option in the long run for the employer, then the employer can proceed with the retrenchments. Some of the above-mentioned alternatives might provide viable solutions to minimize the ramifications of the increased Minimum wage.

Option 3: Reduction of working hours and short time.

An employer may not unilaterally change agreed terms or conditions of employment. Increasing or decreasing the agreed total number of hours that an employee is required to work, is a change to conditions of employment and must be negotiated and agreed upon.

The fact that the parties have to agree to change conditions of employment does not mean that an employer’s hands are tied if employees refuse to agree to a change. Where it is operationally justified, the employer can follow the retrenchment process if employees refuse to agree to a reduction of their working hours.

Conclusion:

The article above provides employers with alternative measures as remedies to counter the inevitable increase of the National Minim Wage.  For any further advice or assistance on the matters above or any other labour related matter Kindly contact us on 013 752 4459 or send us and email at rbuitendag@sdblaw.co.za or aloubser@sdblaw.co.za.