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The devil is in the detail: National Minimum Wage

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The devil is in the detail: National Minimum Wage

14th February 2017

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Deputy President Cyril Ramaphosa last week announced that representatives of government, business, the community sector and two of the three labour federations represented at The National Economic Development and Labour Council (Nedlac) have concluded an agreement on the introduction of a National Minimum Wage (NMW).

The emphasis of the agreement was that the level of the NMW will be R20.00 per hour. However, a number of other important factors have also been dealt with in the agreement and require further consideration. When implementing the NMW, these factors must be taken into account:

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  • Firstly, the NMW is subject to annual adjustment. The following factors will be taken into account when determining the amount by which the NMW must be increased – the cost of living and minimum living levels, the alleviation of poverty, wage differentials and inequality, conditions of employment, the health, safety and welfare of workers, employment levels, inflation, GDP growth, productivity, collective bargaining, the aspirational target and the impact of a NMW adjustment on employment. It is, therefore, important that employers consider making the requisite representations to the NMW Commission on an annual basis, regarding any proposed adjustments to the NMW.
  • Secondly, Small, Medium and Micro Enterprises (SMMEs) and start-up business are not exempt from the implementation of the NMW. However, they will be able to apply for an exemption under certain circumstances.
  • Thirdly, when the NMW is introduced, domestic workers will be paid 75% of the NMW and agricultural workers will be paid 90% of the NMW. It is envisaged that these sectors will be brought up to 100% of The NMW level within two years, pending research by the NMW Committee on this timeframe.
  • Finally, sectoral determinations, collective agreements, bargaining council agreements and individual contracts of employment must comply with the NMW Act, still to be promulgated.

Having regard to the above, it is imperative that the cost of the NMW is taken into account when employers are planning their staffing requirements.

Written by Aadil Patel and Kirsten Caddy, Cliffe Dekker Hofmeyr

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