President Cyril Ramaphosa signed the National Minimum Wage (NMW) Bill into law on Friday, 23 November 2018.
The Bill came into effect on 1 January 2019.
There are a few exceptions to the national minimum wage of R20 per hour, which include:
- The minimum wage for farm workers will be R18 per hour.
- The minimum wage for domestic workers will be R15 per hour.
- The minimum wage for workers on an expanded public works program is R11 per hour.
Employers should also be aware of some of the following points in relation to the National Minimum Wage:
The NWM is an hourly rate.
It is clear from the wording in the NMW Act that the national minimum wage must be administrated in an hourly rate basis.
Schedule 1 of the NMW Act states that:
“…the national minimum wage is R20 for each ordinary hour worked.”
The concessions for farmworkers, domestic workers, workers on an expanded public works program and workers who have concluded learnership agreements are also based on a minimum wage rate per hour.
From a practical perspective this means employers need to review their wage rates on an hourly basis to form a proper comparison.
Definition of “Worker”
The following new concepts are defined by and for the purpose of the NMW Act:
- “Employer” (“any person who is obliged to pay a worker for the work that that worker performs for that person”)
- “Worker” (“any person who works for another and who receives…any payment for that work whether in money or in kind”).
We foresee that there can be confusion between an independent contractor and the new concept of a “worker”. Employers may wish to be cautious and make sure independent contractors’ rates are also tested.
Employment Tax Incentive Act (ETI)
Section 4(1)(a) of the ETI Act requires the employer to pay a wage in each month that is not less than “the amount payable by virtue of a wage regulating measure…”.
Wage regulating measures always specify an hourly minimum rate, and sometimes specify a monthly and/or a weekly minimum wage in addition to the hourly rate. The result is that payroll systems and employers that apply the hourly minimum wage rate specified by the wage regulating measure, will comply with section 4(1)(a).
If there is no wage regulating measure, section 4(1)(b) specifies a monthly minimum wage of R2 000 and requires the employer to ‘gross-up’ the actual wage paid in the month if there are less than 160 “employed and paid remuneration” hours in that month.
Section 4(1)(b) does not provide for, and therefore does not allow, the minimum wage to be validated against an hourly wage rate, whereas the national minimum wage will be applied on an hourly basis.
This creates a challenge for employers and payroll systems. The Payroll Authors Group of South Africa has raised this with National Treasury in the hope this will be addressed in the coming months. In the meantime employers will need to take comfort from the fact that if the NMW hourly rate is paid it is likely the monthly test under ETI will be met.
The original drafts of the NMW allowed for a one year exemption for companies who could show they would be faced with financial hardship in implementing the NMW. In the final Act this has been replaced with a 10% reduction so even if hardship is claimed and on successful application these companies would need to comply with a minimum hourly rate of R18.
Once you have carried out an assessment of your workforce, please make sure you inform payroll to make any amendments. Your payroll systems will not adjust themselves (while this may seem intuitive we have seen multiple employers who have assumed this would be the case). For HRTorQue clients, we can only adjust payrolls on clients’ instructions.
If you would like assistance reviewing your payroll/workers and are considering how to implement the NMW while minimising the impact on your business please give us a call.