Blog


2018-06-28
The National Minimum Wage still a work in progress


The Select Committee on Business and Economic Development (NCOP committee) commenced public hearings on the Basic Conditions of Employment Amendment (BCEA) Bill, the National Minimum Wage (NMW) Bill and Labour Relations Amendment (LLR) Bill on 19 June 2018. 

The NMW Bill sets the NMW at R20 per hour.  The Bill further proposes the establishment of a National Minimum Wage Commission that will annually review the impact of the NMW.  The LLR Bill proposed parental leave benefits to adoptive parents, surrogate mothers and fathers.  The BCEA Bill proposes amendments for enforcement by inspectors to include the NMW Act.

The BCEA Bill and NMW Bill were referred by the Minister of Labour to Parliament’s National Assembly Committee on Labour in February 2018.  This is a norm in the legislative process.  Departments draft bills and refer bills to Parliament, who has the final say as to the outcome of a bill.  The LLR Bill is a private members bill.  This occurs when a Member of Parliament (MP) introduces a bill.  The bill is therefore initiated and drafted by the MP who will also introduce the bill to Parliament. 

Parliament comprises of two houses, namely: The National Assembly (NA) and the National Council of Provinces (NCOP).  Schedules to the Constitution provides guidelines as to how a bill is to be tagged.  Tagging is a process of deciding how a bill will be dealt with in Parliament.  The NA deals with issues affecting the national sphere of Government.  Such a bill will be a section 75 bill and the NA has the final say on the outcome of the bill.  The NCOP focuses on issues affecting the provinces.  Such a bill is tagged a section 76 bill.  For example, if a bill deals with a trade issue, the bill will be tagged a section 76.  This means that provinces have a direct input into the outcome of the bill.  

The NMW Bill, BCEA Bill and the LLR are section 75 bills which mandates the NA committee with the final say on the outcome of the bill.  However, in terms of the legislative process, the NCOP committee can have hearings on a section 75 bill and make recommendations to the NA committee in so far as it affects the provinces. 

The NA committee on Labour, held public hearings and deliberations on the bills earlier this year.  The bills were subsequently adopted in the NA and referred to the NCOP committee. 

During the public hearing held by the NCOP committee, the Congress of South African Trade Unions (Cosatu), Federation of Unions of South Africa (Fedusa) and National Council of Trade Unions (Nactu) made a joint submission on the labour bills.  Cosatu highlighted that consultations on the NMW commenced at National Economic Development and Labour Council (Nedlac) in 2015.  All social partners were included in the consultation process.  An agreement was reached in February 2017 on the NMW by all parties after lengthy and in-depth consultations.  In addition, an expert panel was constituted by the then Deputy President.  The MNW was also informed by advice and guidance from the International Labour Organisation (ILO) which assisted with international best practice and examples from other countries.  Cosatu emphasised that the NMW is not Labour’s desired level and should not be regarded as such.  It had initially proposed a much higher NMW at Nedlac. However, the NMW of R20,00 an hour agreed to will assist in alleviating poverty and cushion the 1%VAT increase.

The Free Market Foundation (FMF) in its submissions, emphasised that instead of further amendments or legislative interventions, there should rather be a review of laws and policies impacting small business in order that it is made easier for small businesses to operate.  This could possibly lead to the creation of more employment.  In addition, FMF pointed out that South Africa has many low-skilled employers that are not in a position to administer and comply with the requirements of complex labour laws.

The National Employers Association of South Africa (Neasa) highlighted that the wage versus the turnover ratio of small business may be as high as 60%, where as in the case of big business, it may be as low as 5%.  In addition, the operational realities of a small business in a rural area is vastly different to that of big business situated in an economic hub.  It emphasised that small business does not enjoy the benefits of economies of scale[1].

The NCOP committee noted that the bills are a step in the right direction, however, enquired from Cosatu how implementation of the bills will be monitored.  In particular, how will vulnerable workers be informed of the NMW and how are they going to be protected when they raise this with their employers.  The NCOP committee was also of the view that if workers are aware of their rights and employers have buy-in into NMW, it could possibly prevent strikes.  Monitoring and implementation therefore plays a crucial.  The NCOP committee also asked about the procedure to be followed should a small business not be in a position to pay the R20, 00 per hour and whether Cosatu has a sense as to whether employers will comply.

Cosatu responded that the NMW is not a magic wand.  It has proposed a higher amount than the R20 per hour at Nedlac, however, agreed on the R20,00 per hour after consultations.  The NMW bill makes provision for an employer to apply to the NMW commission for an exemption, however, would have to submit financial statements in order to make a determination.  Cosatu added that the Department of Labour (DoL) would have to respond on the questions on monitoring, implementation and capacity.

The NCOP committee concluded public hearings and will deliberate on and finalise the bills after the recess period in August.  As the bills are tagged section 75, the NCOP committee may only recommend proposed changes to the bills.  In deliberating on the bills, Delegates will have to weigh and balance the various interest put forward to it.  Ultimately, the recommendations on the bills will be informed by how information was conveyed to the committee and how Delegates received the information.  These recommendations will be referred to the NA committee for consideration.  As the bills are tagged section 75, the NA committee is not obligated to accept recommendations from the NCOP committee.

 

Zelna Jansen

CEO, Zelna Jansen Consultancy

 

[1] Economies of scale refer to reduced costs per unit that arise from increased total output of a product. https://www.investopedia.com/terms/e/economiesofscale.asp