Minimum wage bill – the long and winding road

The National Minimum Wage Bill was approved by the National Assembly on Tuesday, but it will only be implemented in an estimated three to four months.

This is according to Michael Bagraim, Shadow Minister of Labour, who explained that the implementation of this bill still has some way to go.

“The National Assembly of our Parliament has passed this bill, but it still has to go to the National Council of Provinces,” said Bagraim.

Process of implementing a bill

Advocate Ellynn Crozier from Crozier Consulting explained that before a bill can become a law, it must be considered by both houses of Parliament:

• The National Assembly (NA)
• The National Council of Provinces (NCOP)

“First the bill is published in the Government Gazette for public comment, and then it’s referred to the relevant committee. Here it’s debated and amended if necessary,” said Crozier.

“If the bill then passes through both the NA and the NCOP, it gets sent to the President to be signed in to law (assent). It then becomes an Act of Parliament, and a law of the land,” she explained.

So far, the National Minimum Wage (NMW) Bill, the Basic Conditions of Employment Amendment (BCEA) Bill, and the Labour Relations Amendment Bill have been passed by the NA.

“This means the next step is for the bills to be sent to the NCOP for concurrence and thereafter to the President for assent,” said Crozier.

“Initially the bill was to be implemented on 1 May 2018, but the remaining steps must first be completed which will take a bit more time,” she added.

What will these bills change?

In simple terms, Crozier explained that once the bill becomes law employers will have to pay their employees a wage that is not less than R20 per hour.

She pointed out that some five to six million employees stand to benefit from the NMW bill, and she believes it will afford them slightly more financial freedom and, therefore, increased productivity.

“Many industries have already taken the necessary steps during wage negotiations for the 2017/18 period onward, to ensure that wage increases are brought in line with the proposed minimum wage,” said Crozier.

“Employers in these industries have thus by now become compliant because their salary costs have already been adjusted to accommodate the proposed minimum wage,” she added.

Crozier explained that the NMW bill will also provide for the establishment of a National Minimum Wage Commission, which will be tasked with its annual review where it will recommend adjustments.

In addition, once the BCEA bill is implemented employees earning below the threshold of R205 433.30 per annum could refer disputes to the Commission for Conciliation, Mediation and Arbitration (CCMA).

“It will require an employer who fails to pay the correct amount to pay interest on any late payment and for a fine to be imposed on employers for the non-compliance,” said Crozier.

An online exemption tool will also be launched and made available to employers who are currently unable to comply with the NMW bill.

“Applying for exemption will entail that employers must apply in the prescribed format, following the correct procedure,” said Crozier.

Challenges posed by wage bills

Bagraim is pessimistic about the process of applying for exemption. He believes they are notoriously difficult to obtain and difficult to apply for.

“The exemption process is normally extremely onerous, and it is believed that small businesses won’t apply for the exemptions but will merely retrench their staff,” said Bagraim.

He strongly believes the bill will create all sorts of problems in the work force.

“The National Treasury tells us it will lead to about 750,000 jobs being lost – and I believe there will be a lot more,” said Bagraim.

“Many of the companies have already stopped recruiting, and many will undergo an exercise of retrenchment if they can’t afford it,” he added. 

Mari-Louise Stoltz, professional accountant at MOI Financial Services, has vast experience with rendering payroll services to numerous companies.

She points out that updating payroll records will be an administrative burden – more so for large companies with many employees who are earning below the NMW.

“However, they won’t necessarily experience a cost implication because they have dedicated payroll departments to handle this admin,” said Stoltz.

On the other hand, SME’s who outsource their payroll functions could see an additional cost because the service provider will now be tasked with updating payroll records.

“The most glaring result of the NMW bill for employers will be an increase in their annual salary bill and this would result in lower margins and profits, not to mention the additional costs resulting from retrenchments,” said Stoltz.