Fewer benefits, higher pay

2014-06-15 15:00

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New offer cuts into living out allowances, benefits to increase basic wages while substantially favouring the poorest miners

As the almost five-month-long platinum strike neared a settlement on Friday, a combination of wage equalisation and the culling of benefits in favour of higher salaries seemed to provide the crucial breakthrough.

The three major platinum companies have made a new offer that slightly improves on the annual R800 raise brokered by the new minister of mineral resources, Ngoako Ramatlhodi, before his intervention in the strike came to an end on Monday.

Now the mines are offering a flat R1?000-per-year increase in basic salaries, with minor variations between the three companies: Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin.

Details were still sketchy, but the fundamental feature of the new offer is that other elements of pay are to be sacrificed to fund higher basic salaries.

Symbolically, it seems to mark the death knell of the increasingly controversial living-out allowances that were supposed to be the solution to the hated apartheid-era hostel system for migrant mine workers.

The higher basic wage is in essence financed by freezing the living-out allowance at its current level, which will reduce its buying power significantly.

At Implats, the new offer puts the basic wage at entry level at R10?350 by 2017 (if it is applied for five years) instead of the previous “settlement offer” of R9?250.

That’s a R1?100 improvement, of which R650 comes out of increases budgeted for the living-out allowance that will no longer be implemented.

At Amplats, the living-out allowance had been budgeted to increase by more than R1?100 over the five years, providing even more latitude.

But according to an Implats statement everything except basic salaries and the living-out allowance will simply rise by inflation every year.

The earlier “settlement offer” made in April had increased medical and retirement contributions by significantly more than the inflation rate.

That means more of the noncash employment bill is being shifted into the basic wage.

More importantly, the new offer to some extent takes from those higher up the mining hierarchy in order to give to those at the bottom. Everyone earning a basic salary of less than R12?500 will get an annual increase of R1?000.

This applies to all the lower “A” and “B” job categories, which the Association of Mineworkers and Construction Union (Amcu) represents. But the basic salaries in these categories (at Lonmin) range from R5?713 to R10?538.

That means the lower-paid earners will be receiving far larger increases (in percentage terms), leading to a massive compression of the wage gaps in the industry – at least among the lower-paid workers making up the bulk of the workforce.

For workers in the higher “C” categories, the increase will be in the region of 8%, making it difficult to know if the equalisation extends further up the hierarchy.

The last hold-up seems to be over whether the deal covers three or five years.

According to Implats spokesperson Johan Theron, the deal “might look rich at the bottom, but when you factor in the reduced increase as you go higher in the organisation, the combined wage increase becomes workable”.

For the mines, an unprecedented five-year-long deal means a very long period of predictable costs and labour peace with the next round of negotiations only taking place late in 2017.

The wage deal likely to be struck now will apply retrospectively to July and October 2013 for the different companies.

That means the first and second years’ increases will be implemented almost as soon as miners get back to work – a R2?000 jump in the cash salaries they were getting when the strike started.

Beginning of the end for the living-out allowance

Living-out allowances have been a major part of the mining industry’s plan to eliminate the mining-hostel system, something they all committed to in terms of the Mining Charter of 2002.

The experiment is increasingly seen as a dismal failure, with workers choosing the allowance but living in mushrooming informal settlements around mines.

Most major mines have also made large investments in upgrading and converting old hostels into decent housing for those who prefer that over the allowance.

The allowance will remain at its current level of between R1?737 and R1?950 instead of increasing by the inflation rate like all the other allowances.

That will greatly reduce its importance as part of pay packages, especially if the deal is for five years.

In the long run, the new offer signals that the allowance is being jettisoned.

Commentators and Lonmin CEO Ben Magara have recently expressed regret over how the allowance worked out.

But Magara said the problem had been that the allowances were never tied to their intended use: the renting or buying of accommodation.

Instead, mine workers who opted out of mine housing received the allowance in cash and tended to treat it as part of their salaries.

According to Theron, the company had 18?500 of its 33?000 employees receiving living-out allowances.

That proportion had been decreasing as the company rolled out more mine housing, he added.

Although the living-out allowance could simply be put into the basic wage, that would be costly for employers because it would then be pensionable, said one expert in the mining labour field.

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