Minimum Wage Bill — exemptions and fraud

2019-03-06 06:02

ON January 1, the National Minimum Wage Act came into effect which saw workers; excluding farm workers, domestic workers and workers employed on an expanded public works programme; earn R20 per hour for every ordinary hour worked.

The Department of Labour issued exemptions to the act and reported that they received 26 applications for the exemption. It was noted that by the end of January, one employer had been arrested by the South African Police Services for fraud for claiming that it could pay workers R16 an hour.

Speaking on this, Executive Committee member of the South African Payroll Association, Jetro Malapane, said: “The Department of Labour said that it planned to open a case against an employer that misrepresented his company to obtain an exemption from paying the National Minimal Wage. This is a clear and harsh message to companies who want to underpay workers by misrepresenting the profitability and assets of their business.”

Appalled by this news, concerned citizen Luxmi Reddy­ said: “No business owner should be exempt from paying a minimum wage. He, at the end of the day, wants his profit margin to increase. This should not ever be at the price of his employee being paid below the bread line. Wage is an important part of a business budget and it should be kept in mind that a worker who is happy and secure will be loyal. If the owner undercuts his employee, that employee will be capable of doing him down at the first opportunity presented.”

Minimum Wages rules and exemptions

The National Minimum Wage Act No 9 of 2018 established a new minimum wage of R20 per hour for every ordinary hour worked, excluding farm workers, domestic workers and workers employed on an expanded public works program. If an employer cannot afford to pay the National Minimum Wage, it can apply for an exemption under Section 15 of the National Wage Act. The requirements to apply for an exemption haven’t been finalised, but it is anticipated that employers will have to submit audited financial statements, written submissions of employees’ reaction to the exemption application, and particulars such as the employer’s SARS number and UIF number, among other details.

“There was only a short time between the signing of the Act and its commencement date, which sent many employers into a tailspin. The Department of Labour is going to make sure that a company that cannot pay minimum wage is truly not in a financial position to pay the minimum wage. It will also make sure the employer’s particulars and the way they treat employees are above board before they consider granting an exemption,” says Malapane.

What payroll professionals need to know

While the exemption procedure hasn’t been established, Section 16 of the Act will be dedicated to the Minister of Labour’s regulations on the information an employer must provide for an exemption, the procedure that needs to be followed, the manner of consultation with employees, and the period within which an application for the exemption should be made. If an employer receives an exemption from minimum wage, it may not exceed a period of one year.

According to SEESA, the Department of Labour is in the process of creating an online National Minimum Wage Exemption System that employers can use to apply for an exemption, but the launch of the system is yet to be established.

“Payroll professionals should ensure that their clients and employers are aware of the Minimum Wage Act and that employees are being paid accordingly. The Department of Labour’s spokesperson has stated that the Department is intent on naming and shaming employers who are engaging in fraudulent activities by paying below the minimum wage. Claiming that your business has exemption to the minimum wage when it doesn’t is fraud,” concluded Malapane.

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