New minimum wage bill has gaping holes

Johannesburg - The long-awaited National Minimum Wage (NMW) Bill has major holes that could undermine the purpose of a new universal wage floor.

Gazetted last month, the bill has a different definition of “worker” than the bill that emerged from negotiations at the National Economic Development and Labour Council (Nedlac) earlier this year.

It now seems to exclude so-called independent contractors, meaning it is no longer a universal minimum wage and could exclude the most vulnerable casual workers.

The definition creates even more incentive to restructure employment relationships in order to avoid labour laws, warned Shane Godfrey, a senior researcher at the University of Cape Town’s labour and enterprise policy research group.

The bill, along with parallel amendments to other labour laws, opens the door for wage reductions in a number of sectors where wages are set by sectoral determinations.

Other key demands from the labour constituency that negotiated the bill at Nedlac are conspicuously missing.

These include medium-term targets for the wage and a guarantee that it will increase by at least the rate of inflation every year.

The NMW is meant to be instituted next year, at a rate of R20 per hour or R3 440 per month if someone works a 40-hour week.

WHO IS A WORKER?

It appears that drafters at the department of labour did a sloppy about-turn on the scope of the NMW.

“The definition of a worker has been changed since the bill left Nedlac,” Godfrey said.

The bill’s definition of “worker” now simply reads “employee as defined in section 1 of the Basic Conditions of Employment Act”.

If this really was the intention at Nedlac, it is unclear why the new legally ambiguous term “worker” is even used.

“Someone amended it this way. The act is clearly designed for the broader concept of workers. The idea was that it covers everyone.”

There had been a different definition in the Nedlac version of the bill, so it looked like an intentional change, he told City Press.

The Basic Conditions of Employment Act (BCEA) amendment bill, which accompanied the minimum wage bill, still shows remnants of the old definition.

The new BCEA states that the definition of an employee “includes a worker as defined in the NMW Act”.

However, the act defines a worker as being what the BCEA says it is, creating a bizarre circular definition of a worker, Godfrey said. This seems to prove that the bills originally contemplated a new, more expansive, definition of worker.

PULLING WAGES DOWN

Another problem is the way the NMW Bill destroys the existing system of sectoral determinations.

These determinations set wages and special conditions of employment for low-waged and unorganised sectors, including retail, farms, domestic work, hospitality and security.

Crucially, the determinations set complex wage schedules for different occupations in a number of sectors – many of which are higher than the R20 per hour as set in the NMW.

In wholesale and retail, the wage schedules span minimum hourly wages of as little as R17.11 per hour, through to store managers’ wages of R48.67 per hour.

The new bills create a transitional arrangement where all these wages rise by the same percentage as the NMW for the next three years, which will be determined by a newly created minimum wage commission. After that, there is no system for adjusting sectoral determinations anymore.

This opens the door for reducing the minimum wages in these sectors.

If there is no way to adjust them three years from now, it is almost inevitable they will stagnate until the NMW catches up with them.

“The tendency will be to pull wages down towards the NMW,” said Godfrey.

Destroying the sectoral determinations this way creates other problems, he added.

The special conditions of employment in these determinations could fall away. These include “payment-in-kind” provisions in the current farm and domestic work determinations, according to which workers can be charged up to 10% of their wages for food and accommodation.

The NMW Bill, however, contradicts these special sectoral arrangements by explicitly excluding food and accommodation from wages.

This could see labour tenants facing higher rent if the 10% cap falls away, warned Godfrey.

BARGAIN INSTEAD

According to the business constituency’s lead negotiator on the bill, the idea was that determinations would get replaced by new collective bargaining arrangements.

“The expectation is that wage regulation in these categories should fall away and only the NMW will apply,” said Business Unity SA CEO Tanya Cohen.

“During the three-year period, collective bargaining arrangements should be strengthened for such categories.”

But, according to Godfrey, it is unlikely that all these sectors will suddenly get organised.

“Forestry, taxis, domestic work ... this will never happen in these sectors,” he said.

PERMANENT UNDERCLASS

The NMW Bill diverges from what had been agreed at Nedlac regarding farm workers’ and domestic workers’ wages.

These are now set at 90% and 75% of the NMW, or R18 and R15 per hour, respectively, into perpetuity.

The original idea was to phase these sectors in up to the normal R20 per hour over a few years, but now they are seemingly meant to always be paid less, said Godfrey.

“The NMW commission could later say this is part of its brief and change it, but it is not made explicit.”

Other core labour demands about future adjustments to the NMW are also missing.

The fact that there is no medium-term target for the NMW and no guaranteed increase by, for instance, inflation, is also contrary to what labour had pushed for.

WHOLE SECTORS CAN BE EXEMPTED

The bill seems to be far more generous with exemptions from the NMW than had been agreed to at Nedlac.

The labour constituency at Nedlac had pushed for a system where all applications for exemptions from paying the NMW would be on an employer-by-employer basis.

The bill, however, says that employer organisations are allowed to apply for exemptions. This can only logically imply that whole sectors may be exempted, Godfrey said.

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