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Minimum wages

Content provided by Sanlam. See Financial Solutions for Business Owners, for tailormade financial advice.


TimeisMoney.jpgThe Basic Conditions of Employment Act (BCEA) provides for a floor of service conditions, such as hours of work, leave, notice period, etc. The purpose is to ensure that employees are not exploited and that they do not have to negotiate for these basic conditions of service. However, the BCEA is silent on wages. Does it mean employers can pay their workers anything they like? Is there a standard?

In South Africa wages are generally left to employers and employees to determine for themselves. Where there are recognised trade unions, wages may be set through collective bargaining. Where there are no trade unions, employers may set wages according to the prevailing market trends.

However, the BCEA allows the Minister of Labour to set minimum wages for sectors or areas of the economy that are considered vulnerable. The Minister is advised in this regard by a body called the Employment Conditions Commission, which is established in terms of the BCEA. Vulnerable sectors or areas are those with no unions or very little union activity and where wages tend also to fall on the low end.

Minimum wages are set as part of the overall conditions of service in the identified sectors or areas. These conditions are published in subordinate legislation called sectoral determinations. There is no closed list of these so-called vulnerable sectors or areas.

At present, there are sectoral determinations in sectors such as agriculture, domestic work, contract cleaning, taxis, wholesale and retail, hospitality, private security, etc. Businesses that operate in areas covered by these sectoral determinations are bound by the conditions they prescribe, including minimum wages. Of course, the prescribed wages, like the other conditions, are only the floor, and employers and employees are allowed and encouraged to better them through collective or individual agreements.

While some countries (e.g. the UK) have a national minimum wage, South Africa only prescribes minimum wages per sector or area. If a sector or area is not considered vulnerable, there are no minimum wages, regardless of the fact that some employees in that sector or area may be paid very low wages. 

The Minister has the power to review and increase minimum wages at regular intervals. This happens annually and is often linked to the consumer price index (CPI). However, this only applies to minimum wages and not actual wages. Parties are still at liberty to negotiate for better increases, using the minimum as a floor.

If any employer is in doubt whether or not it is covered by a sectoral determination, such employer should contact the Department of Labour. Failure to comply with the minimum conditions of service is frowned upon.

The Department generally conducts inspections to monitor and enforce the sectoral determinations. Employers who fail to comply may face problems, including fines and/or negative publicity.

Lessons

  • SA does not have a national minimum wage, but certain sectors or areas are covered by sectoral determinations.
  • The Department of Labour monitors and enforces compliance with sectoral determinations. 

Information provided by Sanlam Labour Relations

Copyright © Sanlam, 2014

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