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NMW Bill heads to Parliament amid concerns

- National Minimum Wage Research Initiative

The National Minimum Wage Research Initiative at Wits raises concerns over serious shortcomings of the Bills.

The National Minimum Wage Bill 2017 (NMW Bill) – together with the Basic Conditions of Employment Amendment Bill 2017 (BCEA Bill) and Labour Relations Amendment Bill 2017 (LRA Bill) – will be before the Labour Portfolio Committee in Parliament this week. 

This is a momentous achievement. The Freedom Charter famously said: “There shall be a forty-hour working-week, a national minimum wage, paid annual leave, and sick leave for all workers, and maternity leave on full pay for all working mothers”. 

The former Deputy President, Minister of Labour, Department of Labour (DoL) officials, and all those involved in the NEDLAC Wage Inequality Technical Task Team (WITTT) should be congratulated for their roles. 

The National Minimum Wage Research Initiative (NMW-RI) at Wits University has consistently supported the implementation of a carefully-crafted national minimum wage (NMW). The NMW-RI has produced abundant local and international evidence highlighting how this policy intervention can contribute towards reducing poverty and inequality while positively benefiting the economy as a whole. 

With regret however, given serious shortcomings, the NMW-RI cannot support the passing of the Bills in their current form. NMW-RI Coordinator, Gilad Isaacs explains: 

“The National Minimum Wage Bill and associated amendments to the BCEA and LRA contain serious weaknesses that undermine their ability to provide a universal wage floor, reduce poverty and inequality, and protect the most vulnerable workers. The national minimum wage has the potential to play a role in a new wage policy for South Africa – one that moves us away from the apartheid wage structure and contributes towards a new social compact and the structural transformation of the economy. This objective is compromised by the overall package presented in the Bills. Passing the Bills in their current form would be a serious mistake.” 

The NMW-RI is also concerned about the limited timeframes Parliament has to process these Bills. Submissions will be made on the 20th and 22nd of March 2018 and Parliament is due to go into recess on the 29th of March. It is critical that the Labour Portfolio Committee has adequate time to apply its mind to the serious issues raised in the submissions before it. It is worth noting that the Bills presented to the Committee are the same as those published in November 2017 by the DoL despite the DoL receiving detailed submissions in December 2017 and January 2018 regarding the problems contained therein. 

The NMW-RI has made a detailed submission to the Parliamentary process (after an earlier submission to the DoL in December 2018). 

In the submission we note a number of significant positive features of the Bills; amongst others, these include:

  • Recognising the role the NMW can play in reducing poverty and inequality and spurring domestic demand and productivity increases in the economy;
  • Setting the NMW at an acceptable starting point (R20 per hour) that can be increased over time (provided it is accompanied by an appropriate NMW ‘package’ – see below);
  • Supporting universality with certain appropriate tiers and exemption procedures;
  • Excluding non-basic wage payments from the calculation of the NMW;
  • Establishing a dedicated body comprised of the social partners to oversee the implementation, monitoring and revision of the NMW;
  • Amendments to the BCEA that recognise the need for better enforcement. 

We do however point to a number of major shortcomings. 

In the current NMW Bill “worker” excludes “independent contractors”, those that perform task-based work, piecework, home-based work, sub-contracting and contract work. This is because “worker” is defined with reference to the definition of “employee” in the BCEA. These independent contractors – which can range from Uber drivers to shoe makers – are therefore not guaranteed the NMW. This decision, we show, bucks local and international best practice. Our recommendation: a broader definition of worker to include independent contractors must be adopted, the DoL noted in a statement that the narrower definition was made in error. 

The proposed amendments to the BCEA (repealing chapters 8 and 9) irrationally remove a tool available to government to reduce poverty and wage inequality – the ability to amend and create new sectoral determinations (SDs). SDs exist to cover sectors characterised by low levels of collective bargaining and high levels of vulnerable workers, and to implement sector-specific regulation. They set multiple minimum wage levels, many above the new NMW. There is no reason to believe the new NMW removes the conditions that make SDs necessary. We recommended the NMW Commission be given the powers and responsibilities of the current Employment Conditions Commission (ECC) in this regard. 

The NMW Bill does not guarantee that the NMW increases every year – what it does is ensure an annual review. Without guaranteeing a minimum annual increase the real value of the NMW could easily be eroded, thereby undermining its ability to contribute towards reducing poverty and inequality. Further, the role of the ‘medium-term’ target is vaguely specified. We recommend that the Bill ensure, at minimum, an annual increase in-line with inflation as faced by the poor, as well as specify that the medium-term target provides a goal – set in relation to internationally accepted benchmarks – towards which the NMW must be progressively increased over a set period of time. 

The NMW-RI has consistently argued for special protection of those in casual and part-time employment and for ensuring that wage increases due to the NMW do not spur further casualisation and that part-time workers can meet their basic monthly needs. While acknowledging the need for such protection the Bill does not go far enough. The current approach guarantees a worker must be paid for four hours irrespective of the number of hours worked, a minimum number of hours is a positive stipulation. A complimentary approach, as found within some SDs, is to institute a premium on part-time work. In retail, for example, those working less than 27 hours receive an hourly wage about 25-30% higher than those working more than 27 hours. This disincentivises casualisation. Another approach would be to put in place a minimum weekly or monthly national minimum wage in addition the hourly wage, or to increase the minimum number of hours above four. The NMW-RI is not prescriptive as to which combination of these measures should be followed but a more substantive package is needed. 

EPWP workers are effectively excluded from the NMW and an attached schedule sets their wages at R11 per hour. While in principle there is no problem with temporarily setting EPWP wages at a lower “tier”, or percentage of the NMW – as we recommended and is the case for domestic and farm workers – the EPWP rate is not tied to the NMW and could languish at R11 per hour indefinitely. Further, there is no procedure stipulated whereby the level will be gradually raised to reach the general NMW over time. In addition, R11 does not represent a meaningful increase over current levels nor does it come anywhere close to meeting these workers’ basic needs. Excluding EPWP workers also opens the door to abuse of the scheme to circumvent the NMW. We recommend EPWP workers should be included as a “tier” tied to the NMW with the objective of ensuring that they earn the NMW within a set period of time. 

Related, we are concerned that no provisions have been put in place to increase grants to NGOs and small private sector operators, such as in the early childhood development (ECD) sector, which provide vital public services, so that they can afford to pay their staff the new NMW. We recommend government urgently review all such programmes in light of increased wage demands. 

Issues regarding coverage and enforcement are also troubling. The Bills and related documents note the need to train the inspectorate regarding the NMW but seem to imply that it is otherwise well functioning. This is far from the case with serious weaknesses in: a lack of human and physical resources, the allocation of inspectors and their training, no national case management system, and so on. The transfer of responsibility for processing violations of the NMW to the CCMA is similarly full of holes with no sense of how problems within the CCMA will be addressed and new responsibilities will be resourced and managed. 

Of concern also is the system through which businesses can apply for exemptions, and the role of business associations therein, and the potential abuse of this. We recommend the DoL publishes detailed plans with regards to enforcement and exemptions and that these are made available for public comment. 

The Bills also ignore the substantial international evidence regarding the use of business incentives to encourage voluntary compliance and the need for stiff penalties. We recommend the NMW Commission be empowered to review and, together with the appropriate government departments, institute such. 

Finally, we raise a number of concerns regarding the capacity and independence of the NMW Commission secretariat and the powers of the Minister to reject the NMW Commission’s Report. 

As noted above, the NMW must be viewed as a package. Where R20 per hour is combined with universal coverage, guaranteed annual increases, a medium-term plan to increase the amount in real terms, added protection for part-time and casualised workers, stringent enforcement, and strong oversight mechanisms, it can serve as a viable starting point for this policy’s contribution towards changing the wage structure – which must of course be complemented by other policies, including a living wage campaign. However, the Bills before the Portfolio Committee fall short and fail to secure the potential gains from this landmark achievement. 

The NMW-RI hopes that careful consideration by the Portfolio Committee will address these concerns.

For more information, contact:

Dr Gilad Isaacs

Coordinator, National Minimum Wage Research Initiative

Director, CSID research programme

University of the Witwatersrand