As of 1 March 2023, South Africa’s new minimum hourly wage rate rose by 9.6% from R23.19 to R25.42 per hour. Jaundré Kruger National Manager at Consolidated Employers Organisation (CEO) joined the OFM Business Hour in studio to discuss some alternatives that business owners can explore.

Don’t disregard the hike, rather explore the exemption process 

Kruger warns struggling business owners to not disregard the hike, advising instead that they explore the exemption process that is available legally. Section 15 of the National Minimum Wage Act allows for employers who can show that they cannot afford to pay the national minimum wage to workers, to be exempt from it. The CEO National Manager says history shows that this hike is often times capped at 10% of the wage. Now, this may seem ineligible, however, when you do the mathematics and factor in a large number of employees – it can make a substantive difference.

Cut overheads 

Kruger suggests remote working or a shift to the 4-day work week in an effort to cut overhead costs – this may not be completely applicable to professionals in the corporate space – but if it is possible, business owners can explore this avenue and others.

Can the 9,6% hike be reviewed? 

Kruger says yes the hike to R25.42 from R23.19 can be reviewed. However, the more pertinent question is “will the juice be worth the squeeze?”

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The Consolidated Employers Organisation has on behalf of its clients asked for reasons for the steep hike in the national minimum wage, which they say is not only above inflation, but goes against some of the recommendations made to the National Minimum Wage Commission.

Who constitutes the National Minimum Wage Commission? 

For context’s sake, the National Minimum Wage Commission was set along with the aforementioned Act in late 2018. The Commission is made up of the Chairperson, appointed by the incumbent Labour Minister; three members of organised business; three members of organised labour; three delegates from the community; and three experts. The Commission collectively looks at fundamental macroeconomic developments in the country and take recommendations from the public in suggesting a national minimum wage hike. Their final recommendation from the Commission is sent to the Labour Minister, who will decree it and have it published in the government gazette.

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Kruger says they were shocked at the steep hike, hence their request for reasons for the decision. The industries and professions that are expected to be hardest hit are agriculture and domestic workers. He believes that ultimately its these vulnerable workers that will bear the brunt of such hikes, as employers opt to just let workers go to curb costs.

OFM