July 05, 2020

Labour department undermined ‘meaningful’ national minimum wage package

The Department of Labour “ignored the letter or spirit of decisions taken by the Labour Portfolio Committee” when it came to processing the three labour laws recently passed by the National Assembly.

Labour expert Gilad Isaacs of Wits University’s National Minimum Wage Research Initiative says the triad of labour laws currently before the National Council of Provinces (NCOP) awaiting concurrence, and which appear well on their way to becoming law, are disappointing in a number of key respects.

Isaacs says that the NCOP offers a final opportunity to amend the Bills to “ensure they offer maximum protection to workers and a strong, independent and well-resourced Commission to oversee this critical policy intervention.”

The National Minimum Wage Bill and further amendments to the Basic Conditions of Employment Act and Labour Relations Act were passed by the National Assembly on 29 May. Isaacs argues that the Department selectively presented issues raised by stakeholders to the parliamentary Committee in a way that skewed the outcomes of Committee decision-making.

The Department of Labour used the parliamentary process to “advance its own preferred outcomes”.

He also believes the Department “ignored critical concerns raised by the public and social partners, [and] thereby undermining the ability of the Committee to conduct a balanced engagement on the Bills before them”.

Although the Bills have already gone quite a distance down the legislative road, the Wits research initiative felt it was important to point out how the Department had used the parliamentary process to “advance its own preferred outcomes”.

Concerning his chief focus, which is the national minimum wage (NMW), Isaacs say that the Department “sidelined” aspects of the February 2017 Nedlac agreement in a way that effectively weakened the protections that a NMW was supposed to provide.

The proposed legislation, he says, reflects a Committee decision to permit the NMW Commission to update existing sectoral determinations (SDs) and institute new ones, but only after strong resistance by the Department that led to these reforms being watered down.

For example, the Bill does not stipulate that regular reviews of SDs must be undertaken, as was mandated for the NMW. Section 51(3) of the amended Basic Conditions of Employment Act stipulates that SD wages must increase proportionally to adjust to the NMW, indicating a preference by the Department for these not to be reviewed and altered independently.

It will also not be up to the Commission to initiate the process of creating a new SD. While, Isaacs argues that it is appropriate for the Minister to institute a new SD, the Bill also leaves it to the Minister to determine when investigation and research is needed into the creation a new SD, “thus potentially limiting the institution of new SDs.

“This undermines the Commission’s ability to co-ordinate a coherent wage policy using the NMW and SDs in tandem,” he argues, and says that the Department’s amendments “undermine” instruction from the Committee to reinstate the role of SDs.

The Wits research initiative raised these and other concerns after the publication of an amended version of the Bills. Following this a number of the concerns flagged were accommodated in the final Bills.

For example, the original amendments did not include an agreement, which came from Nedlac and the Committee, that lower minimum wages for domestic workers and farm workers should fall away after two years (subject to research indicating otherwise). This now appears in the Bill, although in a convoluted fashion according to Isaacs. Another issued flagged by Isaacs that found its way into the final Bill is that the level stipulated Expanded Public Works Programme must rise in line with the overall NMW, as implied in the Nedlac agreement.

However, other important concerns that Isaacs and his team raised are still absent from the Bill.

The NMW Bill, for instance, does not guarantee, or even promote, an annual increase even though the Nedlac agreement states, “It is specifically agreed that the adjustment should not lead to the erosion of the value of the NMW.” The Bill rather instructs the Commission to consider “retaining the value of the minimum wage” as one among many factors that should be considered.

Isaacs says the “medium-term target” could have offered Government an opportunity to compensate for the perceived low starting level NMW, but it has turned out to be nothing more than a “damp squib”. In terms of the Bill, the medium-term target must only be set within three years. It does not indicate what benchmarks must be used or by when it must be implemented. According to the Nedlac agreement the NMW Commission was to establish an “aspirational target” based on “appropriate benchmarks and International Labour Organization (ILO) guidelines.”

The research initiative argues that, “the lack of guidance given to the Commission on establishing the target may lead to the sort of paralysis that characterised the NMW negotiations…If the target is only reached 3-5 years after it is set, then, in the current formulation, it could take until 2026!”

It expresses support for the guarantee that workers must be paid for four hours of work even if they work for less. This is an international innovation, it points out, yet the Nedlac Committee of Principles agreed that the Commission must investigate the feasibility of increasing the minimum number of hours from four to five hours.

The permission granted to employer organisations to apply for exemptions on behalf of their members has been raised by the Wits’ initiative, but also by the Labour Enterprise and Policy unit at UCT and organised labour, as another matter of concern. The Department argues that changing “on behalf of their members” to “on behalf of a member” responds to concerns raised. Says Isaacs, “this is completely disingenuous, does not address the concerns raised, and was a change suggested during the deliberations by the Parliamentary Law Advisor as a narrow technical correction.

“Further, there is no framework for the exemption regulations [and] it is worth noting that exemptions from the NMW are rare internationally and already abused in South Africa.”

During the Committee deliberations the Department said it did not object to specifically excluding employee contributions from counting towards the NMW, depending on how this relates to Pension and UIF Acts and employer contributions to medical aid schemes or retirement funds, yet none of this is clarified in the amended Bill.

Isaacs also flags the independence of the NMW Commission as of major concern. He warns that despite the Department’s emphasis on the importance of the independence of the Commission and clear “international evidence overwhelmingly indicating that the most effective commissions have operational autonomy from government departments” the actual legislation “moves in the opposite direction”. Most stakeholders and the Committee itself stressed the value of independence and they warn that lack of resources has been “the Achilles heel” of the existing Employment Conditions Commission.

The Commission secretariat will be housed within the Department of Labour and, significantly, the Commission’s budget will no longer come from Parliament but rather will be allocated by the Department itself, at its own discretion. The Commission is not given any operational authority over the secretariat.

“The Commission has limited operational authority over the Secretariat despite the Parliamentary Law Advisor flagging this as concerning during the PC’s deliberations. This will potentially impact the Commission’s autonomy to undertake research, implement complex aspects of its mandate, such as setting a medium term target, and to independently manage its affairs, and is most concerning regarding its role in amending and adding SDs.”

Given that government missed its self-imposed 1 May 2018 deadline all mention of specific dates have been removed from the Bill. Isaacs notes: “All timeframes for promulgation, reviews and amendments to the [minimum wage] level have been removed and it is unclear when the NMW Commission will start operating. Some flexibility is understandable given the failure to meet the 1 May 2018 deadline but it creates a great degree of uncertainty. It is essential for predictability in this respect as changes to the NMW will also impact other wages and collective bargaining in the economy. Therefore new target dates should be transparently stipulated.”

Isaacs’ argues that the Bills have effectively weakened the original Nedlac agreement which was meant to protect the real value of the national minimum wage by ensuring yearly increases in line with inflation.

While they agree that the Bills introduce some improvements, such as increased fines for repeated offences, they say these do not compensate for the many other concerns that they raise.

They also noted that the NMW was supposed to be part of a broader process of finding multiple means to reduce wage inequality. “The national minimum wage has been promoted since 2014 as the first step in a multi-pronged strategy to reduce wage inequality, including engagement on issues such as setting wage ratios and tightening up Section 27 of the Employment Equity Act on disproportionate income differentials to ensure implementation. This has not found expression in this round of the process.”

They want a report on this process by the end of this year and have called on the President, as well as Parliament and the Executive, to move speedily towards the next round of engagements with Nedlac and other stakeholders.

Gilad Isaacs is the Coordinator of the National Minimum Wage Research Initiative, University of the Witwatersrand.


Last modified on Monday, 18 June 2018 14:14

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