The national minimum wage is to increase for 2025 by CPI+1.5% on the current R27.58 per hour from March.
Increases since it was implemented in 2019 have led to increasing non-compliance.
This is revealed in a study conducted for the National Minimum Wage Commission (Commission) by academics at the University of Cape Town to examine the short-term effects of the increase in March 2024, the largest adjustment in real terms since 2019.
The National Employers Association of South Africa (NEASA) says that the current economic climate makes it difficult for many employers to pay the minimum.
Some employers respond to the increases by increasing the amount they pay, but not to the legislated level. Others have reduced working hours.
The report notes that payment of the minimum wage, as the primary tool to improve economic welfare, is constrained by the economic environment, which limits what it can achieve.
The report noted that consistent above-inflation wage increases may not be sustainable without trade-offs.
Concerns include potential negative impact of a minimum wage on employment and the risk of increased noncompliance.
NEASA’s Gerhard Papenfus told the SABC that businesses need to compete for skilled employees by offering competitive wages, but when they cannot afford the minimum wage, they simply pay less.
COSATU condemns any disregard for the national minimum wage by employers.
Cosatu said the increase “will help protect the value of the NMW and workers’ ability to take care of their families.”
“It will inject badly needed stimulus into the economy, spurring growth, sustaining and creating badly needed jobs.”
The Department of Employment and Labour posted that payment of minimum wage cannot be waived; it takes precedence over any contract, collective agreement, or sectoral determination.
To obtain an exemption employers must consult with employees or unions, apply to the Department, and provide evidence of their financial difficulties. Exemptions of up to 10% are granted for one financial year.
Economics professor Jannie Rossouw highlights South Africa’s sluggish economic growth as a significant obstacle to compliance.
Over the past decade, economic growth has hovered around 1% per annum, while population growth has been approximately 1.5% per annum: the result is rising unemployment.
Rossouw says that needs is a 3% economic growth to get unemployment under control. Domestic worker employment has decreased with the rise in the the minimum wage.
NEASA wants the government to let the market dictate the wage and not artificially set it outside of free market powers.
COSATU is urging the Department to increase the number of inspectors and publicly identify employers who do not comply with the regulations.