Labour Legislation passed in Fourth Parliament: National Minimum Wage: workshop

Meeting report

Labour Legislation passed in Fourth Parliament: briefing by Parliamentary Legal Advisors
Labour Relations Act amendment
Adv Anthea Gordon, Parliamentary Legal Advisor, said the Labour Relations Act of 2014 amended collective rights, picketing rules, essential services committee, minimum services, the appointment of an administrator, Commission for Conciliation, Mediation and Arbitration (CCMA) rules and the terms of employment.

The amendment of collective rights in Section 21 included a new test element which can be considered by commissioners. This means that unions can obtain additional rights for collective bargaining because the unions often found it difficult to organise strikes due to a high level of temporary employees. Section 22 was previously unclear whether a client’s premises could be seen as a workplace for the exercise of collective rights. The new amendment makes it clear that any Chapter III reference to employer’s premises will be read as including the client’s premises. This amendment also speaks to the right and interest of those affected by third parties via arbitration award. A Section 32 amendment was required for the purpose of addressing efficiency issues associated with bargaining councils. The amendment improves the efficiency of the exemption procedures associated with bargaining council; it ensures the independence of the exemption appeal board and it requires consultation with the public.

The amendment of Section 69 includes that the Commission in establishing picketing rules may make provision for picketing in a place which is outside the employer’s premises and owned by another person, as long as the other person has been afforded an opportunity to make representations to the Commission. Trade unions that arrange pickets for their members in furtherance of a strike or which is in opposition to a lock-out, may encounter problems in that the premises at which a picket is to take place, does not belong to the employer. Sections 69(12) to (13) only state that a dispute about picketing rules may be referred to the Labour Court but does not refer to any type of relief. The amendment of the section allows the Labour Court to grant certain relief, such as urgent relief, and order parties to comply with a picketing agreement, or rule or variation of picketing agreement or rule. If an applicant seeks an order directing compliance with a picketing agreement, then a 48 hour notice to the respondent must elapse before the Labour Court grants a relief. Section 69(13) sets the time requirements for the Labour Court.

The Essential Services Committee (ESC) section was amended because there is a negative perception about the functioning and administration of the Committee, which operates under the auspices of the Commission. There are also numerous problems with the system of dispute resolution in essential services. The amendments include the composition, powers and functions, appointment panels, powers and functions of appointment panels, the jurisdiction and regulations of the ESC. The amendment of section 72 requires parties to negotiate a Minimum Service Agreement (MSA) within a specified time; this allows parties to refer to the Commission if the timeline is not met. The new amendment allows the ESC panel to decide the minimum services if parties fail to conclude a collective agreement, or if the collective agreement is not ratified. If the panel acts in terms of sub-section (2), the determination of what constitutes minimum services is binding on employer and employee. In this regard, parties cannot refer a dispute to the Commission. The determination by the ESC panel as to what constitutes as a minimum service remains valid until it is revoked by the ESC, and it cannot be varied or revoked for a period of 12 months after it is made.

Dr Barbara Loots, Parliamentary Legal Advisor, said the appointment of an Administrator to administer the affairs of a trade union in the amended Section 103A allows for the Labour Court to appoint an Administrator as the first step. A person such as a Commissioner may be appointed to administer the affairs of a trade union. The amendment also allows an administrator to be appointed on the basis that a trade union materially fails to perform its function due to financial mismanagement. In addition, the fees which will be paid to the administrator will be decided by the Registrar of the Labour Court. The Court may terminate the appointment of an Administrator if they are no longer needed. The amendment of Section 115 of the CCMA rules are to empower the Commission and clarify rules regulating the rights of parties to be represented. The amendment allows the Commission to make rules to regulate consequences of failure of one of the parties to attend a conciliation/arbitration. The CCMA is also allowed to make administrative arrangements for low-income range employees who cannot afford to send in their documents for proceedings.

Adv Gordon said there had been a need to streamline mechanisms for enforcing arbitration awards. The Section 143 amendment states that if an employee is taken back at work due to an arbitration award, that employee can claim payment that is due to them from their employer. Section 144 allows for the variation of arbitration awards, and some of these may exceed the discretion of the Commission. People use appeals to delay processes and the Section 145 amendment allows for the prevention of delays by applicants, reduces the number of frivolous applications and it expedites the finalisation of applications. In addition, it clarifies that if an applicant is unhappy with an arbitration award they are given six months to raise their concerns and apply for a review.

One area which had been a concern for some time is Section 184. The ambit of dismissals has evolved over time. The amendment is designed to being the section in line with case law or to strengthen certain positions. If an employee has been unfairly dismissed they can file a complaint with the CCMA regardless of whether they signed a contract or not. Amendments made to 184(1)(a),(b) and (f) include:
- (1)(a) an employer has terminated employment with or without notice (the word ‘contract’ is deleted)
- (1)(b) the legitimate expectation of renewal of contract has been extended to include legitimate expectation to be retained in employment indefinitely (permanent employment).
- (1)(e) and (f) the word ‘contract’ is deleted.

Dr Loots said some amendments were made for clarification purposes, and that was the case for lock-outs. Court cases interpreted contrary to legislative intent and the purpose of the Act. The amendment of Section 187 included the removal of ‘anomaly’ in sub-section (1)(c) to protect the integrity of the process of collective bargaining. The courts started interpreting lock-outs in a way that mutual interest roles were played.

Adv Gordon said when employees are in the process of being retrenched, consultation should take place. In the past, consultation was used as means to dismiss the other parties’ requirements. Hence a Section 189A amendment has brought in a ‘consultation by agreement’ which allows both parties to prolong the consultation periods.

One of the other contentious issues in the Labour Relations Act (LRA) was labour broking. The amendment of the labour broking, in terms of the LRA, only applies to people who earn below the income threshold in terms of the Basic Conditions of Employment Act (BCEA). If one earns R600 000 per annum or more, the amendment of the labour broking section will not apply to them. Section 198 deals with three parties; the agency, the employer (client) and the employee. The amendment provides a category called Temporary Employment Services (TES) and an employee cannot be employed by TES in contravention of labour law. In any proceedings brought by an employee, the labour court may determine whether the employee is employed in contravention of a labour law. No person can operate as a TES unless registered as a TES in terms of legislation. The new section limits the scope of temporary service to a period not longer than three months or substituting for an employee who is absent. The new sub-sections (3) and (4) say if a person performs a TES for a client in terms of the Section 198A 1) that person is the employee of the TES. If an employee is not performing a TES in terms of section 198A(1) then that person is an employee of the Client. Persons who become employees of a Client cannot be treated less favourably than the Client’s other employee that perform the same type of work. The new sub-section (6) allows for the Minister to call for submissions from the public when deeming categories of work in TES. And the new sub-section (7) and (8) says the National Economic Development and Labour Council (NEDLAC) must be consulted by the Minister when publishing a notice in respect of a sectoral determination.

Fixed Term Employment refers only to employees earning below the threshold. The amendment was to eliminate the abuse of keeping employees on fixed term contracts over lengthy periods for no justifiable reason. The new amendment of Section 198B sets the scope of when a fixed term contract terminates. Section 198B(3) and (4)(a)(i) set out various scenarios such as the nature of work, replacing someone temporary, the volume of work and student graduates being trained. If an employee renews a fixed term contract in contravention of sub-section (3), the employment will be considered to be for an indefinite term. Sub-section (7) and (8) state that if there is a dispute about a fixed term contract; the employer must prove that a justifiable reason exists for a fixed term contract. An employee who is employed longer than 3 months must not be treated less favourably than an employee who is permanent doing the same or similar work. Sub-section (9) states that when the Amendment Act enters into force, an employee must give fixed term contract employees equal opportunity to apply for vacancies. Sub-section (10) say when fixed term contracts are used for periods longer than 24 months, at the end of the contract the employee must be paid one week’s remuneration for each completed year of the contract.

Part-Time Employment for employees earning below the threshold should be remunerated according to the “time” worked and cannot be treated less favourably than the full time employees. They should also be given access to training and skills development as would the full time employees. This amendment seeks to regulate part-time employment of vulnerable workers. Employees who are placed into these part-time positions are students who work on the weekends in retail sectors. However, it was found that there were older people who are income breadwinners in this category who are missing out on medical aid and pension.

Dr Loots concluded that the Code of Good Practice amendment empowers the Minister to issue Codes through a publication in the Gazette only if the Codes have been tabled and considered by NEDLAC.

Basic Conditions of Employment Act(BCEA) amendment
Adv Gordon said the definitions were amended and one of the important amendments was the definition of “service”. The other main theme is that when we are dealing with children, the BCEA aligns with Section 28 of the Constitution, which prohibits a child from entering into employment that prohibits work and services of children that are inappropriate for a child and places a risk on the child’s well-being. The term “child” refers to anyone under the age of 18 and the Act prohibits a child from receiving remuneration for a service at the instruction of an employer. There was much deliberation in the Fourth Parliament about what the meaning of “work” is, and what was meant when we say that “a child may not work”. The Committee has not yet clarified the definition of work and that is one of the reasons why the word “work” was not assigned in the amendment.

When employees seek work, employers often ask them to buy their products before they become employed, or even ‘buy’ employment. Section 33 prohibits employers from selling his/her product to employees seeking employment. Section 54 amended the sectoral determination which deals with the minimum wage increase. On the matter of labour inspectors, before the Department of Labour can lodge a complaint with the court about an employer, it must meet with employer so that they can come to an agreement.

Employment Equity Act amendment
Adv Gordon said the amendment of “designated groups” was to focus on people who were affected by the apartheid era; the Broad Based Economic Empowerment Act definition of “designated groups” has also thus changed. The amendment now includes citizens or persons who could not get citizenship because of the apartheid laws. Section 8 on psychometric testing was amended so that such testing may be used only if it has been certified by the Health Professions Council of South Africa or another body in terms of the law. There was a need to standardise the test used by the employers.

Dr Loots said the amendment of Section 6 was aimed at giving expression to the prohibition of unfair discrimination contained in Section 9 of the Constitution. The new section intends to clarify that there may be other grounds of discrimination and it aligns itself with Section 187 of the LRA which prohibits discriminatory dismissal. The new section 6(4) provides the employer will have to show that a difference in wages/conditions of employment exists for the same or similar work. Section 11 provides clarity as to which party must persuade the court in the case of discrimination disputes. Currently, all disputes about sexual harassment and unfair discrimination must be dealt with by the Labour Court, unless the parties agree to arbitration. She pointed out that not everyone can access the labour court due to the fees, causing vulnerable worker’s rights to be disregarded. The amendment is that all sexual harassment cases can now be arbitrated by the CCMA, all employees who earn below the threshold can have any unfair discrimination dispute heard before the CCMA and a party can appeal against the CCMA arbitration in respect of sexual harassment or other disputes.

Section 48 on arbitration deals with the fact that unfair discrimination and sexual harassment cases may now be arbitrated by the CCMA. The scope of the awards made by a commissioner must be clarified. The Commissioner may now award the same as the labour court in terms of Section 50(2)(a)-(c). The Commissioner may award payment of compensation, payment of damages and the employer must take steps to prevent the same unfair discrimination from occurring in the future.

The Act requires that designated employers prepare employment equity plans for 1 to 5 year periods. The Act did not provide for recourse against an employer who failed to prepare an employment equity plan. The amendment allows the Director-General to apply to the Labour Court to impose a fine on an employer who fails to prepare an equity plan. The possible fines are set out in Schedule 1 of the Act.

Technical amendments addressing reporting were made in Section 21. These were aimed at making it easier for employees to comply with the Act. A labour inspector was previously obliged to request a written undertaking from an employer for compliance with employment equity matter. The amendment makes it discretionary for a labour inspector to request a written undertaking. If the employer does not comply with the written undertaking within the time frame set in the undertaking, the Director-General can approach the Labour Court. Compliance orders issued by labour inspectors could be “objected to” by employers. This caused delays in compliance matters. With the amendment, an employer must comply with a compliance order within the time frame set in the compliance order. An employer must take reasonable steps to appoint and promote suitably qualified people from the designated groups. The Minister may make regulations that must be taken into account by a person who assesses whether a designated employer is implementing an equity plan.

When the Director-General (DG) reviews an employer’s Employment Equity Plan compliance with the Act, the DG may make a request or recommendation to the employer. If the employer does not comply with the request, the DG may refer the matter to the Labour Court. The amendment introduces that if the employer fails to comply with the request or recommendation, the DG may apply to Labour Court for a compliance order. The DG must institute proceedings within 90 days (request) and 180 days (recommendation). If the DG does not institute proceedings within the days allowed, the matter lapses.

Employment Service Act
Adv Gordon said the Act aims to promote employment, improve access to labour market and improve the re-employment of employees. It helps to facilitate access to education and training for work seekers, the employment of foreign nationals with due regard to the rights of the South African citizens and permanent residents and this is achieved by providing comprehensive and integrated free public employment services. The DG must ensure that the department has suitable personal and financial resources to perform their functions and the department must also maintain labour centres for public access to public employment services.

Public Employment Services (PES) dealt with in Section 5 provides for the functions of the PES which must be provided free of charge, such as matching work seekers with available work opportunities and advising workers on access to social security benefits. Section 6 grants the Minister the powers to establish schemes to promote employment of youth and other unemployed persons to provide opportunities for self-employment. Section 7 grants the Minister the powers to establish a scheme to minimise retrenchment impacts. Section 11 allows for an employment information system to be developed and regulated by the department.


The sections dealing with Private Employment Agencies allows for the registration criteria to be set. Section 14 deals with prohibited acts in respect of private employment agencies. Section 15 helps protect employees, dealing with placement fees and CCMA jurisdiction. Sections 16 and 17 deal with the retention of information and confidentiality, while sections 18 and 19 deal with the cancellation of registration and the review of appeals.

Section 20 establishes the Employment Services Board. Section 21 deals with the composition of the Board and the fair and competitive selection process. Sections 24 to 26 deal with the dissolution of the Board. The Board must adopt a constitution which will allow for regulating corporate governance and the appointment of a Chief Executive Officer (CEO). The CEO will be responsible for day-to-day operations. The Board must compose of seven members who are appointed by the Minister; it must have a chairperson, two labour members from NEDLAC, two business members from NEDLAC and two government representatives. The Board must report to the Minister annually who must table this report in Parliament within 14 days.

The transitional provisions allow for registrations in terms of the Skills Development Act to be deemed to be registered in terms of section 13 of the Act. It allows for Productivity South Africa as initially established in terms of the Skills Development Act to remain in force until repealed by this Act. And all actions by Productivity South Africa under the Skills Development Act to be deemed as done in terms of this Act.

Discussion
Ms F Loliwe (ANC) asked what the legal definition of “consultation” is. In addition, she said that the education sector uses fixed term contracts and most teachers are employed on a contractual basis while their teaching posts are being advertised. She asked what legal procedures teachers can take when they are faced with this challenge.

Mr P Moteka (EFF) asked what legal procedures can one take when one's three month contract is suddenly terminated after three weeks.

Ms S van Schalkwyk (ANC) asked if there is a regulatory body which regulates the use of children by advertising agencies.

Dr Loots replied saying “consultation” refers to when a group, or parties, gather together and make decisions together. The parties give each other opportunities to give their opinions. Legal drafting distinguishes between "after consultation with" and "in consultation with". The former  allows parties to consult with one another but they do not have to take the other's suggestions into consideration. The latter means that both the parties involved have to make a decision together and be at the same level of jurisdiction such as national or local.

Adv Gordon replied saying the Department of Education has its own legal rules. She said that the Committee should be mindful that there are some categories where temporary employment services can be used. There may be a sectoral determination in place where there are rules governing the use of temporary employment services within the Department of Education. If the department does have their sectoral governing rules in place, then the amendment would not be applicable to the Department of Education providing that the employee is earning below the income threshold. She added that there is no legal provision for regulating the advertising agencies; however Section 50 of the BCEA says the Minister can make an amendment regarding children who are employed by advertising agencies.

Mr M Bagraim (DA) said the law has not been clear about the amendment on how employees who do the same work should be paid the same amount. There is no provision which clearly states where the implementation of the law can take place; does the CCMA also implement this amendment? He asked when the Employment Services Act will be implemented. With regards to sexual harassment cases, does an employee have the advantage of choosing to go the Labour Court or the CCMA?

Adv Gordon replied that the amendment was to give employees who cannot afford Labour Court fees an opportunity to have their cases heard by the CCMA. The idea is not to give sexual harassment cases exclusively to the CCMA but to rather give employees options of choosing where they would like their cases to be lodged.

Dr Loots said the implementation of the Employment Services Act is in the process of setting up oversight structures. The Minister and Department have certain obligations and are in power positions; the Committee is well within its power to request an update from the Minister and Department regarding the implementation of the Act. Employees who are being unfairly treated and not paid the same as other employees that are doing the same work can report the case to the CCMA. The complaint will be dealt the same way as any other case and the CCMA will investigate the complaint.

Mr I Ollis (DA) asked if there is any legislation that deals with the prohibition of breastfeeding in the workplace.

Adv Gordon replied that such a case would depend on the time at which the breastfeeding took place. Did it take place during lunch time or during working hours?

The Chairperson said the breastfeeding matter would depend on a number of aspects such as health hazards and the type of work that the person is doing.

Ms Loliwe suggested that research should be done to establish what the proper legal implications are when it comes to breastfeeding in the workplace, as it will help the Committee deal with such challenges when they are faced with the same issue.

National Minimum Wage workshop by Parliament Research Unit
Mr Ekhsaan Jawoodeen, Parliamentary Senior Researcher, said under the ambit of National Economic Development and Labour Council (NEDLAC), Deputy President Cyril Ramaphosa has been tasked to convene a social partner dialogue on wage inequality and labour relations. The NEDLAC engagement would specifically focus on the possibility of introducing a national minimum wage in order to reduce income inequality. Key components of the NEDLAC engagement process has included: convening of the NEDLAC Labour Relations Indaba, signing of the NEDLAC Ekurhuleni Declaration, establishment of the Committee of Principals, convening of the technical task teams, wage inequality technical task team, Labour Relations Technical Task Team and engagement by the technical task teams.

The importance of minimum wages as an instrument of social protection was highlighted in the International Labour Organisation (ILO) Constitution, adopted in 1919. The international community‘s recognition of the important social role of a minimum wage was reiterated in the ILO Declaration of Philadelphia in 1944, the ILO Declaration on Social Justice for a Fair Globalization in 2008, and the Global Jobs Pact adopted at the ILO in June 2009. The ILO defines minimum wage as: “the minimum sum payable to a worker for work performed or services rendered, within a given period, whether calculated on the basis of time or output, which may not be reduced either by individual or collective agreement, which is guaranteed by law and which may be fixed in such a way as to cover the minimum needs of the worker and his or her family, in the light of national economic and social conditions. ”

While minimum wages are nearly universal, there remain large differences across countries in their design, coverage, levels and implementation. These differences reflect national preferences. The rationale for the implementation of a national minimum wage varies across countries and include the following reasons: protecting the most vulnerable, creating a safety net, fair competition and ensuring fair wages across the economy. A minimum wage can be set according to general coverage, region, economic sector and occupational category. A minimum wage can also be set according to a category of worker including young workers, apprentices, gender, disabled and vulnerable workers. Minimum wages can be set on either an:
- Hourly, daily, weekly or monthly wage
- Average wage
- 40%-50% of Average Wage
- Median wage
- Cost of living/ Needs based approach.

Central to the implementation of a national minimum wage is the enforcement mechanisms introduced and advantages of a phased-in approach. The poverty alleviation objective of the national minimum wage is based on the idea that market wages would not necessarily be at a level that was socially acceptable to society, so the minimum wage would ensure enough income for all citizens to maintain a minimum standard of living, regardless of occupation. In 1968 the ILO defined a living wage as the “amount necessary to meet the reasonable needs (or basic needs) of an unskilled labourer with a family of average size”. In 1977 the ILO defined basic needs as including certain minimum elements for a family for private consumption, including adequate food, shelter and clothing as well household equipment and furniture. This also implies that essential services are provided such as safe water and sanitation, public healthcare, education and public transport. Among the indicators that might be used to establish a minimum wage rate are ones that minimise the loss of jobs while preserving international competitiveness. Among these are general economic conditions as measured by gross domestic product, inflation, labour supply and demand, productivity growth, labour costs and business operating costs.

The implementation of a minimum wage can have an impact on employment, distribution of wages, household income, skills of workers through training, prices and profits. In terms of wage policy, most countries around the world have adopted wage-setting policies, typically through the legislative process, by establishing laws or by giving legal force to the terms of collective agreements negotiated among employers, trade unions, and employees. Such laws or rules for wage bargaining between employers and workers are aimed at decreasing the likelihood of exploitation and reducing the number of working poor. The levels of unemployment in South Africa over the past twenty years have not dipped below 20%. The unemployment data indicate gender differences with men enjoying advantage over women. Youth unemployment is a key driver of high unemployment with youth unemployment peaking at 42% in 2010. Periods of unemployment for individuals exceeding three years making re-entry into the labour market difficult. Many South African households have no access to a wage income and widespread distribution inequality exists between households that do have access to wage incomes.

Ms Sindisiwe Mkhize, Parliamentary Researcher, said there is a need for a coherent wage policy to undo apartheid’s wage structure and locate a national minimum wage within an overall wage framework. The national minimum wage should not be seen in isolation from a comprehensive social protection network and economic strategies. These approached should complement each other. Unlike many other countries, the minimum wage in South Africa is different for each sector. There is thus currently no single national minimum wage. Even within a particular sector the mandated wage can vary by occupation type, number of hours worked, or geographic location, and this is specified in a ‘Sectoral Determination’, which includes regulations on working hours, overtime pay, and written contracts, among other employment stipulations.

The Constitution, the Labour Relations Act (LRA), the Basic Conditions of Employment Act (BCEA) and the Extension of Security of Tenure Act (ESTA) all strengthened the laws governing worker rights, that had historically been provisioned in colonial and apartheid labour legislation such as the Master and Servants Act (1856) and the Industrial Conciliation Act (1924), or in specific cases by wage boards and bargaining councils. Since 1999 a detailed minimum wage schedule has been developed – currently covering eleven sectors of the economy – and labour market institutions have been created to enforce the new laws. This minimum wage policy has been pursued with the explicit aim of ensuring that workers in low-paid, vulnerable occupations are guaranteed a basic subsistence income and protected from exploitation. Notably though, enforcement of these laws in South Africa remains relatively low.

The tripartite Employment Conditions Commission (ECC) advises the Minister of Labour on various matters, including the determination of the minimum wage in the sectors concerned. The Commission’s advice takes into consideration the information gathered through research into the conditions of employment in the sector and area which will be affected by the sectoral determination. At present, the ECC and Minister of Labour has set wages in eleven sectors, including: Farm worker; Wholesale and Retail; Domestic Worker; Forestry; Taxi; Private Security; Civil Engineering.

The other pillar of wage regulation includes collective bargaining, which is at the heart of the South Africa’s industrial relations system. This system has the ability to set wages and conditions that balance employees’ needs with those of employers, which in turn balance the imperatives of equity and economic development. Tables 1 and 2 of the discussion document are perfect examples of how collective bargaining reduces the share of low-wage workers to a much greater extent than do minimum wages. In general, pay scales negotiated by collective bargaining extend into the intermediate or even higher pay brackets. Conversely, the system has been criticised for favouring large employers, institutionalising the power of trade unions and resulting in greater incidence of fixed wages across sectors. Collective bargaining is sometimes blamed for not adequately recognising differences across enterprises and stifling labour management relationships at the enterprise level. Some research also suggests that centralised bargaining restrains wage levels in certain sectors – with financially stronger employers only required to pay the modest wage increases that can be afforded by smaller or weaker enterprises.

In South Africa the central pillar of collective bargaining has historically been provided by the industrial and (more recently) bargaining council system. Statutory councils, an innovation of the LRA, appear to have more limited appeal. Outside the statutory system, however, bargaining takes place at enterprise and plant levels, as well as in non-statutory centralised bargaining forums. In Europe, there are three types of minimum wages: (1) Statutory minimum wages - this refers to a minimum wage level which is either determined by legislation or pursuant to legislation; (2) Collectively agreed minimum wages is another form of minimum wage is set by collective agreements. As a rule, the collectively agreed minimum wage will be higher than its statutory counterpart. However, collectively agreed minimum wages apply only to the parties to the collective agreement – the trade union and the employers’ association and are mandatory only for the parties’ members; (3) Extended minimum wages - many European countries have mechanisms for expanding the coverage area for collective agreements. As a rule, this takes the form of extension of collective agreements, whereby wage rates and other collectively bargained provisions are given expanded effect.

In countries with sectoral minimum wage regimes, by contrast – with the exception of the special case of Cyprus, where there are statutory minimum wages for certain occupational groups – minimum wages are laid down solely in collective agreements. The scope of sectoral minimum wages thus depends on the robustness of the collective bargaining system and collective bargaining coverage in the relevant country. In some of the countries with sectoral minimum wage regimes, collective agreement coverage is much lower. This includes, in particular, Germany, where coverage is around 58%, as well as Cyprus and – outside the EU – Switzerland, each with 52%. In these countries a relatively large number of employees not subject to collective agreements have no minimum wage protection whatsoever. Against this background it is no surprise that in these countries the trade unions favour a switch to a general statutory minimum wage. Among the countries with universal minimum wage regimes there are both states with low coverage and states with high coverage.

The unionisation rate and collective bargaining coverage have been declining in Germany, accompanied by a strong increase in the number of low-wage workers. Measured in terms of having an income of less than two-thirds of the median wage, the number of low-wage workers increased from 5. 9 million to 8. 4 million in the period from 1995 to 2012, which means that Germany is among the European countries that have the highest number of low-paid workers. Sectoral agreements from the mid-1990s increasingly included ’hardship clauses’ whereby companies got the possibility to undermine sectoral standards in exchange for the safeguarding of jobs. At first, such deviations were only possible under relatively strict conditions. However, over time the criteria for opening clauses were no longer restricted to the danger of bankruptcy but were widened to embrace all kind of situations and motivations including even the improvement of competitiveness.

Mr Jawoodeen said most of the ECC sectoral determinations cover non-tradable sectors, i.e. sectors such as private security, domestic work, retail and restaurants, which do not face competition from imports. This reduces the likelihood that modest wage increases would result in major employment losses. With regard to the tradable sectors, notably agriculture, the evidence points to a different conclusion. South African farmers, whether they produce grapes for wine or lambs for slaughter or sheep for wool, compete with farmers elsewhere in the world for foreign and local markets. Data suggests that the original sectoral determination in agriculture raised wages modestly and improved compliance with non-wage regulations but it also resulted in a significant reduction in total employment and/or hours worked. The clothing sector is a tradable sector and is subject to constraints similar to those in agriculture. In the clothing sector, the minimum wage was set through the extension mechanism provided by the LRA. However, SACTWU itself recognized that higher wages could lead to job destruction and has moderated its wage demands in order to protect its members’ jobs. Nevertheless, it is apparent that the level at which this minimum wage was set has led to significant job destruction in parts of the clothing industry, notably in non-urban areas.

The Portfolio Committee on Labour has been consulting with stakeholders on the possibility of introducing a national minimum wage in order to bring down levels of inequality in the country. The Committee conducted oversight visits across the country to engage with stakeholders at a local level from November 2014 to April 2015. Participants included domestic workers, cleaners, farm workers, security guards, community work project workers, public service workers, mineworkers and the unemployed. In addition to a national minimum wage, others themes that emerged during the oversight visits included temporary employment services (labour broking), unemployment, skills development, salary disparities, gender discrimination at workplaces, low wages and its attendant problems. The Committee also conducted public hearings with stakeholders. Twelve organisations representing academic institutions and employer organisations engaged with the Committee during the public hearings in August / September 2014. These included: University of Western Cape (Social Law Project); Agri-SA, University of Cape Town – Development Policy Research Unit, Progressive Professional Forum, Chamber of Mines, South African Taxi Council, PLAAS, Prof Neil Rankin, Black Management Forum, Business Unity South Africa, National Employers Association of South Africa.

Ms Mkhize noted that statutory minimum wages have proven to be a suitable instrument in combating wage discrimination against women and other disadvantaged groups in society, as these occupational groups are usually clearly over-represented at the bottom end of the wage scale. It contributes to the reduction of poverty, however, the impact of this attribute is limited to, firstly, only the working poor and secondly, not all employees earning the minimum wage live in households affected by poverty. Research shows that, raising the minimum wage reduces poverty in most developing countries. But the impact is modest because the legal minimum wage applies to only a minority of poor workers; in particular, it does not cover workers in the large informal sector.

The effects of higher minimum wages vary between sectors according to factors such as their exposure to international competition, the possibilities for mechanisation, and the incomes of employers or customers. In other words, there is more scope for higher minimum wages in some sectors than in others. This suggests that the minimum wage should vary between sectors. Such sectoral minimum wages can be combined with a national minimum wage. The challenge is to determine at what level government sets the national minimum wage. Higher minimum wages might then be set in other sectors if the expected negative employment effects in these sectors are assessed to be modest.

Elements of parliamentary oversight over a minimum wage system should include: simplicity of the system that reduces the monitoring burden, provincial and regional labour market patterns should be considered, exemptions and reductions should be minimal to avoid negative incentives for firms and workers, the impact of migrant and illegal labour on the system, adjustments to the minimum wage level. It is best to have a clear formula that avoids excessive rigidity in the process and is easy for all stakeholders to understand and apply, effective enforcement that includes a resourced inspectorate that can audit employers, impose penalties and allow for an appeals process and consider the role of trade unions and grass roots non-profit organisations that can monitor and report non-compliance.

Some issue to consider are that at currently bargaining councils cover only about 2.4 million workers, and sectoral determinations about 3.5 million, accounting for 5.9 million of the approximately 10.2 million formal sector workers. Thus about 4.3 million workers are not covered. The biggest advantage of setting a NMW is the ease of enforcement covering all workers regardless of whether they are covered in some form of collective bargaining agreement or sectoral determination. The challenge is to set minimum wages in a balanced way that takes into account a host of factors, including: the needs of workers and their families; the general level of wages in the country; the cost of living; social security benefits; the relative living standards of different social groups; and economic factors such as levels of productivity and possible adverse effects on employment if the minimum wage is set too high. In these situations, there is the risk that employers and workers will not be familiar with the relevant minimum wage, and will therefore not apply it. Moreover, in these situations, the minimum wage is less likely to become a reference wage for wage setting in informal arrangements. If a minimum wage is set very low, then compliance is assured, but the minimum wage does not achieve its goal of protecting workers against unduly low wages. In countries where there is relatively high compliance to minimum wages, research shows that there were supportive policies, particularly with regard to labour inspection, which were instrumental in fostering compliance, for example, Costa Rica.

Discussion
Mr Ollis said the presenters stated that a minimum wage led to an increase in jobs. Through his own research, he has not found any examples that suggested that this was the case. The only example which he could find, which was later found to be faulty research, was in the United States where a hamburger restaurant claimed that a minimum wage had increased the number of their employees. He asked for a list of examples where a minimum wage led to more jobs.

Mr Moteka commented that the introduction of a minimum wage is not a new trend; other countries in the world have been implementing the system. From the countries which have already implemented this strategy, their unemployment rate is not as bad as South Africa’s. Therefore, that gives an indication that implementing the minimum wage system would not be a bad idea. The idea that the minimum wage system will lead to job loss is a selfish notion of capitalists.

Ms Loliwe asked why the Research Unit has provided the Committee with the negatives and positives regarding the system, as well as detailed comparisons with other countries when the Committee’s responsibility is to look for ways in which the minimum wage system can be implemented.

Mr D America (DA) said that the Research Unit should have included data which weighed up the negatives and positives. He asked if the state of the South African economy allows for the implementation of a minimum wage. The creation of jobs would alleviate poverty.

Mr Jawoodeen replied that some of their research came from the United Kingdom; it was sourced from different organisations such as from non-profit organisations and official research papers which were done in the UK. It should also be taken into account that the research was conducted at the level at which the UK had set the minimum wage. The minimum wage system is a very contentious issue; hence they saw the need to provide comparisons to illustrate the complexity of the issue. There is no one-way agreement to the system. Global factors need to be considered when determining the minimum wage; all sides of the debate need to be considered. People today still talk about the legacy of apartheid, which goes to show that the issues which stem from the past are also important factors.

The Chairperson said that the Committee will have ample time to further debate on the topic at the second presentation on this subject by the Research Unit.

Adoption of Minutes
Mr Bagraim proposed for the adoption of the minutes. Ms Loliwe seconded the motion for adoption.

The meeting was adjourned.