Minister on National Minimum Wage; Department inspections: feedback

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Labour

01 March 2017
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The Minister of Labour briefed the Committee on the progress made on the national minimum wage. She explained the national minimum wage will not take over or review the previous signed wage agreements nor will it review the sectoral determinations except where the sectoral minimum wage is less than the national minimum wage. All trade unions have agreed to and signed the national minimum wage agreement except the Congress of South Africa Trade Unions (COSATU) which has requested some time to make a final decision. It was agreed that the national minimum wage be R20 an hour; R3 500 per month for a 40 hour week and R3900 for a 45 hour week with an implementation date not later than 1 May 2018. The Minister assured the Committee there would be no job losses or retrenchments as a result of the implementation of the national minimum wage.

Members wanted assurances from the Minister that people would not become jobless if the new minimum wage was implemented. Questions were asked about possible scenarios should COSATU decide not to sign the agreement; about exclusions and exemptions, about sectoral determinations and bargaining councils.

The Department of Labour (DOL) gave a progress report in response to the findings and recommendations stemming from the Portfolio Committee on Labour Northern Cape oversight visit to a farm and an industrial area in September 2016. Inspections were done on Tirisano Farm; Walker IVECO; Sulphura Salt and the Southern Sun Hotel. The non-compliance findings were outlined. Written undertakings had been secured in some cases; proof of compliance received in others and some had been referred for prosecution. In the matter of the Walker IVECO employee assault by a manager, the case had been settled out of court although it was a criminal case. The Committee members were not impressed with this and directed the Department to forward them the prosecution report.

Department of Labour gave a briefing on inspections done in the Clothing and Textile Industry in KZN. The prevalent issues picked up include the following areas of non-compliance:
• Strong presence of foreign labour from Lesotho, Swaziland and Mozambique without valid work permits.
• There is tendency of allowing such foreign employees to reside within the factories which normally results in unsafe and unhygienic conditions due to lack of access to basic facilities.
• Chinese employers have a tendency of bringing along their family members and employees from China without valid work permits.
• Employers threaten to close their businesses; retrench workers; relocate to other areas where they feel there will be no stringent laws.

There is a new trend where most of the employers in this sector are converting their companies into co-operatives where employees are made members of the co-operative thus the employer absolves his responsibility yet the so-called members of the co-operative do not have any say in how the business is run. This matter has to be discussed with the Department of Trade and Industry which registers co-operatives so that appropriate interventions may be explored to deal with so-called co-operatives which are not genuine.

Meeting report

Minister of Labour on National Minimum Wage
Minister of Labour, Mildred Oliphant, said the ANC manifesto has provision for investigating and implementing a national minimum wage. This wage does not take over the collective bargaining but it is aimed at supporting and strengthening collective bargaining. It was taken up as a means to minimise the wage gap. The national minimum wage will not take over or review previous wage agreements which were signed neither will it review the sectoral determination except where the minimum wage is less than the national minimum wage. If the sectoral determination or collective bargain agreement is higher than the national minimum wage, then it will remain so. All the social partners at Nedlac (business, community, organised labour and government) are committed to this. Organised labour at Nedlac is comprised of three federations (COSATU, FEDUSA and NACTU) and they have all agreed to the need for a national minimum wage but COSATU has not signed the agreement. The union asked for some time to engage with their central executive committee on the agreement. The agreed national minimum wage is R20 an hour; R3 500 per month for a 40 hour week and R3900 for a 45 hour week with an implementation date not later than 1 May 2018. It will be implemented on the finalisation of the relevant legislation. A technical amendment will be done to the Basic Conditions of Employment Act; the Employment Equity Act will be amended to reflect the national minimum wage; and the Labour Relations Act will be amended. Most upcoming amendments will be reflected in the Labour Relations Act with a view to resolving work related conflicts and give stability to the work place. The proposed amendments to the Labour Relations Act are stated in the “Declaration on Wage Inequality and Labour Stability” document and all parties have agreed to this. There are outstanding issues in the finalisation of the national minimum wage and Nedlac has been directed to look into this.

One of these issues is the medium term target of the national minimum wage, the adoption of the national minimum wage and the review of the national minimum wage. There are plans to establish a National Minimum Wage Commission which will be responsible for the review of the national minimum wage while Nedlac will be responsible for the composition of this commission which will have three members from organised labour, three from business community, three from the constituencies and four from government. The role and responsibility of this commission will be determined by the Department of Labour. There are some proposals to make the commission an independent one but the question that begs an answer is who will be the implementer?

On number of hours of work, it has been agreed that workers cannot be paid less than a certain number of working hours, however the number of hours is still under review.

On exclusions, there was a proposal that the Expanded Public Works Programme (EPWP) be excluded from the national minimum wage. All parties initially agreed to this but organised labour later disagreed with a proposal calling for a review of that proposal. Therefore a proposal was presented by Public Works on how compliance could be managed and such exemptions can only last for a year.

In terms of the coverage of the national minimum wage, about 6.6 million workers will benefit from the national minimum wage. About 2.4 million workers are currently not covered by either industry organised or sectoral determination. Only about 800 000 workers are covered by the private bargaining councils and 1.5 million in the public sector bargaining council. The sectoral determinations cover about 4.87 million workers. The highly covered workers are those covered by the sectoral determination. The medium wage in South Africa as a whole is being looked into. The minimum wage is intended to assist those workers who are at a minimum level. The social partners have agreed that when the national minimum wage is introduced, domestic workers will be paid 75% of the national minimum wage and agricultural workers will be paid 90% of the national minimum wage. It is proposed that these sectors will be brought up to 100% of the national minimum wage level within two years pending research by the National Minimum Wage Commission on this timeframe. Employers will be able to adjust and afford this national minimum wage with this phase-in approach.

Discussion
Mr M Bagraim (DA) asked the Minister when COSATU would sign the agreement and if she was sure COSATU is happy with the declaration as it stands or if they would propose changes. He wanted to know if she was sure they would not renege on the agreement at a later date after they sign the agreement. Talking about the exclusions, he asked about trainees and if there were any arrangements to cover them. On the national minimum wage, he asked the Minister her views on the comments made by Treasury that there would be job losses amounting to 700 000 and retrenchments and liquidations. Talking about the 6.6 million people who the Minister suggested would gain from the national minimum wage, he disagreed with the figure because according to him there would be retrenchments and job losses. Speaking about the President’s assertion two years ago that 10 million jobs would be created in five years, he noted the loss of over a million jobs already as against the proposed jobs to be created. He was of the opinion that with the minimum wage, it will be more difficult to create jobs. He spoke about Nedlac supporting the national minimum wage but noted that small businesses have not been properly represented there. He asked the Minister to comment.

The Chairperson responded to the comments made by Mr Bagraim about COSATU not signing the agreement. She was of the opinion he was asking the Minister to respond to mere speculation.

Ms F Loliwe (ANC) asked the Minister if there was a time frame for finalisation of the outstanding issues. She raised the possibility of employers reducing the number of working hours of employees in a bid to reduce wages.

Mr I Ollis (DA) welcomed the Minister. He was of the opinion that in some cases the national minimum wage is double what is being paid now, which will result in job losses when implemented. He asked what steps were being taken to reduce job losses and what the steps entail. He asked what was being done in the various sectors where the workers were being paid slightly lower and what engagements had taken place to address this.

Mr T Rawula (EFF) was of the opinion the minimum wage should be set to accommodate the most vulnerable in society and unfortunately they have been classified into the sectoral determination. He said that the sectoral determination and minimum wage are two parallel overlapping processes which contradict each other. Speaking about strengthening the bargaining sector, he argued that the minimum wage will only stagnate the bargaining council rather than providing more jobs for people. He asked what the impact of the minimum wage will be on the contributions for both provident funds and pension funds. On exclusions, he asked what will happen to the employees which are referred to as temporary employees. On COSATU, he asked what the impact will be should the union resolve not to sign the agreement. He asked the Minister if the agreement will be implemented without COSATU being a part of the agreement.

Mr D America (DA) asked about employees whose salaries are commission based; how would the national minimum wage cater for them? On implementation of an adjustment to the minimum wage, he asked if the adjustment will be pegged or not. He asked what will be done if in the course of implementation of the national minimum wage it is discovered that there are unintended consequences. Should this happen, would the minimum wage be lowered or not? On the exemptions, he stated that the regulations should be very clear so that that process will not be abused or used arbitrarily.

Ms S Van Schalkwyk (ANC) asked the Minister about the incentives for SMMEs, she wanted a clearer explanation of this. She spoke about the tiering of the minimum wage for the agricultural sector, and other workers who receive way less than the minimum wage. Was anything being done to consider this class of workers?

The Minister, in her response, stated she cannot give an assurance on behalf of COSATU, however all the federations have agreed with the minimum wage proposed and have signed. If COSATU refuses to sign the agreement, the implementation of the minimum wage will proceed irrespective of its position because all other unions have signed the agreement.

On trainees and learnerships, the Minister said these categories of people were being paid stipends. On those who cannot afford to pay these stipends, there is legislation to follow before this exemption is granted to employers.

She noted that it was agreed that no employee will be retrenched on the basis of the national minimum wage. This is clearly stated in the accord which was signed by the various stakeholders. Small businesses were a part of the processes in determining the minimum wage; therefore they are committed to this. Treasury has given an assurance that there will be incentives for those employers who are in dire need but subject to the employer giving sufficient proof.

On timeframes for outstanding issues, the Minister gave a timeframe of four months so that the legislation can be factored in. The legislation has been drafted and the process of submitting it to Parliament has begun. An agreement has been reached with DOL to enter into discussion with the bargaining councils.

On the issue of 75% and 90% for domestic and agricultural workers, the current situation was considered before the proposal was made and this was proposed with the intention of strengthening collective bargaining. It is intended that nobody in South Africa will earn less than the minimum wage.

On the provident funds and pension funds, both the employer and employee are required to contribute to these funds. This applies to the Compensation Fund as well. Temporary workers will be paid the national minimum wage and this applies to workers whose salaries are commission based. 

Speaking about potential job losses, Minister Oliphant stated that the figures which were quoted were based on previous minimum wage demands and current research conducted has shown that there will be no job losses as a result of the implementation of the national minimum wage.

Mr Thobile Lamati, DOL Director General, replied that a panel of experts had looked at the implementation of the national minimum wage and the impact it would have on job losses. The National Minimum Wage panel of experts report stated that the national minimum wage implemented in most countries did not result in job losses, however South Africa is different. He assured the Committee that every sector was taken into consideration and all the necessary factors looked into. Job losses were just mere speculation at the moment. He corroborated the position of the Minister on exemptions, noting that the employer must present enough proof to allow for exemption from paying the minimum wage and this exemption will last for only a year.

Mr America said that there were contradictions in the position of the DG with respect to the sectoral determination. He asked if ordinary families who employ domestic workers will be exempt from paying the national minimum wage if they cannot afford it. He asked about the impact of the national minimum wage on such families with regards to taxation.

Mr Ollis referred to the section in Declaration which talked about secret balloting before a strike, and asked if if COSATU had agreed to that provision in the Declaration.

Mr Bagraim referred to the report of the panel of experts which talked about small businesses. He asked for more clarity on that because he felt the decisions taken by the panel were unilateral.

The Minister responded to Mr Ollis saying the documents will be forwarded to the Committee. The SMME decision was not a unilateral decision. On strikes, she noted that all the unions had signed and the position of COSATU on the document will not affect the agreement with the other unions.

Mr Lamati replied about families who cannot afford to pay the minimum wage to their domestic worker. He noted that such families must show their income to prove they cannot afford to pay the minimum wage. If this is done they are qualified for exemption.

Mr Bagraim noted that more disputes will arise as a result of the minimum wage. He asked if the Minister has considered giving more money to the CCMA for employing more inspectors.

The Minister responded that other options will be considered to address that by engaging with Treasury.

Department of Labour progress report on Committee findings in Northern Cape
Ms Marsha Bronkhorst, DOL Chief Operating Officer, spoke about DOL’s response to the findings and recommendations stemming from the Portfolio Committee on Labour Northern Cape oversight visit to a farm and an industrial area in September 2016. She said inspections were done focusing on the Basic Conditions of Employment Act, Sectoral Determination, Occupational Health and Safety Act, Unemployment Insurance Act and Unemployment Insurance Contributions Act. She outlined the inspection findings and follow up done on Tirisano Farm; Walker IVECO; Sulphura Salt and the Southern Sun Hotel. Written undertakings had been secured in some cases; proof of compliance in others and some had been referred for prosecution (see document). On the matter of the employee who was assaulted by the manager at Walker IVECO.  The manager confirmed that indeed the worker was assaulted at work by him and that the case was reported to the police station in Paballelo. The case was not reported to Department of Labour as an injury on duty.

Discussion
The Chairperson asked for an update on the case involving the employer at Walker IVECO and the assaulted employee

Mr Zolile Albanie, DOL Chief Director Provincial Operations: Northern Cape, responded that the case had been settled between both parties.

Mr Lamati added that the matter was settled out of court.

Ms Loliwe asked how it was possible to settle a criminal case out of court. She wanted to know if it meant the case had been discontinued.

The Chairperson noted that the employee was bedridden as a result of the assault. She asked what had been done by DOL to ensure that he was adequately compensated. Had DOL followed up the case?

Mr Bagraim agreed with the Chairperson and Ms Loliwe. He asked why the case was withdrawn and the reasons given by the State not to continue the prosecution. He wanted the report of the prosecution and asked if there was adequate compensation for the victim.

Mr Lamati told the Committee the assault took place in March 2016 and in April 2016, the employer laid charges against the employer. He stated he did not have the details of the criminal case.

The Chairperson asked about the workers who had provided useful information to the Committee and the Department. She encouraged DOL to ensure they look after them so they are not victimised by their employees. This was important so that workers would continue to give information whenever the Committee goes to perform its oversight functions.

Clothing and Textile Industry inspections in KwaZulu Natal
Ms Bronkhorst explained there are various clothing and textile factories in KwaZulu Natal predominantly owned by Chinese employers spread over the region of Newcastle; Ladysmith; and Mandeni-KwaSithebe. The rest of the factories are located in Durban where there is a mixture of big and SMME (Cut and Trim) industries; some owned by South African companies with a strong spread of Indian ownership. The basic conditions of employment such as the hours of work and minimum wages are regulated by the Bargaining Council for the Clothing and Textile Sector as per the collective agreement that was extended to non-parties operating within the sector. The Bargaining Council has agents who monitor and enforce compliance with the clauses of the Collective Agreement. Unfair dismissal disputes also fall under the Bargaining Council which may conciliate or arbitrate over such cases. DOL Inspectors are therefore responsible for the enforcement of the following legislation in the Clothing and Textile Sector: Occupational Health and Safety Act; Unemployment Insurance Act; Compensation for Occupational Injuries and Diseases Act; Employment Equity Act.

Joint inspection campaigns have been conducted on numerous occasions by the DOL Inspectorate where the Bargaining Council agents from the Clothing and Textile Sector, Immigration Officers from the Department of Home Affairs, South African Clothing and Textile Workers Union (SACTWU), Department of Economic Development and Environment and Tourism, Department of Trade and Industry, South African Police Service and the fire brigade have participated:

The prevalent issues picked up from these campaigns include the following areas of non-compliance:
• Strong presence of foreign labour from Lesotho, Swaziland and Mozambique without valid work permits.
• There is tendency of allowing such foreign employees to reside within the factories which normally results in unsafe and unhygienic conditions due to lack of access to basic facilities.
• Chinese employers also have a tendency of bringing along their family members and employees from China without valid work permits.
• Employers threaten to close their businesses; retrench workers; relocate to other areas where they feel there will be no stringent laws.

There is a new trend where most of the employers in this sector are converting their companies into co-operatives where employees are made members of the co-operative thus the employer absolves his responsibility yet the so-called members of the co-operative do not have any say in how the business is run. This matter has to be discussed with the Department of Trade and Industry which registers co-operatives so that appropriate interventions may be explored to deal with the unintended consequences that are brought by these so called co-operatives which are not genuine.

Generally in terms of the Occupational Health and Safety Act, many employers failed to comply with the appointment of health and safety representatives; establishing health and safety committees; conducting risk assessments; appointing first aiders; servicing fire extinguishers; keeping the emergency escape routes clear and readily open able; producing the certificate of compliance for electrical installations; no proper sitting facilities for employees and not allowing those employees who perform their work standing to sit down at regular intervals; no lockers/storage facilities; dining facilities; no toilet paper; soap and hand drying facilities.

In terms of the Unemployment Insurance Act and Compensation for Occupational Injuries and Diseases Act some employers often fail to register; declare workers and contribute to the Funds. As a designated employer employing more than fifty employees, they fail to prepare an employment equity plan and to submit the employment equity report to the Department. Some of the designated employers have been referred to the Labour Court which imposed heavy fines.

The recent case that attracted wide media coverage involved one Chinese clothing company trading as New Rider Trade in Newcastle where the Hawks acting in collaboration with other law enforcement agencies including the Departments of Labour and Home Affairs raided the factory on 3 February 2017 pursuant to a complaint by two factory workers to the SAPS about the workers being held against their will and not being allowed to return to their home country Swaziland. The DOL inspectors issued a prohibition notice as well as a contravention notice to the employer for contravening various provisions of the OHS Act. A written undertaking was secured for failure to register workers with the Unemployment Insurance Fund. Four Chinese nationals (the owner, his wife and two others) and one Swazi supervisor (recruiter of other workers from Swaziland) were arrested and the owner was charged for human trafficking whilst the other three Chinese nationals were charged for not having the correct documentation. The Hawks also apprehended 77 employees (10 South Africans; 22 Lesotho and 43 Swazi nationals).The 10 South Africans were released after taking their statements while the remaining foreign workers were deemed as victims and referred to a crisis centre and then sent to different places of safety. Various meetings have been held with relevant government departments such as the Department of Home Affairs; Social Development; and SAPS to clarify the different roles played by each department regarding this case.

The Inspector report has been submitted to the NPA to strengthen the state’s case during the bail application hearing. A meeting was also held with the Newcastle Chinese Chamber of Employers and the municipality where a request was submitted by the Chinese Chamber requesting DOL to conduct workshops on labour laws for the Chinese and Taiwanese employers in Newcastle as they allege to be living in fear of similar raids. It has been agreed that a workshop will be held during March 2017.The Chinese Chamber undertook to engage a consultant to visit all the factories owned by their members to assist with compliance.

In conclusion, DOL will continue to monitor and enforce compliance with the relevant labour laws. Further joint inspections with other stakeholders will be conducted from time to time including night inspections.

The meeting was adjourned.

 

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