The knock-on effect of national minimum wage increase on the farming industry

On 8 February 2021, the Minister of Employment and Labour gazetted an increase in the national minimum wage (NMW) from R20,76 to R21,69 effective from 1 March 2021. Previously, the prescribed NMW for farmworkers was R18,69 per hour. This has been increased to R21,69, an adjustment of about 16%. This increase has largely been described by the agricultural sector as drastic.

8 Mar 2021 2 min read Employment Law Alert Article

At a glance

  • The national minimum wage (NMW) in South Africa increased from R20.76 to R21.69 on 1 March 2021, with a larger increase of about 16% for farmworkers.
  • Concerns have been raised by the agricultural sector that this drastic increase will negatively impact job security and the industry's ability to absorb higher levels of remuneration, potentially leading to a food crisis and social upheaval.
  • Employers who cannot afford to pay the prescribed NMW rates can apply for an exemption through the National Minimum Wage Exemption System, subject to certain conditions and consultation with trade unions or affected workers. The exemption can be granted for a maximum period of one year.

Wage” refers to the amount of money paid or payable to a worker in respect of ordinary hours of work or, if they are shorter, the hours a worker ordinarily works in a day or a week. Concerns have been expressed by key industry players that this will adversely impact on job security as employers seek to drive down production costs. They are adamant that it will be impossible for the industry to absorb increased levels of remuneration. Some trade unions in the sector have gone as far as saying that if farmers cannot produce food affordably and employ agricultural workers on a large scale, there will be a food crisis and large-scale social upheaval as food insecurity and unemployment start to take root.

On 24 February 2021, during a briefing before the Portfolio Committee on Employment and Labour on the adjustment of the national minimum wage, the National Minimum Wage Commission submitted that research findings and the Annual Labour Force Survey revealed no negative impact on employment, including job losses, as a result of the introduction of the national minimum wage in 2019. Instead, the NMW had led to a statistically significant increase, albeit smaller than expected, and generally improved wages for workers. It is unclear whether these findings were industry specific or generalised across the working population.

In the event that an employer is unable to pay the said rate, they may apply for an exemption from paying the prescribed rates, in terms of section 15(1) of the National Minimum Wage Act. The exemption application must be lodged on the National Minimum Wage Exemption System and may only be granted if (i) the delegated authority is satisfied that the employer cannot afford to pay the minimum wage; and (ii) every representative trade union representing one or more of the affected workers has been meaningfully consulted or, if there is no such trade union, the affected workers have been meaningfully consulted.

Exemption from paying the NMW may be granted for a period not exceeding one year. The exemption must specify the wages the employer will be required to pay the workers, and any other relevant condition. An exemption would only be considered if the employer confirmed compliance with applicable statutory payments and obligations, including but not limited to the Unemployment Insurance Fund, the Compensation Fund and any applicable Bargaining Council Main Collective Agreement.

Accordingly, to the extent that employers are of the view that they cannot afford the increased NMW rates, they have recourse of applying for an exemption.

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