Are you exempt from paying the new Minimum Wage?
20 February 2019 | Web Article Number: ME201913630
By Tertius Wessels
THE National Minimum Wage Act (NMW) came into effect as of January 1, 2019. The act stipulates that all employees (save for farm workers, domestic workers and people employed through Extended Public Works Programme) are now entitled to earn no less than R20 an hour.
However, some employers have expressed their inability to pay the national minimum wage, citing reasons of the wage being above their own financial threshold.
Luckily, the NMW Act does allow for qualifying organisations to apply for an exemption from paying from paying the rate of R 20 an hour.
Here are five things you need to know about being exempt from paying the NMW.
1. Who can apply for exemption?
The NMW Act makes provisions for any employer to apply to the delegated authority for an exemption. An employer or a registered employers’ organisation on behalf of its member, can apply to the delegated authority for an exemption by lodging an application on the national Minimum Wage Exemption System, in the form required by that System.
2. How to apply for an exemption?
An application for exemption must be lodged on the online National Minimum Wage Exemption System. The System is managed by the Department of Labour and is publicly accessible online at https://nmw.labour.gov.za or at any office of the Department of Labour or labour centre.
3. When will an application for exemption be granted?
An exemption may only be granted if the delegated authority is satisfied that – (a) The employer cannot afford to pay the minimum wage; and (b) Every representative trade union representing one or more of the affected works has been meaningfully consulted or, it there is no such trade union, the affected workers have been meaningfully consulted. (c) An exemption will only be considered if the employer confirm compliance with applicable statutory payments, including but not limited to UIF, Workmen’s Compensation and any applicable Bargaining Council Agreement.
To test affordability elements of Profitability, Liquidity and Solvency will be taken into account.
An application for exemption will likely be granted in circumstances where an employer is trading at a loss e.g. Earnings before Depreciation and Dividends Allowance is negative. Before lodging an application for exemption an employer should familiarise itself with the Commercial Financial Decision Process at set out in the Regulations to the national Minimum Wage Act.
4. Details to be included in an application for exemption
Employer particulars such as UIF Registration number, Compensation Fund Registration number, SARS number, Contact Details of Company, etc. Employment details such as the number of employees employed, number of employees likely to be affected by the application, details of current wages, details of the number of hours worked by employees, etc. Financial information – In respect of a business or organisation, full financial statements of the business for the three years (current year predictions and two previous years) and such other information that may be needed including depreciation, entertainment, write offs, finance cost, etc.
In respect of a household, details of the annual household income and expenditure and any other information that may be needed to determine whether or not the employer can afford to pay the national minimum wage.
5. Period for which exemption may be granted and wage threshold?
The delegated authority may grant an exemption from paying the national minimum wage only form the date of the application for the exemption and specifying the period for which it is granted, which period may not be more than 12 months.
The wage threshold below which no exemption may be granted are 90% of the national minimum wage in respect of the employees concerned.
Where exemption has been granted, an employer must display a copy of the exemption notice conspicuously at the workplace where it can be reads by the employee to whom the exemption applies. Copies of the exemption notice must also be given to the representative trade unions, every employee who request a copy and the applicable Bargaining Council.
• Adv. Tertius Wessels is Legal Director at Strata-g Labour Solutions