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What you NEED TO KNOW about minimum wages

by , 13 January 2014
Warning! Paying the wrong minimum wage could cost your company thousands. Make sure this isn't the case. Here's everything you need to know about minimum wages.

The Labour Law for Managers Loose Leaf Service says minimum wages are legislated either through sectoral determinations or bargaining council agreements

The law imposes heavy fines if you don't pay what's due to your employees. This means you'll be liable for back-pay and possibly even prosecution.

For example, let's say you have 100 employees. And the law says you have to pay at least R20 000 per year for each employee.

You only pay them R15 000 each. This is R500 000 too little (R5000 X 100 employees = R500 000). On a first offence, the maximum fine could be R125 000 (that's 25% of the underpayment).

For four offences in three years, the fine could be as much as 200% of the underpayment. In this example, it will be R1 million plus the fines paid for the three previous offences!

In addition to the fine you also have to pay the outstanding amounts.

What minimum wages must you pay?

We'll look at learnerships, sectoral determinations and bargaining councils.

Here's everything you need to know about minimum wages

#1: Learnerships. If you hire learnership contractors then you must apply the minimum wages across all industries and sectors where learnerships are used.

Just keep in mind that learnership contractors aren't seen as fully-fledged employees and are paid with allowances.

The Minister of Labour regulates these allowances through sectoral determinations.

NQF levels are the qualification levels your learners get after they finish a specific learnership training course. These determine the minimum allowance you must pay the learner.

#2: Sectoral determinations. These minimum wages are set by the Minister of Labour and cover a wide range of sectors or industries.

#3: Bargaining councils (formerly industrial councils) also set labour laws for specific industries.

A bargaining council is an organisation formed by trade unions and employer's organisations. They deal with the negotiation and formation of collective agreements. They also regulate dispute resolution and negotiate matters of mutual interest, such as working conditions and wages.

How to keep up to date with minimum wage increases

Other than FSP business, it's also a good idea to:

  • Check with the Department of Labour regularly to see if your business falls under the scope a sectoral determination or bargaining council.
  • Check changes in minimum rates and pay your workers according to law.

Now that you know about minimum wages, make sure you comply to avoid penalties and prosecution.

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