South Africa: The New National Minimum Wage: What Are The Repercussions Involved For The Wine Industry?

The Employment and Labour Minister Thulas Nxesi has announced a new minimum wage for the year 2022. The increase in minimum wages initially took effect in 2002 and set a historic precedent in the protection of vulnerable workers (defined as 'low earning' workers).

The New Minimum Wage (NMW), effective from the 1^st of March 2022, has been set at R23.19 placing the agricultural sector on the same foot as other sectors. This means that the NMW is applicable to both domestic and farm workers, aiming it at minimising the gap between low-income and high-income workers. The wage is the amount paid for an ordinary hour worked and does not include compensation for overtime, transport, accommodation or food.

Is the minimum wage beneficial to the labour market relating to farmworkers?

Arguments in favour of the minimum wage range from stabilising the wage offered per hour nationally as well as regulating the relationship between the employer and employee. However, there have been many arguments against the minimum wage since its introduction. Recently farm owners have indicated that the NMW is unattainable and called instead for a 'minimum grape price'. Low-earning workers are the most vulnerable when a new minimum wage is set. Many workers fear losing their jobs, and in the case of farmworkers, losing their homes as well.

Agri SA indicated their support for the NMW increase, however, they stated that the government needs a more thorough consideration of the economic policies accompanied by such an increase. Farm owners did not receive the same support that their US counterparts received during the hard lockdown and the wine industry is still recovering from the lockdown. Agri SA also indicated that they appreciate the objective of the NMW, which is to alleviate poverty, however, they fear that this increase will see many workers unemployed as the wine industry will simply not be able to afford these yearly increases.

Many organisations in support of farmworkers spoke out against Agri SA claiming that Agri SA speaks for farm owners and that the precise increase amount is irrelevant and that Agri SA would declare any amount unaffordable. Many workers are not able to contribute to medical aid or pension fund, they should, at minimum, be paid a decent salary. Many farm owners pay their workers more than the minimum wage but have urged the government to intervene by providing subsidies for workers residing on the farm. According to them, workers would be in a better position if the government were to provide a household, electricity or water subsidy.

The Covid-19 lockdown negatively impacted the wine industry. Many farm owners were hit hard by the restrictions, and this exacerbated the challenges they already faced on a regular basis. The NMW is not in line with economic policies and has placed immense pressure on farm owners –Not only are they faced with the financial recovery of the global economy after severe restrictions but are now expected to pay out additional funds in wages to ensure that they comply with legislation.

Ensuring fair remuneration for low-income workers is of utmost importance but one must consider the repercussions involved in increasing the hourly rate. Many workers were exploited during the lockdown period and many lost their main source of income. The restrictions imposed by the lockdown had a direct impact on the wine industry in particular and it seems that farm owners' comments were not taken into consideration when making the decision to increase the minimum wage. Should farmers not be in a position to afford the minimum wage, they may instead choose to retrench workers over non-compliance with the law, which would defeat the very purpose of the minimum wage law.

The unemployment rate in South Africa has been described as a crisis and many businesses are calling on the government to consider all factors when making a decision which has direct repercussions on the labour market. Contact SchoemanLaw Attorneys to arrange a consultation today!

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