Business will need to maximise human capital in lieu of National Minimum Wage

HR professionals may have to become more creative about getting the most out of their existing human resources.

The National Minimum Wage Act (NMW) was signed into law by President Ramaphosa on 23 November 2018 and the law has major implications for business.

The Bill provides a platform for reducing inequality, setting a floor of R20 per hour for the majority of the country’s workers, equivalent to R3,500 per month, depending on the number of hours worked, and creates a phase-in period for farm workers, forestry workers, domestic workers, welfare sector and care workers, due to their vulnerability to disemployment. This amount excludes employer contributions to transport, accommodation, food and gratuities. That said, the NMW only applies in the instance where a minimum of four hours a worked per day.

The law will raise the earnings of an estimated six million South Africans, more than half of the labour force, who earn below this level at present. 

Businesses, however, will have to be careful about how they go out about their operations from now onwards. Companies in the retail, restaurant, farming and cleaning space are particularly vulnerable. Global Business Solutions senior consultant John Botha says the business trading environment is likely to remain tough, with a less-than-0.7 percent GDP growth forecast for 2019.

"This is in addition to the recent VAT, fuel and electricity hikes, equal treatment costs, as well as the imminent National Social Security Fund (NSSF) and National Health Insurance (NHI). These escalations will add further pressure to the system," he says.

Lastly, any unilateral changes to working hours as a result of this law will be regarded to be an unfair labour practice. That said, companies that consult employees and trade unions can apply for exemptions based on what the employer can afford but they are only valid for a period of 12 months. 

John says there are a variety of initiatives that businesses can consider to optimise their human capital. These include the following: alternative human capital-led BBBEE strategies, youth employment, internships and learnerships; organisational development initiatives including organisation redesign, workforce re-modelling and restructuring; Purpose-driven skills development; cost cross-subsidisation via tax incentives and resource integration strategies; and applying for exemptions.