Wage negotiations will be tough as inflation increases

Bargaining parties must consider capping inflation, says expert.

Global Business Solutions Group chairman Jonathan Goldberg says with rising inflation it is important for employers and employees to adapt to variable pay.

“What I mean is if you take the current Sibanye strike potentially you could give R1,200 in the good times when profits were above X and when profits dropped below Y then you'd give only R800 for those particular months. That would be a good deal and a way to break the deadlock.”

Jonathan says it is mandatory in a society such as South Africa where jobs are being disposed of at a rapid rate and not created, that more mature partners consider arbitration.

“Again, let’s take the current Sibanye strike. Let’s ask why the parties would not want to go to wage arbitration before an arbitrator based on the evidence of the profits of the company in light of what they could or couldn’t afford and the economic circumstances of workers.

“Clearly that would be a great result where there would be no strike, no loss of earnings, no loss of tax and no loss of revenue for the company,” says Goldberg.

He says the country is facing wage negotiations during very difficult times while the inflation is currently running at 5.9 percent. “The predicted inflation in the next couple of months is higher than this figure, which will make negotiations very difficult.”

“Specifically, in agreements – which most are now beyond a year and up to three years – predicting the inflation levels is going to be awfully difficult,” Jonathan says.

He recommends that bargaining parties look at capping inflation within a range. “Take, for instance, the second- and third-year agreement based on inflation. These would be capped at, say, eight percent of the top level and four percent at the bottom level. In other words, if inflation exceeded eight percent then the increase would be eight percent for that year. If the inflation dropped below four percent then the increase would be four percent in that year.”

“More than this, employers and employees – in these difficult circumstances – need to adopt variable pay.”