6 February 2025
New Minimum Wage Adjustments in South Africa for 2025
South Africa is set to implement a new national minimum wage in 2025, following recommendations by the National Minimum Wage Commission. On 18 December 2024, the Commission published a report in the Government Gazette proposing a 2025 adjustment, setting the stage for public consultations and further government action. Businesses will need to stay informed as these changes could directly affect payroll costs and compliance requirements. Below is an overview of the adjustments and their potential implications for companies across the country.
What is the National Minimum Wage (NMW)?
The National Minimum Wage Act 9 of 2018 ("the Act") governs the minimum wage in South Africa, setting the legal minimum hourly wage employers are required to pay employees. As per the Act, the NMW excludes allowances such as transport, food, and equipment, as well as tips, bonuses, or payments in kind. Employers should therefore ensure that these additional costs are not included when calculating the NMW owed to employees.
In 2024, the national minimum wage was R27.58 per hour, applicable to all workers, including farm and domestic workers. However, employees under the Expanded Public Works Programme (EPWP) earned a separate minimum wage of R15.16 per hour.
National Minimum Wage Increase for 2025
In December 2024, the National Minimum Wage Commission recommended an increase to the National Minimum Wage (NMW) based on the Consumer Price Index (CPI) rate plus 1.5%. This adjustment aims to align wages with inflation and the rising cost of living. With the inflation rate for December 2024 confirmed at 3.00%, the Department of Employment and Labour has officially set the new minimum wage at R28.79 per hour. Additionally, the EPWP minimum wage will rise to R15.83 per hour, effective from 1 March 2025, as published in the Government Gazette on 04 February 2025.
Key Considerations for the Adjustment
The National Minimum Wage Commission (NMWC) considers several factors when recommending increases to the NMW. A few of these key factors are as follows:
- Economic Context: The NMWC evaluates the broader economic environment, including inflation, the rising cost of living, and wage trends, focusing particularly on how these elements affect lower-income workers.
- Labour Market Effects: The NMWC assesses the potential impact of wage increases on employment, wages, and working hours. While higher wages can benefit low-income workers, they may also lead to fewer job opportunities or reduced working hours as businesses adjust to higher labour costs.
- Challenges for Employers: The NMWC is conscious of the difficulties faced by small, medium, and micro-enterprises (SMMEs), as well as sectors like agriculture, where external factors such as load-shedding and droughts can complicate compliance with wage regulations.
- Gross Domestic Product (GDP): The NMWC considered the low GDP growth, including a 0.3% decline in the third quarter of 2024, with agriculture, transport, and trade sectors negatively impacting growth.
Stakeholder Perspectives
Feedback on the proposed changes has been highly varied. Trade unions advocate for higher wages to address poverty and inequality, with some proposing a long-term goal of R12,000–R15,000 in monthly wages. In contrast, employer organizations express concerns about affordability, potential job losses, and inflation. Additionally, a significant portion of the public (67%) opposes the increase, citing fears about its impact on employment and the long-term sustainability of businesses.
The Importance of Compliance with NMW Regulations for Employers
- Financial Risks:
Failure to pay an employee at least the NMW can result in serious financial consequences. Employers who do not meet this obligation may face fines of up to twice the amount of the underpaid wages or the employee’s monthly salary.
- Risk of Disputes Being Referred for Resolution:
When disputes arise over NMW violations, employees can escalate the matter to the Commission for Conciliation, Mediation and Arbitration (CCMA) or the Department of Labour. Labour Inspectors are empowered to investigate claims, issue compliance orders, and take corrective actions to enforce adherence to NMW regulations.
Guidance for Employers on National Minimum Wage Compliance
- Exemption Applications: Employers facing financial difficulties can apply for exemptions from paying the NMW under Section 15 of the NMWA. This exemption process is designed to support businesses that cannot afford the mandated wage rates.
- Review Contracts: Employers must review and update all employment contracts to align with the revised NMW rates. This includes making necessary adjustments to clauses that specify hourly, daily, weekly, or monthly wages, ensuring that all wages meet or exceed the updated NMW requirements.
- Avoid Unilateral Changes: Employers should refrain from making unilateral changes to employees’ wages, working hours, or conditions of employment as a response to the increased NMW. Such changes, especially when implemented without prior consultation or agreement with employees, could be seen as a violation of the employee's contractual rights and may lead to claims of unfair labour practices.
Conclusion
The 2025 NMW adjustment seeks to balance economic realities with the aim of improving worker welfare. With the final rate of R28.79 per hour now confirmed, businesses must ensure compliance through careful planning and payroll adjustments. Staying informed and proactive will be key to navigating these changes effectively.
