Implementing wage increases

Companies that function within the jurisdiction of a Bargaining Council get into the rhythm of that Council in terms of implementing wage increases.

The Road Freight Industry increases usually happen on the 1st of March each year. The Clothing Manufacturing Bargaining Council’s increases are usually around September each year. Even the Sectoral Determinations for certain sectors get into a cycle. Farm worker wages are usually increased in March, Domestic workers’ wages are usually increased in December.

If you have done our Online Training, you would know that in the first module we explain the functions of a Bargaining Council. One of the things a Bargaining Council does, is to extend its agreement to non-parties. This means that when an agreement has been reached between the parties who negotiated it, the Bargaining Council applies to the Minister of Labour to then take those rules and make them applicable to the rest of the industry. In other words – apply those rules to the ones who were not part of the negotiations.

It sometimes happens – for many different reasons – that such agreements are not extended, or promulgated on time…

The consequence of this is that the Agreement is then not applicable to those who did not sign it.
It is not enforceable under the law and companies who are not party to the agreement do not have to abide by its rules. In the case of the implementation of wage increases it will inevitably cause uncertainty. This puts everyone in an awkward situation. One would think that it will be fine if everyone (for the sake of preventing labour unrest) would give the increases anyway while waiting for the minister to promulgate it.

This is however not the case.

In our experience working with the NBCRFLI (the Road Freight Bargaining Council), we have seen that if you increase an employee’s wages without the increase being promulgated or gazetted, the Council dismisses the increase altogether. Their system will force you to increase your employees’ wages AGAIN once the minister has promulgated the agreement.

So to follow the path of least resistance, we never implement increases to our clients’ payrolls unless the increases have been gazetted.

The Clothing Manufacturing Industry Bargaining Council has recently sent out a circular informing the industry of its new increases. Upon investigation we found that these increases have not been promulgated yet. We therefore refuse to increase the wages until they are published in a gazette.

Unfortunately with South African labour laws, this is often the effect – the rule / system is not flexible enough to adapt to the ever-changing circumstances of business. Until this changes, it is always easier to follow the path of least resistance in order to keep your focus on your business’ core function.

Ensuring a smooth December payout season (annual leave)

Last week we gave three tips on how to navigate your way through the Holiday Bonus payouts

The NBCRFLI has three main benefit funds namely the Sick Pay Fund, the Leave Pay Fund and the Holiday Bonus Fund.
Every month, employers contribute towards these funds on behalf of their employees (have a look at this youtube video for a quick explanation of all the funds payable each month) and during the employee’s annual leave period, the Bargaining Council pays out the year’s contributions to each individual employee.

A company might grant their employees their annual leave throughout the year, or the company might close over the Christmas period and oblige all their employees to take their annual leave during this time. Whichever way your company chooses to do it the following points need to be remembered:

  1. The NBCRFLI can only pay out funds that are available

    Every month, the employer contributed towards the Leave Pay Fund on behalf of each employee. If there are only 2 contributions available, then the NBCRFLI can only pay out two contributions. It is therefore important to check whether the employee has enough contributions available to submit a claim.

  2. Do not double-pay your employees

    Perhaps it is silly to state the obvious, but remember to not pay your employees for the period that they go on leave. This will lead to a very unnecessary over payment. If the employee goes on leave for 3 weeks, then only pay him / her for the remaining 1 or 2 weeks that he / she was actually at work. The balance will be paid out of the funds at the NBCRFLI.

  3. Make sure your employees go on leave every year

    Don’t let their leave days accumulate. No company can afford to get by without an employee for 5 weeks in one go, and neither should an employee be allowed to skip a year without the prescribed 3 weeks’ break.

  4. Remember to still make the deductions while your employee is on annual leave

    Deductions for the Wellness Fund, Council Levies and Provident Fund still need to be made for the weeks that the employee goes on leave. The best practice for this is to take everything in the last week before the employee’s leave commences.

If you need assistance with anything related to the NBCRFLI payouts, give us a call 🙂

How to fix it when you are not categorizing your employees correctly

Perhaps you have taken over a payroll from someone, or when you were setting up your payroll, you were not aware of the specific industry rules.

Categorising employees correctly is VITAL to running a smooth payroll. If you do not do this right, then any or all of the following could happen:

  1. Your rates of pay could be wrong. If an employee is categorized as a higher / lower grade than what it is supposed to be you run the risk of underpaying or even overpaying him / her. This is very difficult to correct, especially if there is an overpayment that has been happening for some time.
  2. You could be applying the wrong rules to your employees. In many industries there are different sets of rules for different types of employees. If you categorise your employees incorrectly then you run the risk of non-compliance because you are looking at the wrong set of rules.
  3. Your disciplinary procedure might be unfair. Employees are graded according to their level of responsibility and authority. If you treat a lower grade employee as if his level of responsibility is higher, then it could lead to unfair labour practice.
  4. Incorrect classification of employees affect your Skills Development Reporting as well as your Employment Equity Reporting. This would be a case of non-compliance as well and could lead to fines and penalties.

So how should you approach an audit to establish whether your employees are classified correctly?

First, you should insure that you have a set of rules (recent) for the industry that you work in. Many Bargaining Councils have detailed definitions of employees and this is very handy. Then you need to look at your own in-house documents. Are there job descriptions and contracts of employment? What is being printed as a job title on the pay slips?

Set up an excel sheet with the above information in each column and do a comparison. Remember to discuss this with line managers, or operations managers in order to ensure that your understanding of a position is correct.

And lastly, if something has to change, the employee needs to be informed of this. If the change affects the employee’s pay package then consultations need to be held and you may need assistance from a labour relations consultant.

 

Bargaining Councils: A study on their effect on your payroll

5 Things Payroll Managers need to know about Bargaining Councils

 

Although many Tax Practitioners pass Bargaining Council issues onto their HR department, it is important to realise the effects these institutions have on Payrolls.

There are currently 47 registered Bargaining Councils in South Africa. Of these, 3 are Statutory Bargaining Councils, 6 are Local Government Bargaining Councils and 38 are Private Sector Bargaining Councils.

The largest Private Sector Bargaining Councils are the National Bargaining Council for the Road Freight and Logistics Industry (NBCRFLI), The Metal and Engineering Industries Bargaining Council (MEIBC), and the Motor Industry Bargaining Council (MIBCO).

Here are a few things you should know about these institutions:

1.    A Bargaining Council’s scope does not necessarily include EVERYONE on your payroll

Bargaining Councils are registered for specific industries, but if (as an example) you transport goods for gain and you need to register with the NBCRFLI (National Bargaining Council for the Road Freight and Logistics Industry) it does not mean that every single person on your payroll would be affected by this.

What you need to look for are the “scheduled employees”   for the Bargaining Council that the company falls under. These are the categories of employees that would be affected on your payroll as well.

Most payroll systems would then have a sub-screen of sorts where such employees can be flagged as registered under that specific Bargaining Council. It is important to then also ensure that the category codes used for these employees are the same as what the Bargaining Council uses to ensure that your information on the payroll is the same as what will be captured at the Bargaining Council.

The scheduled employees are usually your blue-collar employees, and they would normally also be listed on the Bargaining Council’s annual minimum wage rate table.

If you need a short course that goes into detail about this, go to our Udemy course “The Jurisdiction of the NBCRFLI” for an in-depth look at this.

 

2.    Private Bargaining Councils all have levies and funds that are payable to them on a monthly basis

As with all statutory bodies, Bargaining Councils demand certain funds and levies to be paid to them. These are deducted and contributed on your payroll and submitted to them using a prescribed form.

At the NBCRFLI, companies pay over Council levies, Wellness Fund contributions, Sick Fund contributions, Holiday Pay Bonus Fund contributions, Annual Leave Pay Fund contributions and Provident Fund contributions.

Some Bargaining Councils (not all) even have online-based portals (much like SARS E-filing) where returns are created and submitted. And much like SARS E-filing, these sites often have little glitches that need to be addressed before one can do a proper submission.

All Payroll Managers should be aware that your payroll data needs to balance with your submission. This is especially true when data cannot be submitted directly from your payroll system to the Bargaining Council. This could be a real challenge, as Payroll systems often export Bargaining Council return data using information on sub-screens, which means that if employees are not flagged as Bargaining Council members, then even though the deductions were made on the payroll, they will not pull through onto your export. This creates quite a problem for companies when they cannot balance back to the original data on the payroll system, but with a little more attention to detail this can be prevented completely.

 

3.    Bargaining Council agents have the right to inspect and issue compliance orders to companies who are non-compliant

Compliance Orders may be issued without warning to companies who do not comply with a Bargaining Council’s Collective Agreement. These orders should not be ignored, but rather investigated and disputed, or paid on receipt. Please remember that this might also affect your payroll in the form of back pay, deductions, and classification of employees.

A company usually has 14 days to comply before the matter is referred to arbitration. At arbitration, the commissioner may award up to 200% penalties to a non-compliant company!

Non-compliance could include any of the following issues:

  • Not registering with the Bargaining Council
  • Not deducting and paying over prescribed levies and funds
  • Not submitting / paying monthly returns
  • Underpayment of wages / overtime
  • Unauthorised deductions

Compliance orders usually originate from a complaint lodged by an employee / or employees or it might even be submitted directly by a trade union who was made aware of issues by its members.

 

4.    Some Funds are taxable in the hands of the employer when paid over to the Bargaining Council

Some Bargaining Councils have Holiday Bonus, Sick Leave and Annual Leave Funds. The principle behind these funds is that companies contribute to them on a monthly basis for each scheduled employee. At the end of the year, the Bargaining Council can then pay out these funds to the employees as a holiday bonus. In the case of annual leave, the Bargaining Council pays it out on application for when the employee goes on leave.

It is important to note, that the Bargaining Council – although it is the one paying out the funds – does not become the employer and is not liable to deduct PAYE from the payout. This remains the obligation of the company, and on the payroll it becomes a taxable company contribution.

The other way in ensuring the money paid to these funds are taxed, is to enter it as an earning as well as a deduction in the period that the Bargaining Council pays out the money to the employees.

 

5.    Bargaining Council Wage Increases

One of the main functions of a Bargaining Council is to negotiate wages. When an agreement is reached between the parties, it is first submitted to the Minister of Labour for promulgation. It is important to note that once the parties have signed the agreement, it is not enforceable on companies who are not members of the parties who signed it. It only becomes law to them once the Minister promulgates the agreement and it is gazetted.

Another important factor to remember is that usually the “across the board” (ATB) increases apply to everyone who were employed before the date of promulgation. Those employed after this date will be paid at the new minimum wage rates. Should the ATB increase be insufficient to get an employee’s rate up to the minimum rate for his / her category, then such employee will be paid according to the minimum wage. The increases are normally structured in such a way that those employees with longer service periods would be on higher rates due to the ATB increases awarded to them.

 

Navigating the sometimes stormy seas of payroll processing in a Bargaining Council environment can be a challenge and it is important to know whether the company falls under the jurisdiction of a Bargaining Council, and what that Bargaining Council’s Collective Agreement states. It therefore makes sense to outsource such a function to someone with expertise on the subject, which is what makes Mediant Solutions a payroll bureau with a difference. You can contact us any time through our contact page.

 

Annual Leave – keeping records

 

Keeping employee annual leave records is a responsibility placed on employers by the BCEA as well as many Bargaining Council Collective Agreements. During the festive season, this becomes very important, as companies close over December and accurate records will show which employees are entitled to what.

This post aims to show in short, what is important to keep:

Leave Records MUST include:
• the name, surname and clock number of the employee
• the date employment commenced
• the days on which an employee works, if the
information is relevant to entitlement or payment
• the employee’s current entitlement to annual
leave
• the dates any annual leave was taken
• the amount of payment for any annual leave taken

In South Africa, the BCEA rule for annual leave is that an employee accrues 1 day for every 17 days’worked. This can be further broken down to say that an employee accrues 1 hour’s leave for every 17 hours’ worked.

The way this is set up on payrolls is usually that it amounts to 1.25 days per month, and if you take 1.25 days and multiply it by 12 (months), you will get the required 15 annual leave days as required.

The following is a list of 3 pitfalls we have identified in companies’ approach to annual leave:

  1. Employers mistakenly think that employees are entitled to 21 paid annual leave days. This is not true – the requirement is for 21 consecutive days, but only 15 paid days. This is because in a period of 3 weeks, there are only 15 (possibly 18 – if employees work a 6-day week) working days for which an employee applies for annual leave.
  2. Employers award all their staff 3 weeks’ annual leave days at the beginning of each year, instead of accruing it throughout the year. The risk here is massive, firstly because the rule is completely misinterpreted. Annual leave is meant to be accrued, and if you just make it available at the beginning of each year, keeping the annual leave records becomes a nightmare. Also – when employees leave the company, the calculation of their termination leave is also much more complicated.
  3. Employers do not ensure that employees go on 3 weeks’ leave and the leave ends up accruing until it becomes unaffordable. It is important to have a leave policy / clause in employees’ contract of employment that makes it compulsory for employees to go on leave once a year, or else forfeit such leave. This then places the obligation on both parties to ensure that the employee starts on a zero balance each year.

It is easy to set up the annual leave accrual on most payroll software packages. It is also good if you use an excel template in order for your records to contain all the information it needs.

We use SAGE payroll software and have acquired the leave module in order to keep records more efficiently.

You should ensure that you keep records as well. 🙂