The National Minimum Wage (NMW) increase was announced on 08 February 2021. Given the steep rise in Forestry worker wages, some employers might find themselves in a situation where they cannot afford the NMW. In such a case, a very particular process needs to be followed. In cases where producers cannot afford the NMW, an exemption process has been launched. This can be accessed at https://nmw.labour.gov.za/.
It is very important to note that if an employer is trading at a loss, the exemption will automatically be granted. If an employer is not trading at a loss, the calculation on whether or not exemption is granted will be to determine the employer’s earnings before depreciation and dividends allowance (EBDA). Secondly, the employer’s return on assets (ROA) will be calculated by dividing the EBDA by the total assets of the past two years. Thirdly, if that ROA is found to be less than 6%, then the increase or decrease of assets in the past two years will be calculated in terms of a percentage. If that is found to be negative, exemption will be granted. If that is found to be positive, but less than 50%, exemption will be granted.
The exemption process is valid for 12 months and works on 90% of the new minimum wage of R21.69 (i.e. R19.52).
Our members are encouraged to interrogate the regulations on exemptions and use the process where appropriate.