South Africa’s National Minimum Wage is set for a notable increase starting 1 March 2025, and if you’re an employer—especially running a small or medium enterprise—this shift could significantly impact your budgets, payroll, and operational structure.
Knowing how the changes affect your business is essential for maintaining compliance, avoiding potential fines, and sustaining positive relationships with your workforce. Below, we break down everything you need to know about the minimum wage hike and share practical steps to stay ahead of the curve.
1. The New Minimum Wage for 2025
Effective 1 March 2025, the national minimum wage (NMW) per hour increases from R27.58 to R28.79, reflecting a 4.39% rise. This is the base rate that applies to most workers, but there are specific categories and exceptions:
- Farmworkers and Domestic Workers
Since 2022, these workers have been brought onto the same rate as the general NMW. Therefore, from 1 March 2025, they, too, must receive R28.79 per hour. - Expanded Public Works Programme (EPWP) Workers
Their wage will increase from R15.16 to R15.83 per hour. - Learners Under Learnership Agreements
Workers engaged in learnerships (as defined in section 17 of the Skills Development Act 97 of 1998) are entitled to minimum weekly allowances set out in Schedule 2 of the National Minimum Wage Act 9 of 2018. These allowances have also been adjusted upward.
Sector-Specific Updates
Certain industries, including contract cleaning and the wholesale and retail sector, operate under their own sectoral determinations, which also stipulate minimum wage rates. These sector-specific thresholds have been revised to align with—or exceed—the new standard baseline.
2. Why the Increase Matters
The NMW aims to protect low-income workers and ensure a basic standard of living, particularly in the face of rising costs. Several factors influence the annual increase:
- Food Price Inflation
Recent data shows that food inflation often outpaces general consumer inflation, placing those on lower wages at a disadvantage if increases do not keep up. - Electricity Tariffs
Ongoing hikes in electricity prices add to the financial stress for low-wage earners, reinforcing the need for wage adjustments.
By raising the wage floor, the government seeks to alleviate income inequalities and boost the purchasing power of low-income households, which can have broader economic benefits through increased consumer spending.
3. Impact on Small and Medium Enterprises (SMEs)
For small to medium enterprises, the NMW increase presents both challenges and opportunities:
- Increased Wage Bills
SMEs operating on slim margins might feel the added pressure. They’ll need to review and possibly adjust pricing strategies, operational costs, or production methods to accommodate higher staff expenses. - Potential for Better Staff Retention
Paying a fairer wage can enhance employee morale, reduce turnover, and foster loyalty. In some cases, this can offset the increased payroll costs by improving productivity and reducing recruitment and training expenses. - Compliance vs. Penalties
Investing in proper compliance—updating payroll systems and processes—can be far less costly than the penalties and legal fees associated with non-compliance. - Avoiding Unilateral Changes to Contracts
Employers might consider changing employee hours or conditions to mitigate increased payroll costs. However, making unilateral alterations without proper consultation and agreement can be deemed an unfair labour practice, leaving employers liable to disputes and legal challenges.
4. Consequences of Non-Compliance
Failing to abide by the National Minimum Wage Act 9 of 2018 can have serious ramifications:
- Fines and Back-Pay Orders
If an employer is found to be underpaying staff, the Department of Employment and Labour can order back-pay for the affected workers and impose fines. - Legal Challenges and Damage to Reputation
Employees may approach bodies such as the Commission for Conciliation, Mediation and Arbitration (CCMA) to lodge grievances in terms of Section 73A of the BCEA. Legal disputes are costly and can tarnish an employer’s reputation. - Unfair Labour Practices
Attempting to bypass the wage hike by reducing hours or altering roles without proper procedures can lead to claims of unfair labour practices, which often require compensation, reinstatement, or other remedial measures.
5. Steps Employers Should Take
To ensure a smooth and lawful transition, SMEs and other employers should:
- Update Payroll Systems
Adjust all systems and processes to reflect the R28.79 per hour wage (or relevant sectoral rates). If you’re using payroll software, ensure it’s configured correctly to avoid accidental underpayments. - Review Budgets and Pricing
Factor in the increased wage bill when revising budgets or setting prices. Identify potential cost-savings in other operational areas. - Communicate with Employees
An informed workforce is less likely to be suspicious of management motives. Hold staff meetings or circulate written notices detailing any adjustments. - Consider Exemption Applications
If genuinely unable to afford the new rate, employers can apply for an exemption via the National Minimum Wage Exemption System at https://nmw.labour.gov.za or visit a Department of Employment and Labour office. Not all applications are granted, and strict criteria apply. - Monitor Sectoral Determinations
If you fall under a sectoral determination, confirm that your payments comply with both the general NMW and any specific sectoral requirements. - Stay Informed
Keep abreast of announcements from the Department of Employment and Labour. Policy updates or amendments could further affect your obligations.
6. Conclusion
The 2025 national minimum wage increase to R28.79 per hour underscores the government’s ongoing commitment to narrowing income inequality and uplifting low-wage earners. While this presents challenges—especially for small and medium enterprises—it can also bring about benefits in terms of employee satisfaction and retention.
Above all, compliance is key. From updating payroll systems to reviewing budgets and engaging openly with your workforce, taking proactive steps now will help your business avoid costly penalties, maintain legal standing, and potentially strengthen your workplace culture in the long run.
Disclaimer:
This blog post is for informational purposes only and does not constitute legal advice.
For specific guidance tailored to your situation, please consult our offices by emailing: info@laboured.org.za or calling us at 0823303939 / 0796951343 info@laboured.org.za