The Impact of Wage Increases on SMEs

Updated on 31 July 2014

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Wage agreement the end for small businesses

The wage agreement in the metals and engineering sector is the death knell for small businesses, the Free Market Foundation said on Wednesday.

“The recent developments in the negotiations reflect the unholy alliance between unions and big business. Big business has agreed to increases for the next three years without being concerned about the impact on small businesses,” FMF chairman Herman Mashaba said in a statement.

“The reality is that this agreement sounds the death knell to thousands of smaller companies in the sector.”

Six unions in the metals and engineering sector signed a wage deal with most employers on Tuesday.

According to the new wage deal, workers would get increases of between eight and 10 percent, depending on whether they were high or low earners.

But one of the employer bodies, the National Employers’ Association of SA (Neasa) refused to sign the offer, saying it had been sidelined in the negotiation process, facilitated by the labour department.

As a result, Neasa, which has 22 members and employs about 70,000 workers, has vowed to continue with a lock-out of striking workers.

Over 200,000 National union of Mineworkers of SA members downed tools on July 1, demanding a salary increase of 12 percent, down from their pre-strike demand of 15 percent. They also demanded a R1000 housing allowance, and a total ban on labour brokers.

Mashaba said Neasa was refusing to sign because it saw through the agreement and the devastating impact it would have on smaller firms and employment prospects.

“As an entrepreneur and businessman, I know first hand the risks of employing even one extra worker.”

On 4 March 2013, the FMF filed a challenge in the High Court in Pretoria to Section 32 of the Labour Relations Act 1995.

The organisation said the clause allowed collective agreements on wages and conditions to be extended to employers who were not party to the negotiations.

According to the FMF, some bargaining council agreements imposed unaffordable wages and conditions on smaller employers who consequently reduced their workforce and could not employ more workers.

Mashaba called on Small Business Development Minister Lindiwe Zulu to take action.

“Minister Zulu, please make this your first priority. Act to save small firms in the metal and engineering industry by intervening to prevent this agreement being extended to non-parties.”

– Sapa

See Also: SMEs Battle Over Wage Increase Concerns

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