The minimum wage has been a trending story in the different media houses within Uganda. Parliament passed the bill which will become law once it is signed by the President. However, as the voice employers, we are not entirely against it, but we think it can work with a better structure that takes into account the ability of the employer to pay.
According to ILO, a minimum wage is “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”. This definition refers to the binding nature of minimum wages, regardless of the method of fixing them. Minimum wages can be set by statute, decision of a competent authority, a wage board, a wage council, or by industrial or labour courts or tribunals. Minimum wages can also be set by giving the force of law to provisions of collective agreements.
We have been engaging the trade unions and the Government regarding the issue of the minimum wage for a long time and in 2016 we developed an employers’ position paper on it. Below I have presented some highlights from the position paper:
I. A Collective Bargaining approach to minimum wage determination should be considered: Employers are generally of the opinion that employers and workers should negotiate on the appropriate minimum wage.
II. Harmonise sectoral minimum wage arrangement with a national minimum wage: Employers have generally proposed a sector based minimum arrangement to cater for the differences that exist among the various sectors of the economy. Geographical considerations have also been put forward including urban and rural areas. However, a single minimum wage would be easier to arrive at given the fact that the negotiations would not be scattered and prolonged as it would be the case with sector based minimum wages. Kenya and Tanzania are currently reviewing their sectoral minimum wage arrangements with a view of changing to a national minimum wage.
III. Periodic review of two years is appropriate for an effective minimum wage: Government should consider reviewing the minimum wage after every two years. This is because negotiations will take a reasonable amount of time. Therefore, a two year period for renewal would be adequate as it also gives adequate time for employers to adjust to the implementation of a new wage arrangement.
IV. Standardize computation of the minimum wage including non-wage benefits: This is because beyond wages, employers tend to provide a number of non-wage benefits to their workers including housing, food, and transport among others. These are additional costs to the employer and should be taken into consideration when computing the minimum wage in Uganda.
V. The employer’s ability to pay the minimum wage should be emphasized: This is because an unrealistically high minimum wage is unsustainable and therefore cannot be met by the employer in the long run. Wages which are high may lead to unemployment as employers reduce on the number of workers in order to meet the high labour costs. This leads to other undesirable consequences like low demand for products and services due to lost income combined with increase in prices of goods and services.
VI. The proposed minimum wages: Given employers preference for sectoral minimum wage we proposed the following five categories of minimum wages. Agriculture (110, 000 UGX), Manufacturing (120, 000UGX), Hotel (150, 000UGX), Construction (160, 000UGX) and others (100, 000UGX).
To sum it up all, employers appreciate the need to put in place a minimum wage system in the country while paying specific attention to the ability of the employer to pay. The Government has to focus on providing a conducive business environment that would allow employers to create more jobs in the economy.