Bargaining Councils: Is Your Client Already Bound by One?
This article will count 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.
Some South African businesses must follow a Bargaining Council agreement without even knowing it.
The business may never have joined a council or signed anything. This does not always matter. If the business operates in an industry and area covered by an extended Bargaining Council agreement, the rules can still apply.
If the business has not followed these rules, it may owe money for previous years.
What is a Bargaining Council?
A Bargaining Council is set up under the Labour Relations Act. It brings together trade unions and employer groups in a specific industry, such as construction, road freight, clothing manufacturing, or metal and engineering.
They agree on things such as minimum wages, working conditions, and employee benefits.
These rules are contained in a Main Agreement.
The Minister of Employment and Labour can extend a Main Agreement. When this happens, it can apply to all employers in the industry and area covered by the agreement, including businesses that did not take part in the negotiations or join the council.
The extension is published in the Government Gazette.
How Can a Business Be Bound Without Knowing It?
Many small business owners do not regularly check the Government Gazette.
A business could therefore operate for years without knowing that a Bargaining Council agreement applies to it.
There is usually no automatic notification telling every business that it falls under a council.
The business may only find out when there is:
A Bargaining Council inspection
An employee complaint
A labour dispute
By then, the business may already have failed to follow the agreement for several years.
"But We Never Signed Anything"
This is where many business owners become confused.
Whether an extended Main Agreement applies does not depend on whether the owner signed something or chose to join the council.
The two important things are:
The industry in which the business operates
The area where the business operates
If an extended Main Agreement covers that industry and area, the business can automatically be bound by it.
The Risk of Back Pay
This is where the problem can become expensive.
If a business is found not to have followed the agreement, the Bargaining Council may calculate what should have been paid from the time the agreement started applying to the business.
This can sometimes go back several years.
The amount may include:
Wages that should have been paid
Unpaid Bargaining Council levies
Provident or pension fund contributions
Sick pay fund contributions
Holiday bonus fund contributions
For a business with many employees, these amounts can quickly add up to hundreds of thousands of rand.
Why This Matters to Your Clients
This is an important risk for SMEs, especially businesses in industries such as construction, engineering, road freight, and clothing manufacturing.
A business owner may believe that employees are being paid a fair wage. However, the Bargaining Council may have a higher minimum wage based on the employee's job grade and experience.
There can also be other compulsory contributions, even if the business is already paying employees more than the minimum wage.
Once a Bargaining Council starts investigating, it may also check more than one employee. If there is a problem with one employee's pay, the council may check other employees in the same position or even the whole business.
What Should Accountants and Bookkeepers Check?
If you handle payroll or compliance work for SME clients, there are five basic checks you can do.
1. Check the client's industry and area
Find out exactly what type of work the business does and where it operates. Both are important because Bargaining Council coverage depends on the industry and location.
2. Check the Government Gazette
Look for an extended Main Agreement that covers the client's industry and area.
3. Check employee wages
If an agreement applies, compare what each employee is currently earning with the Bargaining Council's wage scale for that employee's job grade.
4. Check the payslips
Look for Bargaining Council levies and any required provident fund, pension fund, sick pay fund, or holiday bonus fund contributions.
5. Deal with problems early
If you find that the business has not been paying the correct amounts, help the client put a correction plan in place before the problem comes up during an inspection or employee dispute.
Example
An engineering workshop has eighteen employees and has been operating for six years.
The owner believes that the employees are being paid fair wages.
During a Bargaining Council inspection, the owner discovers that a Main Agreement for the metal and engineering industry has applied to the workshop's area since before the business opened.
The council compares each employee's wages with the official wage scale. It also calculates unpaid council levies and provident fund contributions.
The total amount owed comes to several hundred thousand rand.
The problem could have been identified much earlier if someone had checked whether a Bargaining Council agreement applied to the business.
Common Questions
Does this only apply to large businesses?
No. A business with five employees can be covered by the same Main Agreement as a business with two hundred employees. What matters is the industry and area, not the size of the business.
What if the business pays more than the minimum wage?
There may be no wage shortfall, but the business could still owe Bargaining Council levies or other compulsory fund contributions.
Can a business apply for an exemption?
Sometimes. Bargaining Councils may allow businesses to apply for exemptions from certain requirements. However, the business must formally apply. An exemption is not automatic.
How can a business find out which council applies?
Check the Government Gazette for extended Main Agreements and the Department of Employment and Labour's information on registered Bargaining Councils. Compare this with the exact type of work the business does and where it operates.
The Bottom Line
A business can be bound by a Bargaining Council agreement even if the owner did not know about it, never joined the council, and never signed anything.
The important factors are the industry and the area where the business operates.
For accountants and bookkeepers, checking Bargaining Council coverage can help clients find problems before they become expensive.
A simple check now could prevent a client from receiving a large unexpected bill later.
Choose Your Path to Exclusive Insights
Stay ahead in the world of accounting with premium content designed for professionals like you. Access expert articles, industry trends, and essential resources. Become a CIBA member and claim your CPD hours from CIBA.
CIBA Member Access
R250.00 FREE!
100% Discount when you become a CIBA Member. Join now to claim your CPD Hours. Register here: https://accounts.myciba.org/register
Premium
R250.00
Every month
Trending
