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REPORT ON THE INVESTIGATION INTO A SECTORAL

DETERMINATION FOR THE HOSPITALITY SECTOR-2010

INDEX

CHAPTER ONE:...............................................................................................3

Background to the investigation....................................................................3Terms of reference..........................................................................................5Methodology....................................................................................................5

Phase One – Administrative aspects......................................................................5Phase Two – Consultation with stakeholders.........................................................5Phase Three – ECC Process...................................................................................8Phase Four – Publication of the amended sectoral determination.........................8Structure of the report............................................................................................9

Sector Profile.................................................................................................10Employee profile within the sector...............................................................11

CHAPTER THREE.........................................................................................13Job categories...............................................................................................13Minimum wages............................................................................................16Minimum wage increases for year 2 and 3...................................................22Accommodation............................................................................................23Sunday Work.................................................................................................24Night work and provision of transport.........................................................26Additional issues raised...............................................................................27

CHAPTER FOUR...........................................................................................31EVALUATION IN TERMS OF ECC CRITERIA...............................................31

The ability of employers to carry on their business successfully.........................31The operation of small, medium and micro-enterprises.......................................32The cost of living..................................................................................................32The alleviation of poverty....................................................................................32The likely impact of any proposed condition of employment on current employment or the creation of employment........................................................32

CHAPTER FIVE.............................................................................................33SUMMARY OF THE RECOMMENDATIONS BY THE ECC............................335.1 Job categories....................................................................................335.3 Minimum wages..................................................................................335.4 Minimum wage increases for year 2 and 3.........................................335.5 Accommodation.................................................................................335.6 Sunday Work......................................................................................345.7 Night work and provision of transport....................................................34

2

CHAPTER ONE:

As directed by you, the Employment Conditions Commission (ECC) has pleasure in

presenting you with a report on its investigation into the Hospitality Sector.

Background to the investigation

The current sectoral determination 14 for the Hospitality sector was published on 15

May 2007 and became effective from 1 July 2007. The wages component of the

determination will lapse on 30 June 2010. The determination regulates conditions of

employment and minimum wages to be paid in the hospitality sector. The wages were

set in accordance with the number of employees an enterprise employs, where an

enterprise with 10 or less employees pays 10% less than an enterprise with more

employees. This approach was informed by the fact that the majority of employees in

the hospitality sector are employed by small firms, i.e. those with 10 or less

employees. The new minimum wages and the wage increase regime for the hospitality

sector need to be in place by 1 July 2010.

Employers in the hospitality sector are to a very large extent organized in terms of the

different fields in which they operate. Table 1 provides an overview of the range of

organizations within the hospitality sector. As illustrated in the table, these

organizations represent a reasonable profile of the main sub-sectors in the scope of

coverage of the Sectoral Determination.

3

Table 1: overview of the range of organizations existing within the hospitality

sector

Organisation Sub-sector/description

Tourism Business Council SA

Umbrella body representing business sector in tourism on macro-issues;

Members include trade associations and individual businesses.

THETA Training body for all sub-sectors related to tourism and hospitality, conservation, sport and recreation.

The Federated Hospitality Associations of South Africa (FEDHASA)

Hospitality trade association including, hotels, restaurants, caterers, self-catering, time-sharing, home hosting (B&B, guesthouses), suppliers, consultants and service providers to hospitality industry; conference venues, country clubs and taverns.

National Accommodation Association

Trade association for smaller establishments- 1-30 bedroom establishments.

1500 members

Bed & Breakfast Association of South Africa (BABASA)

Mostly Small, Micro and Medium Enterprises SMME’s including lodges, guest houses (1- 15 rooms), B&Bs (1-6 rooms) & caterers.

Mostly informal and “unregistered”, partnerships and “mom and pop” shops.

National Council for Tour Guides

Represents tour guides and adventure operators (e.g. bungee jumping etc.)

National Association of Catering Employers (NACE)

Employers organization in the catering industry

In the process of registering as an employers’ organization

South African Commercial and Catering Workers’ Union (SACCAWU)

Trade union

Hotels, restaurants, tourism, gambling.

Congress of South African Trade Unions (COSATU) affiliate

Hotel, Liquor, Catering & Allied Workers Union (HOTELLICA)

Trade union representing hotel and catering employees.

National Council of Trade Unions (NACTU) affiliate

Commercial Catering, Accommodation Workers’ Union (CCRAWU)

Independent trade union- breakaway from South African Catering, Commercial and Allied Workers’ Union (SACCAWU) mainly hospitality sector

4

Terms of reference

The terms of reference for this investigation as published in the Government Gazette

No. 32526 notice No. R.873 dated 25 August 2009 was as follows:

“to review wages and the conditions of employment in the Hospitality Sector”.

Methodology

A four-phased project framework was developed for the investigation:

Phase One – Administrative aspects

A notice was published in the government gazette on 25 August 2009, inviting

interested parties to make written representations within 30 days to the Director-

General. In response to the notice, four (4) written submissions were received from

the following organisations:

1. SACCAWU;

2. FEDHASA;

3. Southern Sun; and

4. Southern Midlands Tourism.

Phase Two – Consultation with stakeholders

Public hearings were scheduled across the country as set out in table 2 below.

A total of 28 public hearings were conducted, covering all nine provinces. There were

almost three hearing sessions in each of the provinces. After the initial planned public

hearings, site visits were conducted in certain workplaces, targeting specifically

employees. This was due to the poor turnout of employees during the public hearings.

Employee attendance was disappointing in most of the public hearings.

Table 2 below indicates places visited together with the attendance profile of

stakeholders for each hearing.

Table 2: Public hearing schedule and attendance profile

5

Hospitality Public Hearings 2009Province Dates Venues Time Employers Employees

Eastern Cape

20/10/09 Mthata 10H00 17 1521/10/09 East London 10H00 12 522/10/09 Port Elizabeth 10H00 0 3

Limpopo 20/10/09 Modimolle 10H00 10 11 21/10/09 Polokwane 10H00 12 1022/10/09 Tzaneen 10H00 16 6

Western Cape

28/10/2009 Cape Town 10H00 9 0 29/10/2009 Beaufort West 10H00 13 3 30/10/2009 George 10H00 6 2

Kwa-Zulu Natal

02/11/2009 Durban 10H00 4 503/11/2009 Richards Bay 10H00 10 404/11/2009 Newcastle 10H00 4 0

Mpumalanga 02/11/2009 Nelspruit 10H00 10 503/11/2009 Witbank 10H00 13 4

Northern Cape

09/11/2009 Kimberley 10H00 7 1 10/11/2009 SpringBok 10H00 14 0 11/11/2009 Upington 10H00 5 0

North West 18/11/09 Brits 10H00 8 0 19/11/09 Potchefstroom 10H00 4 0 20/11/09 Christiana 10H00 10 3

Gauteng South

18/11/09 Johannesburg 10H00 4 0

Gauteng North

17/11/09 Pretoria 10H00 2 018/11/09

Magaliesburg

10H00

8

5

Free State 23/11/09 Bloemfontein 10H00 18 19 24/11/09 Welkom 10H00 4 1325/11/09 Harrismith 10H00 8 7

As reflected in table 2 above, public hearings were not well attended, particularly in

respect of employees’ representation. Subsequent to the public hearings, site visits

were arranged where interviews in the form of a questionnaire administration were

conducted. The questionnaire process yielded results, as the secretariat managed to

visit workplaces and interviewed a total of 253 employees and 15 employers. Table 3

reflects the places visited and the number of employees and employers spoken to

during the site visits.

Table 3: Questionnaire administration

Name of outlets. No. of Employers No. of employees.

6

BLOEMFONTEINAloe Guest House 2 2City Lodge 1 4Palm lodge 2 4Altair Guest House 8Bloem spar 1 2Formula one hotel 8TOTAL 28NELSPRUITLa Roca guest house 2Town lodge 6Road lodge 5Mugg and Bean 10Panarotti restaurant 2Bairoo restaurant 4Milky lane 2TOTAL 31RUSTERNBURGSparkling Waters 11Blue Hill guest house 2Spur restaurant 18Wimpy restaurant 4Southern Sun hotel 12Akwaba Lodge 6Rustenburg Boutique 4TOTAL 57Pietermaritzburg/DurbanNando’s 6Ocean basket 5Mugg and Bean 4Rievere hotel 3Albany Hotel 4Palm breeze B& B 4All Season B& B 4Spur 5Wimpy 4TOTAL 39Beaufort West/Cape townOasis hotel 2Formula 1 Hotel 2Beaufort manor 5Steers 4Daddy long legs 1 5Harbour bridge hotel 6Protea hotel 3Southern Sun 4KFC 12Tree top guest house 1 3TOTAL 46

7

PORT ELIZABETHAvocet guest house 0 2Formula one hotel 2 0KFC (Heugh Road) 0 10Nando’s 0 5Kwadwesi Fish Tale 0 2Admirality Guesthouse 1 2Palm Beach Guesthouse 1 0TOTAL 4 21

KIMBERLEYDulce café 1 3John Dory 0 3China restaurant 1 0Protea hotel 0 1Bench mark 0 12Chicken licken 1 3Road lodge 0 6 King pie 0 3TOTAL 3 31

Phase Three – ECC Process

During this stage the ECC considered the inputs received and made its

recommendations as contained in this report.

Phase Four – Publication of the amended sectoral determination

This phase will see the publication of amendments to the sectoral determination, once

you have considered the recommendations of the ECC.

Structure of the report

The report consists of the following chapters:

8

Chapter 1 of this report gives a background of the sector and the methodology

utilized;

Chapter 2 of this report outlines the state of the hospitality sector;

Chapter 3 discusses the findings of the investigation and resultant proposals;

Chapter 4 discusses the proposals in light of the criteria that the ECC has to

consider; and

Chapter 5 summarizes the recommendations of the ECC.

9

Chapter Two

Sector Profile

Over the last decade or so we have witnessed a spectacular growth of the sector. I t is

generally accepted that the hospitality sector is one of the fastest growing sectors of

the economy. In March 2009, the CEO of Tourism Business Council of SA during a

press conference said, 'the travel and tourism industry is one of the world’s highest

priority industries and employers, the world’s leading growth sector, one of the fastest

growing economic sectors globally and a sector whose business volume equals or

even surpasses oil exports, food products and or automobiles.' The CEO continued to

point out that, 'in SA the sector generates R179 billion of economic activity and 445

000 jobs through direct employment and a total of 1 011 000 jobs, representing 7.6%

of total employment.'

In anticipation of future opportunities the Development Bank of Southern Africa

(DBSA) announced at the 2009 Tourism Indaba that it intended prioritizing tourism

projects locally and in the Southern African Development Community (SADC) region

with development finance to invest in tourism infrastructure, since commercial

finance institutions might be more cautious in the context of the economic downturn.

Similarly, the Minister of Tourism remained positive about the prospects for the

sector in the coming period. He claimed that the domestic market remained strong

despite the downturn, with 13, 9- million South Africans spending R25, 8bn on local

travel. According to the 2010 research by the World Travel and Tourism Council

report on SA the overall tourism sector’s share of the economy rose to an estimated 8,

5% of gross domestic product last year from 8.1% the year before. It was estimated

that tourism’s total contribution to the economy was R194, 5bn, a 19% rise, with an

estimated employment of 1, 04-million people in 2009.

Tourism has become the lifeblood of the South African economy and has injected

R350-billion in foreign direct spending since 2003, according to Engineering News

(July 2009). Last year, the sector contributed 8, 4% to the country’s gross domestic

product. While growth in the global tourism industry came in at 1, 3% last year, South

Africa fared better, at 5, 5%. A significant indicator of growth in this sector is that it is

estimated to have double in size since 1994. According to Stats SA January 2010

report, tourism contributed eight percent of South Africa's gross domestic product last

year and provided employment for 1.2 million people.

10

According to the web-based Bluechip Journal, 'despite the global economic downturn,

it seems that the hospitality industry is booming in South Africa. The listed Private

Equity investment company Dale Capital Partners (DCP) identified the hotels and

leisure sector in South Africa as a core component of its current investment strategy.

It has taken the step of increasing the level of investment in excess of R200 million.

Despite the global economic slowdown the hotel sector in South Africa continued to

record significant growth. In South Africa the hospitality sector continued to reflect an

increase in numbers of staff for the first quarter of 2009 and further, several high-

demand events should add further yielding opportunities, not the least of which is the

2010 FIFA Soccer World Cup, which is estimated to contribute in excess of R51.1

billion to South Africa’s gross domestic product.'

Bluechip Journal further claimed that despite the current global financial crisis, the

hotel and leisure sector in South Africa would continue to record significant growth

because South Africa had established itself as a MICE (Meeting, Incentive,

Conference & Event) destination.

The doubling of tour operators in the past five years, while expansion in hotel rooms

and rapid expansion in non-hotel accommodation as well as product proliferation

generally, are indicative of the current growth phase of the tourism industry.

According to the THETA 2007 sectoral plan, there are more than 40 430 enterprises

in the hospitality sector, most employing fifty or less employees. According to

Tourism Business Council of South Africa (TBCSA), SMMEs account for almost

90% of employment opportunities in the tourism sector, employing less than 50

people.

Thirty percent of labour in the hospitality sector is classified as unskilled. While there

has been a steady increase in the number of employees in this sector, general workers

dominate the industry by 72%. Most of the employment opportunities remain labour

intensive.

Employee profile within the sector

According to research by NALEDI, more than 70% of workers in the sector are not

covered by collective agreements or Bargaining Councils.

According to THETA, Conservation and Tourist Guiding together with Hospitality

are the sectors that employ the highest percentage of black people, with more than

11

70% of the workforce being black and majority of them in lower skilled occupational

categories.

THETA also points out that business outsourcing has become a major force in the

sector and this trend is impacting on wage levels, job security and other benefits.

Services such as cleaning, babysitting, training, security, payroll, information

technology, call centres, catering and others are being outsourced and more than half

of hotel staff is not employed by hotels but by different service providers. The

THETA analysis reveals that the majority of employees in the hotel trade are still in

lower job levels, either as service workers (54%) or general workers (18%),

constituting a total of 72%. Employment growth was estimated at 7.2% in 2005,

14.3% in 2006 and 10.6% in 2007. As far as ownership patterns are concerned

THETA provided the following information on Hospitality ownership patterns: black

(21%) and white (79%).

THETA in its report identified the following sources contributing to atypical trends of

employment in the sector:

Outsourcing

Operational nature – 24/7

Seasonality of the sector – fluctuation of demand for services

Cost reduction

Increased flexibility

SMME’s

Labour broking

Franchising

As in the previous research report by HSRC, the employment patterns still reflect

85% of employees being employed by enterprises employing less than 50 workers.

Eighty percent of employees are those employed by employers employing less than

ten employees and 72% are black.

12

CHAPTER THREE

This section focuses on inputs received from the stakeholders, both from the public

hearings and also from the questionnaire administration process. The format of the

report in respect of these issues is as follows: issues for discussion, followed by the

views of stakeholders, then the Department’s proposals and, finally, recommendations

of the ECC. The following issues were discussed during the public hearings:

Job categories;

Demarcation;

New minimum wages;

Minimum wage increases;

Accommodation;

Sunday work;

Night work and transport provision; and

Other related conditions

Job categories

Views of employers

In line with setting of a new minimum wage, some employers in Limpopo proposed

that job categories be included in the determination to allow specialization by

employees. They also suggested that Theta should be consulted when introducing job

categories to ensure that they meet the standards set in the NQF.

Views of employees

Some employees employed in bigger establishments proposed the introduction of job

categories in the determination and emphasized that skills and work experience should

be taken into consideration when dealing with minimum wages. They argued that a

newly appointed employee should not receive the same wage as an employee who has

worked a number of years with more experience. They also argued that job categories

would eliminate exploitation where an employee is required to perform a variety of

13

duties without any form of compensation. According to them, job categories would

motivate employees since they would be performing specialized jobs and be paid

accordingly. However, some employees working in guest houses and B&Bs indicated

that job categories would not be suitable for them due to the size of their businesses.

They indicated that the current determination covers their situation perfectly.

SACCAWU, on the other hand, submitted that a breakdown of occupations with clear

job descriptions should be included in the determination. SACCAWU also proposed

that an appropriate definition of workers classified as domestic workers should be

included to avoid a situation where employers utilized their domestic workers in their

establishments, especially guest houses and B&Bs. The union also suggested that

temporary workers be given a clear definition, with defined regulations in terms of

hours of work and duration of contracts. Lastly, SACCAWU requested the

introduction of a full-time permanent and temporary employee ratio to try and curb

the casualization within the sector.

Views of the Department

During the initial discussions prior to the establishment of the sectoral determination,

proposals regarding job categories were discussed extensively. Stakeholders indicated

that the Minister has powers to establish minimum conditions of employment which,

in this case, would be setting of minimum wages and proposed that employers in their

operations should benchmark on the minimum wages to determine wages for the

skilled staff. Another consideration in this regard was the fact that the majority of

employers in the sector are small establishments, who may not have the capacity to

employ staff according to fixed job categories. The Department therefore proposes

that the scope of application should be maintained as it is in the current determination.

Views of the ECC

The ECC supports the proposal by the Department that this matter is appropriately

addressed in the determination and no further changes are proposed during this time.

Demarcation

Currently a two tier wage dispensation is applicable in the sector. The wages are set in

terms of the number of employees employed in the establishment. The minimum

14

wage for employers employing more than 10 employees is set at a higher rate, whilst

the minimum rate for those employing 10 or less employees is set at 10% lower.

Views of the employers

The Southern Midlands Tourism forwarded inputs on behalf of their stakeholders

based in KwaZulu-Natal. In their submission they argued that the decision of

demarcating in terms of the number of employees employed has a negative impact in

that employers have decided to remain below 10 employees in order to pay the

reduced wage. They proposed that the occupancy rate should be utilized to determine

the wage which the employer should pay.

FEDHASA argued for demarcation based on rural and urban areas within the

hospitality sector. They indicated that establishments located in the rural areas do not

enjoy the same level of economic prosperity as their counterparts in the major

metropolitan areas. They also do not enjoy similar average levels of occupancy as

their urban counterparts. Their room/meal rates are generally considerably lower than

the rates charges in the urban areas. In addition, they mentioned that many of the rural

hotels are struggling and therefore proposed that the determination should provide for

an urban/rural differential as far as the minimum wage provision was concerned.

Some employers in the Northern Cape also proposed that a regional differentiation

should be made to accommodate establishments in the rural areas. They argued that

SMMEs in the rural areas were not as profitable or economically active as those in

urban areas. Some employers in Springbok also proposed an urban/rural divide,

indicating that they relied on the mines in the area, many of which had shut down and

led to a further downturn in business. Consequently, they had to rely on passing trade

in order to sustain their businesses and retain staff.

Views of employees

Some employees of small establishments like the B&Bs and guesthouses indicated

that the determination should provide for a single wage without any distinction in

terms of the number of employees employed. They argued that employees of small

establishments were required to do everything whilst their counterparts in hotels do

specialized work. They indicated that their workload is more than that of employees

employed in big establishments.15


Demarcation was extensively debated prior to the establishment of the sectoral

determination. The proposal to demarcate based on the urban and rural was also

examined and the challenge was the fact that establishments in urban areas did not

necessarily make more profits when compared with those in rural areas. For example,

the Kruger National Park establishments are located in a rural area but are more

profitable than some urban establishments. Another challenge in this regard was the

fact that there are developments taking place in a number of towns located in the rural

areas, e.g. Nelspruit. Most of the tourists visiting South Africa would prefer to visit

Nelspruit as their point of destination and therefore the income generated by the

hospitality establishments in this area could be much more than that of some urban-

based establishments. On the basis of this inconsistency, it was therefore

recommended by the ECC that the number of employees employed by the

establishment be utilized to demarcate the establishments, which resulted in a two tier

wage dispensation.

The Department therefore proposes that the current demarcation in the determination

should be maintained.

Views of the ECC



Minimum wages

The current minimum wages in the sector are as follows:

TABLE 1:

Table 1: Minimum wages for employers with 10 or less employeesMinimum rate for the period Minimum rate for the

periodMinimum rate for the

period1 July 2007 to 30 June 2008 1 July 2008 to 30 June 2009 1 July 2009 to 30 June 2010Monthly Weekly Hourly Monthly Weekl

yHourly Monthly Weekly Hourly

R1480-00 R341-60 R7-59 R1659-08 R382-93 R8-51 R1843-23 R425-43 R9-45

TABLE 2:

16

Table 2: Minimum wages for employers with more than 10 employeesMinimum rate for the period Minimum rate for the

periodMinimum rate for the period

1 July 2007 to 30 June 2008 1 July 2008 to 30 June 2009

1 July 2009 to 30 June 2010

Monthly Weekly Hourly Monthly Weekly Hourly Monthly Weekly Hourly

R1650-00 R380-80 R8-46 R1849-65 R426-88 R9-48 R2054-96 R474-26 R10-53

Views of the employers

Some employers complained that the hospitality industry was becoming less

economically viable. They emphasized that profitability in rural areas was less than in

that in metropolitan areas. The Southern Midlands Tourism indicated that

establishments in rural areas were only profitable during holiday peaks. They

proposed that demarcation into various areas should be included in the determination.

Most employers proposed that new wages should be determined by using the CPI as

the economic indicator.

FEDHASA proposed that an annualized average CPI should be considered. They also

urged that the average income of the hospitality sector should be considered to

determine the level of the wage increase which the sector could absorb without any

negative effect on employment levels. They indicated that in 2009 the number of

visitors had declined by almost 20% and the sector has been battling to continue to

pay their employees the prescribed minimum wages.

Some Durban employers indicated that economic growth had declined and therefore

this should be taken into consideration by the Minister when dealing with wage

increases. They indicated that due to the economic situation their clients had no or

little money to spend on vacations and restaurants. Therefore, they argued, if wages

were substantially increased small businesses could be forced to shut down. They

mentioned that the Minister was supposed to review wages during the time the

country felt the effects of recession. In addition, they argued that the economic

climate of the country should to be taken into consideration and mentioned that the

sectoral determination had resulted in jobs losses since some employers could not

afford to pay the prescribed minimum wages and huge increases.

17

In addition, FEDHASA pointed out that their members were concerned that the

determination did not provide a minimum wage for trainees, who currently receive the

same wage as permanent and experienced employees. They recommended that the

determination should make provision for a reduction on the prescribed minimum

wage of between 10% and 15% for all trainees employed in the hospitality industry

whilst registered with THETA-approved service provider. They reasoned that this

would not only encourage employment, but would benefit trainees in their career

growth.

In the Northern Cape, employers were reluctant to specify a quantum for the new

minimum wage levels. This reluctance was based on the economic recession, with

most employers calling for a wage freeze to assist the sector to recover from the

devastating effects of the global recession. They argued that inflicting a substantial

minimum wage hike would lead to employers retrenching workers as this would result

in a lot of businesses becoming unsustainable. They argued that the inflationary

effect of the proposed 35% hike on electricity tariffs by Eskom, if granted, would

further undermine business sustainability.

Views of employees

In line with the call for job categories to be included in the sectoral determination,

SACCAWU proposed the following wages for different job categories and also wage

increases for the subsequent years:

Category 2010/2011 2011/2012 2012/2013Chef R4 000-00 CPIX + 3.50% CPIX + 3.50%

ManagerAssistant managerSupervisorTrainee manager

R4 500-00R4 200-00R3 800-00R3 800-00

CPIX + 3.50% CPIX + 3.50%

Conference Co-ordinator

R3 900-00 CPIX + 3.50% CPIX + 3.50%

Bartender Assistant Bartender

R3 500-00R3 000-00

CPIX + 3.50% CPIX + 3.50%

CashierAssistant Cashier

R3 000-00R2 800-00

CPIX + 3.50% CPIX + 3.50%

18

Head Cook R3 500-00 CPIX + 3.50% CPIX + 3.50%

Head Waiter R3 500-00 CPIX + 3.50% CPIX + 3.50%

Head Wine Steward

R3 500-00 CPIX + 3.50% CPIX + 3.50%

Receptionist R3 500-00 CPIX + 3.50% CPIX + 3.50%

Kitchen Supervisor

R4 000-00 CPIX + 3.50% CPIX + 3.50%

Counter Assistant R3 000-00 CPIX + 3.50% CPIX + 3.50%

Waiter R3 000-00 CPIX + 3.50% CPIX + 3.50%

Motor Vehicle DriversExtra HeavyHeavyLightPart-time Driver

R3 900-00R3 700-00R3 500-00R3 300-00

CPIX + 3.50% CPIX + 3.50%

House-keeping R3 000-00 CPIX + 3.50% CPIX + 3.50%

Baker R3 800-00 CPIX + 3.50% CPIX + 3.50%

Cook R3 800-00 CPIX + 3.50% CPIX + 3.50%

Catering Assistant R3 000-00 CPIX + 3.50% CPIX + 3.50%

Delivery Employee

R3 000-00 CPIX + 3.50% CPIX + 3.50%

General Assistant R3 000-00 CPIX + 3.50% CPIX + 3.50%

Security R3 000-00 CPIX + 3.50% CPIX + 3.50%

In most areas employees supported the proposal by SACCAWU. They indicated that

while employers complained about the effect of the recession on their businesses, it

was worse in the employees’ case because they were faced with transport and food

price increases. They also complained they could not afford to even pay school fees

and buy proper clothing for their families. Although the country faced economic

recession, the employees proposed a cost of living wage increase and CPI. A large

number of employees in both Rustenburg and Nelspruit argued that wages should be

increased by 10% - 15% based on increased food prices, school fees for children,

transport costs, rent, water, electricity and accounts for furniture and clothing.

19

An example was given where an employee, who earns R2170.00, with 20 years of

experience in a restaurant, has two children aged 11 and 14. The employee’s monthly

budget is as follows:

School fees: R800 per month

Groceries: R1000 per month

Electricity: R200 per month

Transport: R350 per month

The salary that she earns every month does not meet her basic needs. Every month she

borrows from family and friends to cover the other needs such as clothing.

Furthermore, some employees in bigger establishments felt that there should be job

categories introduced due to the fact that different jobs have different levels of

responsibility and skill while some jobs require a certain qualification to be employed

in them. Some employees such as waiters have an advantage as they get a commission

or tips to supplement their salaries. Other employees felt that wages should be

categorized according to the experience a person had in the sector.

Although employees in general called for a higher wage increase, there were some

employees who cautioned that if wages were set at a higher level which employers

could not afford, job losses could result. They argued that it was better to give a

reasonable increase in order to retain staff instead of having a few people working

earning huge salaries.


The Department acknowledges the impact of the economic downturn in the sector in

that the sector is dependent on the clients. During the period of recession the number

of visitors decreased due to the fact that people did not have extra money in order to

spend on holidays. Stats SA also confirmed the decrease in their report released in

February 2010. Although the recovery of the local and international economies and

tourism industries remains uncertain, in South Africa the situation could improve with

the hosting of the FIFA World Cup tournament which commences in June 2010.

According to TBCSA, accommodation sector in South Africa has given an indication

that its rates would be increased almost by 100% during the tournament and this

indicates that employers would be able to afford an increased minimum wage.

Considering the facts above, the Department is of the view that the new minimum

20

wage which will become effective in July 2010 should be set at 7,5% higher than the

current wage applicable throughout the sector for the first year. This represents an

increase of CPI + 2.4%. The Table below represents the proposal by the Department

on the new minimum wage levels:

Table 4: New minimum wage level proposal 10<

Table 5: New Minimum wage level proposal >10

Table 1: Minimum wage for employers with 10 or less employees

Minimum rate for the period Difference from the previous

wage


Monthly Weekly Hourly Monthly Weekly Hourly

R1981.48 R457.30 R10.17 R138.25 R31.87 R0,72

Table 2: Minimum wage for employers with more than 10

employees

Minimum rate for the period Difference from the previous

wage


Monthly Weekly Hourly Monthly Weekly Hourly

R 2209.09 R509.83 R11.33 R154.13 R35.57 R0,80

21

Views of the ECC

The ECC acknowledges the impact of the economic downturn on the sector and also

the fact that employees are also affected by the economic conditions within the sector.

The ECC further notes the number of jobs lost due to the economic crisis. While

acknowledging that the country may be beginning to emerge from the economic

crisis, the ECC is mindful that setting the minimum wage or increases too high may

result in further job losses or non-compliance with the prescribed minimum wages,

both of which scenarios are not acceptable. In the circumstances, the ECC

recommends that the first year’s minimum wage should be set at 7.1% higher than the

current wage. The ECC recognizes that the proposed figure is higher that the current

level of CPI as reported by StatsSA, but this is justified in light of the fact that the

sector will derive some benefit from the FIFA World Cup.

Minimum wage increases for year 2 and 3

The current sectoral determination provided for an annual wage increase determined

on the basis of CPI plus an additional 2%.

Views of employers

Employers in their submissions indicated that although in the current determination

the 2% above CPI was appropriate, a number of things have changed in recent times,

requiring a review of this approach. They indicated that the position of employers

needed to be carefully considered particularly in the light of the global and local

economic recession and also the fact that the inflation rate is now nearing the target

range of between 3% and 6%. They argued that in such circumstances an increase of

2% above the CPI could be equal to as much as 33% to 66% increase above the

prevailing inflation rate. They also pointed out that over a three year period, such

increases in a low inflationary environment would deliver a real income improvement

to employees but would also place a significantly increased burden on employers and

the potential viability of their businesses. They therefore proposed that an increase of

1% above the CPI would be a less risky strategy while at the same time providing for

22

some real and meaningful income growth for employees. In addition, they cautioned

that the recovery of the local and international economies and tourism industries

remains uncertain at this time and a more cautious approach should be adopted.

On the other hand, FEDHASA mentioned that as a result of the recent changes to the

CPI calculations prepared and published by StatsSA, a majority of their members felt

strongly that all future minimum wage increases for the Hospitality Sector should

provide for the minimum wage plus CPI or, at the most CPI plus 1%. It is also

important to note that they strongly emphasized that it should be based on CPI and not

the CPIX (or the new version thereof which is currently also published by StatsSA).

They also suggested that the CPI be annualized as opposed to the “once off” reliance

on the May CPI figure, which could be severely distorted on a month to month basis.

FEDHASA also stated that the industry is currently under pressure as a direct result of

the global downturn and the strong rand. The World Cup 2010 would create a boom

for one to two months but would not provide answers to the industry after this event.

Views of employees

Apart from the submission received from SACCAWU, some employees proposed

rand value increases of between 9% and 10% for years 2 and 3. They indicated that

the wage increase should improve their living conditions. They also argued that the

CPI related wage increase for them would not add any value since they were already

paid low wages. SACCAWU, as indicated above in the table, proposed a CPI plus

3,5% for years 2 and 3.


Considering the views and inputs received from the stakeholders the Department

maintains that annual wage increases should be determined by using CPI (excluding

owner’s equivalent rent) plus 2% for the two subsequent years.

Views of the ECC

With respect to the minimum wage increases for years 2 and 3, the ECC recommends

that wages should be increased by CPI plus 1%.

23

Accommodation

The current sectoral determination does not regulate accommodation and does not

stipulate the provision of accommodation.

Views of employers

Some employers proposed a deduction of 10% for accommodation and food. They

indicated that due to the location of their establishments, they are compelled to

provide for food and accommodation in order to ensure that employees are on the

premises on time for them to service their clients. These employers indicated that,

although they currently have arrangements for payment with their staff, it should be

regulated to ensure uniformity in the sector.

Views of employees

Some employees indicated that employers should pay and provide accommodation

free of charge since it is to their advantage that employees sleep at their workplaces.

Other employees, especially those who reside far from their workplaces, indicated that

the arrangement with their employers in providing accommodation should not be

tampered with since it would be costly for them to travel home every day.


Considering the current escalation in food prices, electricity, and the cost of living in

general, the Department is of the view that if the proposal by the employers is

included in the determination, employees’ wages have to be improved tremendously

since at the moment employees’ wages are under severe pressure and cannot

accommodate another deduction. The Department therefore recommends that the

current status of the determination be retained.

Views of the ECC

The ECC supports the proposal by the Department that the current status in the

determination be maintained in relation to accommodation.

Sunday Work

The sectoral determination currently stipulates that an employer must pay an

employee who works on a Sunday at double the employee’s wage for each hour

worked, unless the employee ordinarily works on a Sunday, in which case the

24

employer must pay the employee at one and one-half times the employee’s wage for

each hour worked or grant paid time off.

Views of employers

Employers indicated that the nature of the hospitality sector requires them to work 24

hours and 7 days a week. They indicated that prices paid by their clients during

weekdays are similar to the price paid on Sunday. They argued that should they be

forced to pay double the rate on a Sunday, they would be forced to stop their

operations and this would have a negative impact on the hospitality or tourism sectors

in South Africa. Employers also indicated that workers get weekly rest periods, which

sometimes include a Sunday. Furthermore, they proposed that the current provision in

the sectoral determination around Sunday work should be maintained. FEDHASA

indicated that the restaurant, guest house and hotel industry differs from other

industries, in that the nature of the sector is inherently based on the availability of

guest services which they provide for 7 days per week and 365 days per year. They

indicated that the hospitality industry, which is in a much more invidious position

than the retail industry as far as the need to be open on Sundays is concerned, does not

have the option of working a 40 hour week with no Sunday overtime, as in the retail

sectoral determination, and therefore urge that this provision be included in the

hospitality sectoral determination.

Views of employees

Some employees indicated that Sunday is meant to be a day to attend church service

and also the time for family due to the fact that long hours are spent at work during

the week and this day is an opportunity to be with their families. They therefore

proposed that Sunday should be paid at a double rate irrespective of whether they

ordinarily work on a Sunday or not. Employees indicated that there should be

recognition for working on a Sunday and the current 1.5 is not sufficient. SACCAWU

25

proposed that the current regulation is sufficient apart from the fact that employees

should be rotated to avoid consecutive Sundays being worked.


The Department recognizes the operational requirements in relation to the fact that

establishments within the hospitality sector are required to be open 7 days a week, 365

days a year. The Department proposes that the current provision in the determination

should be maintained. This means that Sunday should be remunerated at one and one-

half times the employee’s wage for overtime worked. If an employer requires an

employee who does not ordinarily work on a Sunday to work on a Sunday, that

Sunday should be remunerated at double the normal rate.

Views of the ECC

With respect to the Sunday pay, the ECC supports the proposal by the Department

that Sunday be remunerated at one and one-half times the employee’s wage for

overtime worked. And that if an employer requires an employee who does not

ordinarily work on a Sunday to work on a Sunday that Sunday shall be remunerated at

double the normal rate.

Night work and provision of transport

The current determination stipulates that if the transport cost is more than the daily

cost to the employee who is required to perform night shift, an employer who requires

such an employee to perform night work must subsidize such an employee for

transport expenses.

Views of employers

Some employers, especially those employing more than 10 employees, indicated that

they do arrange and subsidize transport for the shifts which finish late. Other

employers indicated that, although they pay for transport, employees should have the

choice of either sleeping on the premises or traveling home everyday.

Views of employees

Some employees felt that employers should pay for transport, but a large number were

of the view that employers should provide transport as public transport is not reliable

and it is difficult to get transport at night. An example was given of an employee who 26

uses two different modes of transport to get to work, when working night shift, the

employee knocks off at 11pm catches a bus to town but struggles to get a taxi to the

township which means most days she has to sleep in a police station.

The employee then catches a taxi home at 3am but after all that trouble has to be at

work at 6am.

Employees employed by bigger establishments indicated that employers do arrange

and subsidize transport for night shifts. They also indicated that their arrangement

with employers should not be tampered with as it was more beneficial to them.

On the other hand, SACCAWU indicated that an employer should be compelled to

provide and pay for transport for hours beyond 18h00. They also indicated that the

sectoral determination should prohibit employees from working more than three days

beyond 18h00 as this has a negative social impact. Lastly, they also proposed that

pregnant employees should not be scheduled to work shifts beyond 16h00 and before

09h00.


During the site visits conducted, it was indicated by employees that employers do

provide accommodation to those employees who sleep at work. Transport is also

subsidized by employers in the event employees have to sleep in their respective

establishments. The only concern which was picked up during the consultation

process was Spur Restaurants where the waiters do not get transport subsidies and

also work until late without any form of compensation. Employees indicated that they

suspect that this occurs because they get tips from customers and therefore can afford

the transport and also not get paid for overtime.

Due to the fact that employers have already initiated the process of granting

accommodation and also are required by Law to subsidize transport, the Department

is of the view that the current regulation in the determination is sufficient and

therefore no changes are proposed.

Views of the ECC

The ECC proposed that this matter is dealt with appropriately in the current

determination and the status quo should remain.

27

Additional issues raised

Additional issues raised by SACCAWU

An appropriate definition of workers classified as domestic workers

Temporary workers should be given a clear definition with defined regulations

in terms of hours of work, duration of contracts.

Introduce a full-time permanent and temporary employee ratio

Prohibit sub-contracting with linkages to core business functions

Prohibit Labour Broking

Prohibit casualisation beyond school vacations

A ratio should be introduced between internships, trainees and learnerships vs.

full-time employment to avoid the substitution of full-time employment by

internships.

That retrenchment should be prohibited as a response to the implementation of

SD 14.

Views of the Department on the issues raised

In relation to the definition of domestic workers definition, the Department is of the

view that the determination as it stands does define its applicability in terms of the

scope of application. The matter raised here is an interpretational one and also an

enforcement issue which needs to be taken up with the inspectorate division.

Regarding temporary workers, the Department wishes to indicate that the

determination and the BCEA do not provide for temporary workers and therefore it is

not possible to define.

Introduction of full-time permanent and temporary employee ratio is also another

issue which the Department cannot regulate. It is beyond the scope of a sectoral

determination. Labour laws also do not prohibit employers from employing

employees for less than 45 hours.

With regard to labour broking, this cannot be prohibited under a sectoral

determination. Any changes would need to be made in the enabling legislation,

28

including BCEA. This issue also forms part of the NEDLAC’s Labour Market

Review, which is currently ongoing.

Regarding the issue of prohibition of retrenchments, the Department is of the view

that this matter cannot be regulated in the determination. This issue is adequately

provided for in the Labour Relations Act.

Views of the ECC

On the additional issues raised by SACCAWU, the ECC is of the view that some of

the issues raised relate to the implementation and enforcement of the determination

and cannot be addressed at its level. Other issues would be addressed within the

current labour law review process, which makes it premature for the ECC to

deliberate on them at this stage.

Additional issues raised by employers

1. Overtime

Employers indicated that the hospitality industry has fundamental problems with the

re-negotiation of the agreement to work overtime in terms of Clause 10(2) one year

after the commencement of the employment relationship. Due to the very nature of

the hospitality industry, it is operationally exposed to the need for reasonable overtime

to be worked within reasonable terms (i.e. an hotel or restaurant could typically be

overrun with a conference or a few busloads of tourists over two to three days and be

entirely quiet the next week). Employees who, after a year of employment, simply

refuse to work any overtime during these short pressure peaks pose serious challenges

on management of businesses as well as spreading an unreasonable workload on their

colleagues.


The Department feels that the issue of overtime was appropriately dealt with when the

sectoral determination was established. In terms of Section 50 of the BCEA,

employers can apply for a ministerial determination in the event that their operational

requirements require deviation from the conditions specified in the sectoral

determination. It is therefore proposed that this matter could be dealt with in terms of

the Ministerial determination process.

Views of the ECC

29

The ECC supports the views of the Department relating to the request by employers to

increase overtime. The ECC recommends that the current status in the determination

be maintained with respect to overtime.

2. Averaging of the hours of work

Some employers suggested that sections 13(3) and 13(4) should be removed from the

provisions of the Determination. They argued that the averaging of hours of work

should not lapse and that it should only be subject to a written agreement as provided

for in section 13(1). They indicated that a written agreement would protect the rights

of both the employee and the employer. They also indicated that the hospitality

industry in South Africa, especially areas that are seasonal such as the Western Cape,

Kwazulu-Natal and Mpumalanga, would benefit from the change to this clause. In

particular the Game Lodges with unique shift systems rely on this clause for the shift

systems to work (where employees live on the premises and work for extended

periods on a trot in order to have longer periods off, which enables them to travel out

from the isolated areas and have a meaningful time with their families).


The Department feels that this matter is appropriately addressed in the determination.

Section 50 of the BCEA allows employers to apply for a ministerial determination in

the event that their operational requirements require deviation from the sectoral

determination. It is therefore proposed that this matter could be dealt with in terms of

the Ministerial determination process.

Views of the ECC

The ECC supports the proposal by the Department that employers can utilize section

50 of the BCEA if they cannot comply with certain provisions of the determination.

The ECC therefore recommends that the current measure in the determination is

sufficient.

30

CHAPTER FOUR

EVALUATION IN TERMS OF ECC CRITERIA

Section 54(3) of the BCEA lays down the criteria which the ECC ought to consider

when setting conditions of employment and minimum wages for a particular sector.

The ability of employers to carry on their business successfully

The total number of travellers who visited South Africa through all its ports of entry

during November 2009 declined -4.3 year-on-year after rising 4.6% year-on-year in

October, according to Statistics South Africa (Stats SA). A total of 2.273 million

travellers (arrivals and departures) passed through South African ports of entry in

November 2009, made up of 654,713 South African residents and 1.618 million

foreign travellers. There were 332,355 and 322,358 South African resident arrivals

and departures respectively. The corresponding volumes for foreign arrivals and

departures were 864,808 and 753,416 respectively. Stats SA said a comparison

between the movements in October and November 2009 indicates that there was a

decline in all movements. There was a decline of 11.1% from 373,807 in October

2009 to 332,355 in November 2009 for South African arrivals and a decline of 7.6%

from 348,809 in October 2009 to 322,358 in November 2009 for South African

departure.

31

Foreign arrivals decreased by 2.8% from 889,529 in October 2009 to 864,808 in

November 2009. A comparison between movements in November 2008 and

November 2009 indicates that there was an increase in all movements. Foreign

arrivals increased by 4.5% from 827,605 in November 2008 to 864,808 in November

2009. In November 2009, road transport was the most common mode of travel used

by 68% of travellers. The number of travellers who used air transport was 704,673

(31.0%). In November 2009, overseas tourists came mainly from Europe (70.6%);

followed by North America (11.3%); Asia (9.3%); Australasia (4.6%); Central and

South America (2.6%); and Middle East (1.6%). Virtually all tourists from Africa

came from the SADC countries (96.8%), followed by East and Central Africa (1.6%);

West Africa (1.3%) and North Africa (0.2%). In November 2009, an overwhelming

majority (97.6%) of tourists came into South Africa for holidays compared with those

who came to study (0.6%) and those on business (0.6%)

The operation of small, medium and micro-enterprises

According the President of the National Accommodation Association (NAA-SA) it

appears that the last six months of 2009 was financially challenging especially to

those establishments that rely entirely on clients from overseas and South Africa. He

further indicated that they are hoping for a boom during the period of the World Cup

and beyond which may well result in a need for extra staff. The NAA-SA however

indicated that the challenge is to keep the interest in South Africa maintained for

financial reasons and their commitment to create employment. This statement

therefore suggests that the proposed wage increases will not have any negative impact

on the operation of small, medium and micro enterprises.

The cost of living

Considering the current escalation in food prices, electricity, and transport, the

proposed 7.1% increase and also the annual increase pegged at inflation rate plus an

additional two percent will attempt to address concerns faced by those earning low

wages which reduces their standards of living.

The alleviation of poverty

This is a long- term process and cannot be addressed overnight by a wage adjustment

only. However, the survey by Stassa in 2005 showed that hospitality employees on

32

average had 3 financial dependents. This means that an adjustment in the minima will

impact on the lives of people other than the employees themselves.

The likely impact of any proposed condition of employment on current

employment or the creation of employment

Due to the global economic down turn employers have experienced challenges in

affording to effect wage increases. Although this has been across all sectors of the

economy, with the hosting of 2010 FIFA World Cup employers will be in a better

position and will also require additional staff during the tournament. As the

employment creation in the sector is highly dependent on the demand for services, it

is expected that more jobs will be created within the sector.

CHAPTER FIVE

SUMMARY OF THE RECOMMENDATIONS BY THE ECC

The following are the recommendations of the ECC:

5.1 Job categories



5.2 Demarcation



5.3 Minimum wages

The ECC acknowledges the impact of the economic downturn on the sector and also

the fact that employees are also affected by the economic conditions within the sector.

The ECC further notes the number of jobs lost due to the economic crisis. While

acknowledging that the country may be beginning to emerge from the economic

crisis, the ECC is mindful that setting the minimum wage or increases too high may

result in further job losses or non-compliance with the prescribed minimum wages, 33

both of which scenarios are not acceptable. In the circumstances, the ECC

recommends that the first year’s minimum wage should be set at 7.1% higher than the

current wage. The ECC recognizes that the proposed figure is higher that the current

level of CPI as reported by StatsSA, but this is justified in light of the fact that the

sector will derive some benefit from the FIFA World Cup.

5.4 Minimum wage increases for year 2 and 3

With respect to the minimum wage increases for years 2 and 3, the ECC recommends

that wages should be increased by CPI plus 1%.

5.5 Accommodation

The ECC supports the proposal by the Department that the current status in the

determination be maintained in relation to accommodation.

5.6 Sunday Work

With respect to the Sunday pay, the ECC supports the proposal by the Department

that Sunday be remunerated at one and one-half times the employee’s wage for

overtime worked. And that if an employer requires an employee who does not

ordinarily work on a Sunday to work on a Sunday that Sunday shall be remunerated at

double the normal rate.

5.7 Night work and provision of transport

The ECC proposed that this matter is dealt with appropriately in the current

determination and the status quo should remain.

5.8 Additional issues raised by SACCAWU

On the additional issues raised by SACCAWU, the ECC is of the view that some of

the issues raised relate to the implementation and enforcement of the determination

and cannot be addressed at its level. Other issues would be addressed within the

current labour law review process, which makes it premature for the ECC to

deliberate on them at this stage.

5.9 Additional issues raised by employers

34




5.9.1 Averaging of the hours of work

The ECC supports the proposal by the Department that employers can utilize section

50 of the BCEA if they cannot comply with certain provisions of the determination.

The ECC therefore recommends that the current measure in the determination is

sufficient.

5.9.2 Overtime




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