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National Minimum Wages Act 2018

"Minimum Wages "

The Act came into force on the 1^st day of January 2019.  

Purpose of the Act

The purpose of the Act is to address the uniqueness of individual sectors of the economy while providing for an employer-employee led minimum wages determination by way of providing a mechanism that allows employers and employees to be represented and heard during the processes leading to the establishment of minimum wages including providing for heavy penalties for non-compliance.

The previous Act of 1957 was archaic and lacking in the above material aspects.

Establishment of a Minimum Wages Board

The Act provides for the setting up of sector specific  Boards for this purpose with representation from Minister of Gender, Labour and Social Development, Ministry of Finance, Planning and Economic Development, Central Organisation of free trade unions, National Organisation of Trade Unions and the Federation of Uganda’s Employers

The Minister maintains the preserve to appoint the Chairperson of the above Board and four additional persons to act as assessors who shall be representatives from bank of Uganda, National Planning Authority, Uganda National Bureau of Statistics and any other person with knowledge in the sector in respect of the particular sector.

The Assessors have no voting rights but merely make recommendations to the Board which are not binding.

The functions of the Board are not limited to recommending wages for the different classes of workers in a particular sector but also to recommend on the general terms of employment in that particular sector including working hours, work conditions, minimum pay holidays.

The Board is adhoc to the extent that upon concluding its final report satisfactory to the Minister and upon the report receiving Cabinet approval, the Board may then be dissolved.

Contractual and Court determined minimum wage

Contractual determination

By way of the Act, employees engaged in a sector with no provision for a minimum wage may engage in collective bargaining or authorise a third party to undertake negotiations on their behalf with respect  to establishing a minimum wage.

These negotiation are guided by the day to day work of employees, total income earned by the employer, total liabilities and future forecasts of the profitability of the employers business and any other information which may be of value in this regard.

The negotiations once commenced must be concluded within three months subject to mutual agreement for an extension not exceeding six months.

The wage once agreed upon must be paid within 30 days of the ministerial approval and may be valid for a period not exceeding 5 years at the lapse of which fresh negotiations may be re-opened. Employers shall also be at liberty to pay employees a rate higher than the minimum wage

Court determination

Upon failure to conclude negotiations upon the lapse of six months any interested party may refer the matter to the Industrial Court for determination of the minimum wage applicable.

Upon the Court delivering an award, a certified copy shall be shared with the Minister who shall arrange for it to be gazetted as a wage regulation applicable to the employees.

Offences

An employer who pays less wages than those prescribed under the regulation or fails to observe any of the conditions of employment prescribed in the order commits an offence is liable upon conviction to a fine not exceeding Ug Shs 1,000,000/= or imprisonment for a term not exceeding three years or both including an order to pay the difference between the amount which ought to have been paid and what was actually paid.

Powers of Authorised officers

The Act provides for powers of officers to confirm compliance with the minimum wage in place including any conditions of employment prescribed.

Merits of the Act

a)      Seeks to curb exploitation of workers / employees through setting up a minimum wage. This should assist in improving the quality of life for many Ugandans especially those providing unskilled labour and also have a knock on effect on productivity of employees generally;

b)      By providing for avenues for wage determination, the Act seeks to ultimately reduce / eliminate the strikes for low wages among different categories of workers;

c)      Provides for participation of key stakeholders through the composition of the Board, Assessors and contractual negotiations;

d)     Is mindful of the different categories of workers for the different sectors and therefore makes provision for sector specific deliberations in arriving at a minimum wage.

Challenges of the Act

a)      The contractual negotiations leading to the establishment of a minimum wage require the disclosure of sensitive employer information which any Company may not be comfortable/ willing to share with the employees. It also seems to suggest that the employer and employee should be equal partners in splitting of proceeds from the business where as not;

b)      The Act empowers the Board to determine other conditions of work including the minimum number of paid holidays. This could potentially create a conflict between the Employment Act and the Minimum Wages Act where provisions contrary to those provided in the Employment Act are made.

c)      The applicability of this Act is constrained to the extent that a large population is currently engaged in the informal sector. To that extent the developmental objective may not be met as planned.

d)     The cost of labour if made expensive could ultimately lead to various consequences including a mass lay off, substitution of human resource for alternative means such as machinery or exportation of labour to other countries where the same service can be offered cheaper. This would result into a higher unemployment rate

e)      The composition of the Board appears to create confusion to the extent that it provides for a composition of four from five separate organisations. It also appears that keen interest was not paid to ensuring that there is a balance between employer and employee interests when determining the composition of the Board. The Board appears to have more pro-employee representation