Bargaining agreement will put many small restaurants ‘out of business’

Hospitality industry association Fedhasa has warned that extending a collective bargaining agreement covering wages and employee benefits to all restaurants in South Africa could force small eateries to close and lead to job losses.

On 16 October, Labour Minister Nomakhosazana Meth gazetted the extension of the agreement, which takes effect on 26 October.

It will apply to all employers in the restaurant industry, including those that are not signatories to the relevant bargaining council.

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Fedhasa estimates that the agreement’s additional employment-related obligations could increase restaurant payroll costs by 9%.

These include:

Prescribed minimum wages, ranging from the national minimum wage of R30.23 per hour to R57.23 per hour for chefs and R40.46 for managers;
Employer contributions of 5% towards the bargaining council’s provident fund, in addition to the employee contribution;
Contributions towards a funeral scheme;
A uniform cleaning allowance of R17.50 per week;
A minimum annual bonus equivalent to two weeks’ salary; and
Bargaining council levies of R16 per employee per month, shared between employer and employee, and a R25 monthly levy per establishment payable by the employer.

The agreement was negotiated through the Bargaining Council for the Fast Food, Restaurant, Catering and Allied Trades and signed by several unions, including the Food and Allied Workers Union (Fawu), National Union of Metalworkers of South Africa (Numsa), South African Commercial and Catering Workers Union (Saccawu), Federal Council of Retail and Allied Workers (Fedcraw), and the Hotel, Liquor, Catering, Commercial and Allied Workers Union of South Africa (Hotelicca).

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Saccawu spokesperson Sithembele Tshwete said parties to the agreement had the legal right to ask the minister to extend it to non-parties.

Small restaurants squeezed

Fedhasa national chair Brett Tungay told Moneyweb that many restaurants are small, family-run businesses that could not absorb the additional costs, including the levies payable to the bargaining council.

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He said the extension would generate levy income for the council from restaurants across the country, while placing additional pressure on businesses already struggling with rising operating costs.

“This will cause a lot of heartache in our country, where we already have a huge unemployment problem.”

He added: “The restaurant sector is a major employer, and it has the ability to be a great employer. But not if it is squeezed out of business.”

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Exemption route available

According to the agreement, if a small business wishes to be exempt it must apply to the council.

The agreement states: “Where a small employer or his employee can satisfy the Council that the provisions of the agreement restrict entrepreneurial initiative and/or employment opportunities, they may apply to the Council for exemption from the specific provisions, and the Council may grant such an exemption.”

Tungay said the minister is seeking to extend wage negotiations conducted through three bargaining councils in Gauteng to the entire country, including restaurants that operate mainly during the tourist season and those in smaller towns.

“We are trying to get as much information from all independent and franchise restaurants in the country,” he told Moneyweb, explaining that Fedhasa wanted to approach the court for an interdict against the labour minister’s decision.

The organisation aims to demonstrate that the agreement does not represent the entire sector.

Tungay said many restaurants are already struggling to pay rent, salaries, rising electricity costs, municipal rates and water bills, as well as licence fees. He added that restaurants are not highly profitable businesses.

“What we are concerned about is the increases in costs; how many workers will be laid off and how many businesses are going to close.”

One argument is that the bargaining agreement will benefit workers, he said.

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“It will benefit a few workers in a few establishments, but will cause more unemployment and business closures.”

Vulnerable workers need protection

Fawu spokesperson Dominique Martin said extending the agreement’s scope was necessary in response to the severe exploitation of vulnerable workers in the hospitality and fast-food industries.

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“These workers work extended hours without benefits or any job security and often are abused by employers who don’t even pay the minimum wage and even worse, are often found making unlawful and deductions from workers’ earnings and even from their tips.

“Vulnerable workers need to be protected from these systematic exploitative practices, and this extension will go a long way towards achieving that,” she said.

“We understand that it may affect smaller businesses, but, as with the implementation of the national minimum wage, there is an exemption process for businesses with legitimate concerns.”

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