How will the minimum wage hike affect businesses and workers?

THE National Minimum Wage (NMW) in South Africa has risen to R28.79 per hour, effective March 1, 2025. This 4.38% increase from the previous rate of R27.58 reflects the government’s commitment to improving workers’ livelihoods.

However, it also poses significant challenges for businesses, especially small and medium enterprises (SMEs), which are already grappling with a rising cost of living alongside a sluggish economy.

The wage hike has left many businesses questioning how to balance increased labour costs with maintaining profitability. SMEs, in particular, may face difficulties in absorbing these costs, potentially leading to job cuts, reduced working hours, or increased reliance on automation. For some companies, the added financial burden could threaten their survival.

While the wage increase aims to improve workers' living standards, it raises a critical question: “Will the latest minimum wage increase lead to better job security, or will businesses struggle to stay afloat?”

On one hand, higher wages can enhance disposable income and reduce poverty. On the other hand, businesses may need to reduce their workforce or limit hiring in order to manage costs, potentially exacerbating unemployment in an already strained labour market.

This is where partnering with a Temporary Employment Services (TES) provider can add immense value. TES providers offer a strategic solution for businesses navigating the complexities of the NMW increase.

These providers serve a vital role in helping companies remain compliant with labour laws while managing costs effectively. TES providers enable businesses to achieve workforce flexibility by hiring temporary staff for seasonal or project-based needs without long-term wage obligations.

Additionally, they assist with cost management by allowing companies to maintain a skilled workforce while keeping payroll expenses manageable. Furthermore, TES providers ensure adherence to labour regulations, reducing legal risks and administrative burdens, which is crucial for businesses seeking to avoid costly penalties and reputational damage.

Critics argue that temporary work can lead to job insecurity. However, reputable TES providers counter this by offering pathways to skills development and possible permanent employment down the line.

Many TES partners provide workers with training opportunities, industry exposure, and access to benefits such as health insurance or funeral plans—benefits often unavailable in traditional temporary roles.

Businesses will likely be faced with the reality of an NMW increase year-on-year and therefore need to adapt swiftly to this new landscape. At the end of the day, the wage increase underscores the importance of strategic workforce management in balancing business sustainability with worker welfare.

Partnering with a TES provider can ease the transition by optimising workforce strategies and ensuring compliance with labour laws. TES providers can also add value by assisting businesses with upskilling employees through tailored training programmes and mentorship opportunities, thus enhancing productivity and market competitiveness.

While the NMW increase is certainly a step toward reducing inequality and improving livelihoods in South Africa, its success depends on how businesses adapt.

Temporary employment solutions offer a lifeline for companies striving to remain viable while remaining compliant and fair in the labour arena. This is ultimately a win-win for employers and employees alike.

* Eleni Fourie is a corporate sales executive at Workforce Staffing and writes in her personal capacity.

** The views expressed here do not reflect those of the Sunday Independent, Independent Media, or IOL.