Local Government clinches a wage and pension reform deal

Press Release from SALGA

Parties at the SA Bargaining Council on Wednesday, 15 September 2021, clinched a multi-year salary and wage deal for local government, bringing to an end the local government 2021 wage negotiations.

The South African Local Government Association (SALGA), the employer body representing 257 municipalities in the country has been in salary and wage negotiations with the South African Municipal Workers Union (SAMWU) and Independent Municipal & Allied Trade Union (IMATU) since March 2021.

The salary and wage negotiations have now concluded and an agreement covering three financial years from 2021 – 2024 was voted unanimously which has a package of salary based and associated measures. Foremost, in the package is a multi-year wage deal, pension fund reforms, a financial relief mechanism for municipalities in financial distress and for the terms of the agreement to be revisited should unforeseen negative economic circumstances arise in future during the period of the agreement.

The collective agreement, in respect of this current financial year, stipulates that all municipal employees shall receive an increase of three and a half percent (3.5%) with effect from 1 July 2021, a period in which the remuneration of municipal employees is adjusted every year, and a once-off non-pensionable cash allowance.

Non-pensionable cash allowance to be received as follows:

  • Employees earning a basic salary of R 12 500 or less as at 1 July 2021, shall receive an amount of R 4000.00.
  • Employees earning a basic salary of R 12 501 or more as at 1 July 2021, shall receive an amount of R 3000.00.

The relationship between the salary increase and non-pensionable cash allowance can be best summarised as follows; while the salary increase of 3.5% is effective from 01 July 2021, the effect of the cash allowance becomes operational at a later stage. To mitigate the impact of paying these cash allowances, the agreement envisages an extended timeframe within which municipalities can make adjustments to their current budget in order to fulfil this obligation unless they have applied for exemptions.

A further provision in the agreement is that; inflation-linked increases in the outer years of this agreement will be based on the inflation outlook and projections made by the South African Reserve Bank.

The new collective agreement represents a win-win outcome for the negotiating Parties and on the other hand, it gives municipalities who are in financial distress a lifeline and a breathing room.

The agreement also imposes a zero-rated increase in some benefits, such as home owner’s allowance and medical aid. The work on the pension restructuring will commence which will see several reforms in the body form.

Reaching the deal was no easy feat as negotiators in the bargaining council deadlocked several times leading to a Conciliator being brought in after a Facilitator’s Proposal in August 2021 also failed to conclude the negotiations.

The municipal wage talks took place in the backdrop of a severe financial economic distress environment imposed by the devastating global Covid-19 pandemic and SALGA approached the negotiations in mind to sustain the financial sustainability of municipalities while balancing the interest of the labour to ensure peace and stability, as well as in ensuring the continuation of service delivery.

The collective agreement means that the sector will be stable in that there will be no need for year-on-year wage negotiations. The multi-year collective agreement will enable municipalities to budget without uncertainty in the Medium Term Budgeting process. Local government attention can now focus on service delivery and preparing the transition towards the 5th Term Democratic and People-Centred Local Government without interruptions.

SALGA wishes to acknowledge the country’s municipalities for having provided strategic direction and meaningful support that has assisted the wage negotiations to conclude, Labour Parties for contributing to this process and the SA Bargaining Council for providing a conducive environment for the wage talks.

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