Farmers have been asking me what legal deductions they can make from their employees’ wages. There are items, like training, work tools and uniforms, that can’t be deducted. However, in terms of Sectoral Determination 13: Farm Workers Sector, there are a number of items that a farmer may legally deduct from an employee’s wage. Farmers can also enter into an agreement with an employee with respect to legitimate expenses incurred by the farmer, effectively on behalf of the employee.
Farmers aiming to reduce labour costs are entitled to make deductions from an employee’s pay for the benefits provided to the employee. The law makes it clear that a farmer may deduct from an employee’s pay for providing things such as accommodation and food, and for monies loaned in advance to an employee. A maximum of 10% of an employee’s wage, whether it be the new minimum wage or higher, may be deducted for accommodation, a maximum of 10% for food, and a maximum of 10% for a monetary loan repayment.
The downside to this is that a farmer’s long-time, valued employees who earn more than minimum wage employees, could end up being charged more than minimum wage employees for the same accommodation and food. A farmer can avoid this situation by setting the accommodation deduction to the value of 10% of the minimum wage, for all employees.
Some farmers have told me that, since the new minimum wage was set, their higher earning long-service employees have complained that the difference between their existing wage and that of more recently employed workers earning the new minimum wage will be significantly less.
An option to fairly appease these long-time employees without having to further add to dramatically increased wage costs is not to deduct for accommodation and food from these long-service employees. Rather, add the value of their food and accommodation to their existing wage and then deduct this value again to balance the books and to show these employees that you are rewarding them with benefits.
Bear in mind that accommodation for all employees must be to a minimum set standard. This includes a durable and waterproof roof, glass windows that can be opened, a potable water source within 100m of the accommodation, and a flush toilet or pit latrine in, or near, the building. An employee also has to be allocated a living area of a minimum of 30m2. This does not have to be in a single building.
It can be made up of the area of all the living facilities accessible to the employee, even if they’re in separate buildings. So the area of an employee’s private sleeping quarters and the area of communal ablution facilities, communal kitchen and communal entertainment can be added together to make up the 30m2. The area of the communal facilities must be divided by the number of employees using it to get a single employee’s allocated area.
I recommend that a farmer not already supplying food to employees should not start doing so. Due to factors like constantly fluctuating food prices, things can get complicated when the time comes to deduct the value of the food from an employee’s pay. While it is easier to deduct costs for food items bought at a shop, for which a purchase receipt is given, a farmer who provides food produced on the farm, such as milk or maize meal, must allocate a value to this food. Even if the farmer charges employees farm gate prices for own-grown food, its total value per pay period for each employee can be significant.
Should the monthly value of store-bought and farm-grown food supplied to an employee be likely to total more than the maximum 10% allowed, the farmer and employee should have a written agreement committing the employee to pay the farmer the balance over 10%. Alternatively, the farmer and the employee could agree that anything over 10% for food would be seen as an advance loan to the employee. The farmer would then be entitled to deduct this balance from the employee’s pay packet to a maximum of 10% of the total wage.
It’s very important to understand what a farmer may not deduct for. Farmers may not deduct for electricity, livestock grazing on the farm and transport provided by the farmer. On the other hand, farmers may charge employees for these services. To do this there should ideally be a written agreement that is freely and voluntarily entered into between farmer and employee where the farmer agrees to provide a service at a mutually acceptable charge, and the employee agrees to pay this charge.
This agreement needs to be in both the farmer’s and the employee’s first language and should be signed by both parties as proof of having accepted the agreement. The farmer should then note the details of all subsequent transactions related to the agreement, and preferably also issue the employee with receipts for payments made to the farmer with respect to the agreement.
An agreement could see the farmer paying an employee their wage in cash, and the employee immediately using part of this cash to pay the farmer for receiving the agreed upon services at the mutually agreed price. Written agreements are important as they provide incontrovertible proof of any breach of the agreement such as non-payment for a service received. This proof will be valuable should the matter have to be taken to a court of law. It is essential that this agreement be in both the farmer’s and the employee’s first language so that neither party can plead ignorance of its terms and conditions.
If the employee is illiterate, the contents of the agreement must be verbally relayed to the employee by another person, preferably with the same first language. The third person must sign the agreement as a witness that the employee fully understands and accepts its terms and conditions. If the employee refuses to sign an agreement committing to pay the farmer for services provided, the farmer is not obliged to provide these services.
If there is no electricity infrastructure accessible to employee accommodation, a farmer is not obliged to pay to install electricity. If there is electricity accessible to, or in, the accommodation, the farmer is not legally obliged to provide it to employees for free. The farmer and employee may sign an agreement for the sale and purchase of the electricity. Without individual electricity meters, it can be difficult for the farmer and employee to agree on a fair charge for electricity supplied and used. However, it is costly and laborious to have these meters installed.
The same can be said for pre-paid electricity meters. Pre-paid meters can also be tampered with if the farmer has not put appropriate security and controls in place. I have heard of cases where a farmer subsidises the cost of pre-paid electricity vouchers for employees, but sells the same vouchers at true cost to ex-employees living on the farm. Unfortunately, some employees have then used their privilege to buy subsidised pre-paid electricity vouchers on behalf of non-employee farm residents. To counter this, a farmer must devise a system that can monitor an employee’s electricity purchases against actual use, or that can dedicate these pre-paid vouchers to specific electricity meters.
Some farmers provide transport to and from the farm for employees who live off the property. There is a significant cost associated with this. However, it is understandable that there are cases where, if a farmer does not provide free transport to employees, they will not have anyone willing to work for them. In cases where a farmer is providing transport, but there are alternatives like taxis and buses, the farmer has the option of no longer providing the transport, to save on costs.
However, if the farmer is concerned about finding labour, but needs to cover some or all of the labour transport costs, the farmer can offer to transport employees at a lower fee than that charged by taxis and buses. Once again, the farmer must enter into formal written agreements with each of the employees using the farmer’s transport.
Probably the most problematic farmer-provided service to employees is the provision of grazing for employees’ livestock. In a written agreement where a farmer gives permission for an employee to graze their livestock on the farm, it is essential that a farmer clearly stipulate every single term and condition related to this permission, preferably before the permission is granted. This could include the number and types of livestock allowed, where these livestock may graze, that this grazing is allowed only as long as the person is in the farmer’s employ, and that there is a charge payable by the employee to the farmer for the grazing.
A financial value can be attributed to the grazing per livestock over a given time frame. This excludes costs incurred by the farmer in the provision of supplementary feed and veterinary treatment for an employee’s livestock, should these be clearly agreed upon. Once again, it is crucial to have grazing agreements in writing so that if an employee reneges on the agreement and it becomes necessary for the farmer to take the matter to court, the farmer can prove that the employee had understood, and fully agreed to, the grazing agreement’s terms and conditions.
It is important that farmers don’t have a knee-jerk reaction to dealing with increased labour costs. In terms of the various laws, there are options available to farmers to help them reduce labour costs without having to resort to retrenchments. The retrenchment process is, of itself, a challenging legal process.