Salga retreats from pay deal ‘mistake’
THE South African Local Government Association (Salga), which negotiates wages and conditions of service with the employees of the 283 municipalities, is trying to extract itself from an agreement it made with unions last year “by mistake”, in which it undertook to increase employer pension fund contributions to 18%.
The undertaking, which is binding on all municipalities, has serious implications for their wage costs, which have been steadily eating into budgets, crowding out spending on other priorities. As most contributions are about 14%, the agreement will raise the wage bill by four per- centage points, on top of annual wage increases.
The South African Cities Network, which monitors the finances of the big cities, said in a report published two weeks ago that staff costs have increased 50% since 2005, “putting pressure on everything else in the budget”.
Salga executive director Rio Nolutshungo said yesterday the intention of the agreement had been to “arrest, or at least contain, the increasing costs” of municipalities’ pension fund liabilities. The idea was to put a ceiling on contributions for new entrants, not to raise everybody to the level of 18%, he said.
“The text of the agreement omitted the second part, which concerned how existing employees should be dealt with,” he said. In a circular following last year’s agreement, Salga told municipalities the agreement was “erroneously drafted” and “it had never been the intention of the negotiating parties to elevate employer contributions to 18%”.
But unions are holding employers to the deal. South African Municipal Workers Union (Samwu) general secretary Walter Chiledi said: “We don’t believe it was a mistake. They knew what they were signing for. This is typical of Salga … always coming up with funny stories.”
Independent Municipal and Allied Trade Union communications officer Anja Muller-Deibicht said it appeared that Salga had tried to back out of the agreement without informing the unions, by sending a circular to municipalities only.
The Independent Municipal and Allied Workers Union and Samwu have declared a dispute with Salga over its refusal to implement the increases. After a year of wrangling, an arbitration hearing at the South African Local Government Bargaining Council is set for October.
Mr Nolutshungo said Salga would argue that even though it had put the clause into the agreement, it did not have the legal standing to make such a commitment on behalf of municipalities as it required pension funds to change their rules. Salga could not force them to do this, he said.
The employer contribution made by municipalities to employee pension funds is already high by private sector standards. Independent con- sultant Dave Crawford of Crawford Employee Financial Guidance said that “on average, employers contribute between 9% and 11% of an employee’s salary to the pension fund”. “Eighteen percent is very high,” he said.
Wages and conditions of service in the municipal sector are far better than in the private sector, a result of a range of factors including union strength and centralised bargaining. All municipalities are bound by the agreed-upon wage increase regardless of their financial situation.
The minimum municipal wage is R4,927 a month, putting unskilled municipal workers in the top 20% of entry-level wages in SA, equivalent to an underground miner.