Employment Law Alert: Does Uganda have a minimum wage?

By: Patrick Mugalula

Background:

The Parliament of Uganda passed the Minimum Wage Bill, 2015 (hereinafter “the Bill”) on Wednesday, 20th February, 2019. The objective of the Bill is to put in place a mechanism for the determination of a minimum wage that is fair to both employers and employees. The Bill addresses a host of challenges that have plagued both employees and employers over the years, by putting in place a consensual and consultative framework through which employers and employees can determine minimum wages for different categories of employment based on the specific circumstances of each work place on a regular basis. 

Whereas, the Bill was passed by Parliament into law, it will only become effective after the President of Uganda has assented to it by appending his signature to it. 

Historical position:

Many of Uganda’s laws were passed in the colonial and pre-colonial times by the British in their administration of the Uganda protectorate. Since these laws were largely adopted from England basing on its specific socio-economic needs at the time, they are either no longer practical or outrightly impossible to implement in Uganda’s present employment landscape.

Employment, Labour and Industrial relations in Uganda, were until 2006, regulated under such old (pre)colonial laws. However, a raft of new laws were passed in 2006 to address the bulk of employment related matters including; the Employment Act 2006, the Labour Unions Act 2006, the Occupational Health and Safety Act 2006 and the Labour Disputes (Arbitration and Settlement) Act 2006.

These laws (and the Workman’s Compensation Act 2000) effectively address the majority of employment related concerns today. They create the essential framework for employment in Uganda, employees’ and employers’ rights at the work place, management of work place injuries/illnesses and resolution of employment disputes. Nevertheless, this bundle of laws passed in 2006 did not address the matter of the wage levels in Uganda. This was a matter still dealt with under the Minimum Wages Advisory Boards and Wages Councils Act Cap 221, a law passed in 1957.  (hereinafter “the old law”). 

In summary, the old law provided for Wage Advisory Boards and Wage Councils. The Boards and Councils were set up by the Minister (in charge of labour) through a statutory instrument to inquire into the existing wage rate and conditions and thereafter to propose a minimum wage and/or employment conditions for a given set of employees or area for which the Minister felt there was a need to have such special regulations. The Board’s proposals were presented to the Minister who after receiving public views on the proposals would pass them on to the President. If satisfied with these proposals, the President would issue a statutory order known as a Wages Regulation Order to pass the proposals. On the other hand, wage councils were appointed by the Minister and served a similar role to the Wage Boards except that, the wage proposals from a Wage Council could be passed by the Minister himself as a Wages Regulation Order without referral to the President.

Failure to pay a fixed minimum wage was a criminal offence punishable with a fine of UGX 500, for each offence, in addition to the fact that the minimum wage was taken to be the true wage so that the employer would be indebted to the employee in the amount of the difference (between the minimum wage and the lower wage paid) as unpaid wages. 

The Minimum Wage Bill, 2015

The Bill maintains some of the systems and procedures of the old law but also introduces some new systems. This enables the Bill to operationalize the good parts of the old law and at the same time introduces new processes to bridge the gap with the socio-economic trends today. The key aspects of the Bill are addressed below:

Wage Boards:

Under the Bill, the Minister is empowered to appoint an eight-person Wage Board to recommend a wage and/or terms of employment for all employees or for a specific class of employees in a given sector. Their role is primarily, to investigate the terms of employment in a given sector and recommend a fair minimum wage rate, to revise an existing minimum wage, to advise the Minister on Policy issues or any other roles assigned to it by the Minister. 

The Wage Boards will be comprised of 4 members and 4 assessors each appointed from a representative entity including the Ministry of Finance, Central Organization of Free Trade Unions, National Organization of Trade Unions and Federation of Uganda’s Employers for the members, and Bank of Uganda, National Planning Authority, Uganda National Bureau of Statistics and an expert from the sector for the assessors. The members will be responsible for the decisions for the Board while the assessors will only be there in an advisory and non-executive role to give a non-binding opinion to the members before they make their decision. 

In making their recommendations, the Boards will be in a position to recommend minimum wages to be paid per hour, day, week, month or other period, normal working hours on any day or week, conditions of work for all or for a specific set of employees, minimum rates of wages for apprentices, minimum holidays with pay, periodical increments on wages and their percentages for these increments and extra remuneration/allowances for worker who use their own tools at work.

Upon concluding their investigations, the Boards will have to submit to the Minister a report containing its recommendations. If satisfied with the report, the Minister will present it to the Cabinet, which may approve it. Cabinet approval of a report from a Wages Board shall automatically dissolve the said Board. In the event that the Minister or Cabinet is dissatisfied with anything in the report, they will be able to send it back to the Board for alterations and resubmission. From this report, the Minister may, by statutory order pass a statutory minimum wage order.

Contractual Minimum Wages:

The Bill provides another alternative for the determination of a minimum wage. This is through negotiations between employers and employees in any sector where a minimum wage is not prescribed by the Minister. 

This form of negotiation must be carried out between the employer and a representative for all workers, which may be a labour union or a third party. However, the employer may not negotiate with individual employees. Before such negotiations, the employer must avail the employees or their representative, documents showing the day to day work of the employees, total income earned by the employer, total liabilities of the employer, future forecast profitability of the employee and any other useful information.  Negotiations must be concluded within 3 months from their commencement. Upon agreement the employer must, immediately, announce the agreed minimum wage to all employees, submit the wage to the Minister for approval if approved by the Minister, pay the same within 30 days of the approval.

If, however, the parties disagree or are not able to agree on a wage within 3 months, then the matter must be referred to the Industrial Court for the determination of a fair minimum wage. 

However, the wage if agreed upon, shall remain in force for 3 years or if the parties agree for up to 5 years but no longer. Thereafter, the parties will have to negotiate another minimum wage as provided for above. 

Furthermore, in the event that the Minister passes a Minimum Wage Order after the conclusion of negotiations, the higher of the two, (the negotiated minimum wage and the statutory minimum wage) shall be applicable in respect to the affected employees. 

Offences and civil remedies:

Failure to pay a fixed minimum wage is a criminal offence punishable with a fine of UGX 10,000,000 or imprisonment for up to 3 years or both, for each offence in addition to the fact that the minimum wage is taken to be the true wage, so that the employer would  then be indebted to the employee in the amount of the difference (between the minimum wage and the lower wage paid) as unpaid wages. 

Failure to maintain proper records of an agreed upon minimum wage, wage sheets, contracts, records of payments and other records is an offence for which an employer will, upon conviction be liable to pay a fine of UGX 4,000,000 or imprisonment for up to 12 months or both.

Obstruction of a labour officer while he/she is investigating the employer’s compliance with the law is an offence for which an employer will, upon conviction be liable to pay a fine of UGX 500,000.

Making false entries or records relating to wages and payment of a minimum wage is an offence for which an employer will, upon conviction be liable to pay a fine of UGX 4,000,000 or imprisonment for up to 12 months or both.

Any agreement that contradicts the Bill will be void in as far as it contradicts the Bill.

Analysis:

The Bill is a tremendous improvement on the old law. It introduces a critical innovation of contractual agreement on a minimum wage between an employer and his/her employees. This is undeniably a critical component of the Bill, since practically speaking, it is unlikely that there will be enough Boards empanelled by the Minister to address all sectors. 

This consultative/consensual framework is the shinning light of the Bill and will go a long way in ensuring better labour relations in Uganda. 

On the other hand, the Bill does have some shortcomings:

Continuity; whereas in the Bill it is a key role of the Wage Boards to periodically revise the minimum wages they propose to the Minister, the Bill also provides that once their report is received by the Minister the Wage Boards are resolved. This leaves a gap in terms of the revision of statutory minimum wages.

Industrial Court; whereas the Bill makes provision for the Industrial Court to resolve failed contractual negotiations for a minimum wage between an employer and its employees, the Bill does not lay out a criteria or methodology for the Industrial Court to apply in resolving these matters. As such, what would ordinarily be a run-of-the-mill contractual negotiation between an employer and an employee is now being turned over to the Court which is a party outside the employment relationship.

This presents two critical issues, firstly there is a lack of certainty on the part of the employer as to what rate the Industrial Court will apply and why. This could be a source of apprehension on the part of employers.

Secondly, business decisions are made on the basis of maximizing returns to the business owners/stakeholders, such business owners/stakeholders may see the imposition of a court order/statutory minimum rate as a disincentive to invest in Uganda due to increased labour costs.

Conclusion:  

In sum, there are widely contrasting opinions as to the impact of the Bill on employment in Uganda. In some quarters, it is alleged that the Bill will unrealistically augment the cost of labour in Uganda, thereby acting as a disincentive to employers and making investment in Uganda unattractive, while others welcome the Bill with open arms as a tool to combat exploitation of employees by employers.

Regardless of which side one falls on however, this Bill is likely to have profound effects on employment in Uganda. The Bill creates several rights and obligations for both employees and employers and it is therefore critical for employers to audit their human resource framework to ensure that they are well prepared for when the Bill becomes law.

Got questions? Patrick Mugalula, Arthur Mukiibi Katende or Edward Nsubuga Ssempebwa are happy to help.

This Employment Law alert provides general information only. It is not intended to provide advice with respect to any specific set of facts, nor is it intended to advise on all developments in the law.