Sierra Leone's minimum wage increase: an employer's perspective
December 13, 2014
"Statutory Instrument No.6 of 2014, which has been created out of the 1997 Minimum Wage Act, has brought with it a Presidential order followed by a Parliamentary approval on Thursday 30th October, that the minimum wage for every worker; government and private, should not be below five hundred thousand Leones (Le 500,000), effective 1st January 2015" (click here for full article from Awoko).
This is welcome news for Labour Congress and the workers earning below Le500,000, especially since the cost of living has significantly increased in the last few months; however, considering the country’s current economic state the jubilation might be premature. The impact of this new policy will be borne mostly by small businesses and individuals who are already earning above the new minimum wage, as a majority of the large companies already pay their workers above Le500,000. Due to the epidemic, small business owners are already suffering from lower revenues, while individuals' spending on consumables has hiked. Now, they are being lumbered with an increase in labour cost (basic salary and employer's NASSIT contribution).
An increase in salaries is generally a good thing, but the timing in this case will make it difficult, possibly impossible to implement in a way that would increase the standard of living. Some individuals that I talked to have already started revising their domestic workers’ contracts to part time, while demanding productivity from them to complete tasks in half the time it previously took them. In effect, they are doing the same work for less money. Roles are also being combined, with some employees being terminated. Small and medium-sized companies are considering using more casual labour instead of maintaining permanent workers.
It could be argued that the increase in costs could be passed on to the client or customer, but that will only work for essential goods or services. Eg security service companies can directly transfer the increase in staff expenses to their clients. However, if their clients cannot afford to pay the new rates and cancel or reduce the service, the guards not working would be laid off.
Only time will tell the full effect of this rise in minimum wage, but for now it seems that with the trying times that Sierra Leone is going through due to the Ebola crisis and the challenges in the mining industry, the positive impact on the average Sierra Leonean’s life will take a while to become visible.