Clothing firms resort to layoffs to shoulder wage hikes

25 Apr '11

2 min read

Alex Liu, Chairman of Newcastle Chinese Chamber of Commerce said that, Newcastle based clothing units, which are under pressure from the government to adhere to the minimum wage legislation, have started to lay off workers to make it possible for them to adhere to new pay specifications.

The recent move is an intensification of the row over compliance with the new minimum wage structure, which was introduced around eight months back.

Though, Liu did not provide any specific number, nor had not undertaken any survey. However, he said that he knew of factories which have started retrenching workers.

He substantiated the fact that, his company Simunye, too was close to shut down, as they intended to re-start with fewer numbers of workers. According to him, around 100 to 120 of the present concentrated workforce of 160 could be re-employed.

He further stated that, as they are streamlining, all the workers would be retrenched, and only skilled workers would be hired in the new restructured firm, a majority of whom would be from the retrenched employees.

The Newcastle based clothing firms employ around 8,000 workers. During March, the minimum wages were hiked to R336 per week, and are set to touch R465 by year-end and R516 by April 2012.

Majority of the firms are finding it difficult to comply with the minimum wage structure as there has been no alteration in the prices that they get from the retailers, Liu said and added that, it seems hardly possible for these firms to raise wages, unless the retailers agree to pay higher prices.

However, as stated by Wayne van der Rheede, Deputy General Secretary of Southern African Clothing and Textile Workers' Union (SACTWU), no retrenchment notice has been received from any of the firms.

The Bargaining Council for the Clothing Manufacturing Industry has recently started assessing the wage structures of 416 non-compliant firms, to check if these firms have upgraded to the 70 percent compliance level in minimum wages set to be achieved at start of the current month.

Fibre2fashion News Desk - India