The start of the second session of the 2015 gold wage negotiations process on Monday saw South African gold producers table a five year offer, which would see their employees share in profit gains, as well as benefit from social and employment guarantees.

The foundation of the 2015 gold wage offer is the need to ensure the sustainability of the industry, and consequently, the preservation of jobs and sharing in the gains made by the companies when they have positive margins.

Gold companies AngloGold Ashanti, Evander Gold Mines, Harmony Gold, Sibanye Gold and Village Main Reef have thus developed company-specific economic models which will allow the parties to track the movement of all economic inputs needed to ensure sustainable mining.

Through transparent and regular information-sharing, employees, unions and other stakeholders will be able to clearly evaluate the ongoing economic and social performance and sustainability of the companies and the business units, whether these be individual shafts or mines.

Importantly, the model allows for employees to substantially benefit from upside in industry performance.

Any improvement in company performance resulting in a profit, after all costs of the business have been allocated, will trigger automatic sharing in the resulting gains.

As of 1 July 2015 till 30 June 2020, the employees, being represented at the 2015 gold wage negotiations by unions the Association of Mineworkers and Construction Union, the National Union of Mineworkers, Solidarity and UASA, will benefit from automatic profit sharing should a company’s performance result in a profit.

This means that, between 3% and 5% of profits earned on average over the preceding six months will be equally shared amongst all employees.

The profit share will not be capped and will be in addition to any production or safety allowances or bonuses earned, and paid to employees quarterly in arrears.

However, if the profit margin at a business unit level, after all costs have been allocated, falls below a margin of 6%, this would trigger an automatic review of the operating unit.

A consultation process would then begin to jointly find measures to restore the viability of the business unit and avoid job losses. Should these measures not be successful, voluntary and, if necessary, statutory consultation will begin in respect of job losses.

In addition to the  profit share, the offer comprises social and employment guarantees, based on conditions at the time this agreement is concluded. The core components are:

  • Guaranteed employment provided that the profit margin at operating unit level does not fall below a margin of 6%.
  • Guaranteed annual increases in basic wages for entry-level underground workers from 1 July each year. The offers range from increases of between 7.8% and 13%. In the case of mine workers, artisans and officials, the offers range from 4.5% to 6%.
  • The creation of a special purpose vehicle(SPV) funded by the companies to address housing and living conditions of employees, and to ensure that employees and their families have a choice of where and how to live. The SPV would aim to benefit from economies of scale to reduce the cost of housing and speed up delivery. The living-out allowance (LOA) would continue at its current level until the SPV is able to deliver affordable and desirable outcomes for all employees.
  • Significant commitment to alleviate employee indebtedness with the objective that no employee should be indebted, in respect of payroll-administered deductions, by more than 25% of net pay. Personal financial management training and reasonable access to on-site debt counselling services will be provided to all employees.
  • Measures to ensure that all employees may retire with dignity, while at the same time acknowledging the different needs of younger and older employees.
  • A review of training expenditure, in consultation with the unions, with a view to ensuring that the maximum educational and skills enhancements are realised from the industry’s training budgets. The companies party to these negotiations currently spend some R1.5 billion on education and skills development each year.

Finally, to ensure job retention and operational sustainability, the companies ask unions and employees to commit their support existing and new initiatives to enhance operational efficiency, including the introduction of new forms of work organisation, greater diversity of skill acquisition and flexibility, team work and any other mutually agreed measures that will enhance output, efficiencies and the quality of life of employees.

Negotiations, which will resume today, are scheduled to continue till 1 July 2015.

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