National Minimum Wage introduced in Uganda

Posted in Eastern Africa Blog post

This blog was written by Agnes Nabaggala, Shonubi, Musoke & Co. Advocates (Uganda), alliance firm of Norton Rose Fulbright.

The National Minimum Wages Act (2018), signed into law in Uganda on 1 January 2019, is the first update to the legislation since 1957 and signifies a major step change in Ugandan employment law.

The legislation aims to curb exploitation and improve the quality of life for Ugandans - especially unskilled labourers, and reduce the prevalence and impact of strike action. It introduces heavy penalties for non-compliance, including hefty fines or imprisonment.

Under the Act, sector-specific boards, comprising various government departments and ministers, will recommend wage brackets for varying classes of workers across particular sectors, as well as sector-specific terms of employment including working hours and work conditions. These recommendations will then need to be approved by Cabinet before going live.

Employees in sectors without a prescribed minimum wage may still engage in collective bargaining with their employers, or authorise a third party to negotiate on their behalf to establish a minimum wage, which will be valid for 5 years once gazetted. If no agreement is reached, the matter may be referred to the Industrial Court for a resolution.

A major challenge to the efficacy of the Act is the fact that a large proportion of the Ugandan population works in the informal sector. According to the Uganda National Household Survey, only 38% of the nine million employed Ugandans were in formal paid employment as of 2016.

A further concern is that a rise in the cost of labour could lead to lay-offs, as employers either find alternative means of output such as machinery, or export the labour to countries where employment is cheaper, thereby exacerbating unemployment.

As Uganda has no unemployment benefits and limited penetration of any sort of social protection, enforcing the Act should be approached with caution owing to the adverse effects it could potentially have on levels of employment.

Nevertheless, employers should be mindful that with this law, employees may well feel more empowered to agitate for salary increments and we should expect a good amount of litigation in this regard, as employers struggle to keep up with employees’ demands which are now backed by statute.