Mixed reaction over minimum wage in the private sector

Dar/Moshi. Private sector workers in the country have a reason to smile after the government announced increased minimum wages that will take effect starting next year.

The 2022 wage order repeals the private sector salary scheme of 2013.

The news was yesterday greeted with different opinions from economists, with some noting that the new minimum wage rates would have both positive and negative effects.

The senior lecturer at the College of Business Education (CBE), Dr Dickson Pastory, went as far as saying that some employers may reduce the number of employees so that they can afford to pay the new salaries, thus affecting the scope of employment.

At the same time, an expert on economic issues, Dr Margret Tweve, saw the move as an impetus to bring more development through the private sector that has largely employed more workers. The minimum wage for the private sector was announced by the minister in the Prime Minister’s Office responsible for Labour, Youth, Employment and the disabled, Prof Joyce Ndalichako, through the government statement No. 697 of November 25, 2022.

However, the new order will come into effect on January 1, 2023 when the minimum wage order for the private sector issued in 2013 will be repealed. The new wages touch about 12 sectors; Agriculture, Health, Communication, domestic and hotel work, personal security services, energy, transportation, construction, mining, private schools and business as well as industrial sectors.

Also, the change has affected the fishing and marine services sector, among others, with the law giving permission to the employer to pay the employee more than the minimum as long as he does not pay the employee below the announced level.

The announcement comes five months after Prof Ndalichako stated that the government was in the final stages of disclosing the minimum wage for the private sector, while opening the 63rd general meeting of the Association of Tanzania Employers (ATE). Through the law, in addition to paid annual leave, an employee will be entitled to a holiday allowance once every two years of service and a lorry driver will be entitled to an allowance for travel distance and stay outside his station.

In the new rates, an employee working in restaurants, lodges and bars will be paid a minimum of Sh150,000 per month, mid-range hotels Sh180,000 and tourist hotels will be paid Sh300,000.

Domestic workers who do not live in the employer’s household will not be paid less than Sh120,000 while those who are not in that group will be paid Sh60,000 per month while domestic workers employed by diplomats and big businessmen will be paid a minimum of Sh250,000 .

Workers in the communication services will be paid a minimum of Sh500,000 while workers in broadcasting/advertising and media services, post offices and courier services will be paid a minimum of Sh225,000.

In large tourist hotels, an employee will be paid a minimum of Sh300,000, medium hotels Sh180,000, while in large and international companies workers in the security service will be paid Sh222,000 while small companies will be paid Sh148,000.

In the Energy sector, international companies will be paid Sh592,000 and small companies Sh225,000 while in the transport sector, those working in aviation services will be paid Sh390,000.

Director of Policy for Tanzania Private Sector Foundation (TPSF), Mr Zachy Mbena, said the move was welcomed because the existence of a system that coordinates salary levels increases morale even though there were private sectors that pay employees more due to their performance.

“If the value of the relevant cadre is high, then the market determines the payment rates, but I applaud the government’s efforts when it brings coordination of matters concerning people’s rights…,” said Mr Mbena.

For his part, the secretary general of the Federation of Trade Unions of Tanzania (Tucta), Mr Henry Mkunda, said that until the government announced the minimum wage for the private sector, there was a process that took five years. “The process started five years ago, we started creating minimum wage committees for public servants and private institutions. So this is the result of the work we started doing for a long time,” he said. Mr Mkunda added: “We are grateful for this step and even if you look at the proposed standards, they are friendly compared to previous years, except for a few sectors that we believe will be worked on.”

However, Dr Pastory said, “The positive result is that the government will increase its income through the PAYE tax. Therefore, if the salary increases, the Paye increases as well,” said the economist.

He also said that the increase may cause employers to hire fewer workers to reduce operating costs, but it may also increase inflation in the economy, thus increasing people’s living costs.

For her part, Dr Margret Tweve noted that, “Even though not everyone will be conversant with the rates, this step is going to be a motivation in the private sector’s performance in the country.”