Rising Wages, Rising Claims - What Contractors Need to Know

South Africa’s annual increases to the national minimum wage are intended to promote fair pay and reduce inequality. For contractors and project owners, however, these increases can have significant cost implications during the life of construction projects.

The National Minimum Wage Act 9 of 2018 (NMWA) came into effect on 1 January 2019 and applies to employees across all sectors. In accordance with section 6 of the NMWA, the national minimum wage is reviewed annually to advance economic development and social justice.

Each annual increase therefore carries both social and commercial consequences, particularly in labour-intensive industries such as construction, where labour costs represent a significant portion of overall project expenditure.

In accordance with the most recent annual review, South Africa’s national minimum wage has increased again, bringing some relief to construction workers and other low-income employees across the country.

From 1 March 2026, the national minimum wage increased from R28.79 to R30.23 per hour, representing roughly a 5% increase.

For many workers in the construction sector, particularly general labourers and entry-level or unskilled workers, this new rate sets the legal minimum that must be paid for every ordinary hour worked.

Employers operating in the construction industry must therefore ensure that their pay structures and payroll systems reflect the updated minimum wage to avoid non-compliance with labour legislation.

Paying below the national minimum wage is a contravention of the NMWA. Workers earning below the current ministerial threshold of R261 784.45 per annum may refer a dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) concerning the failure to pay any amount due in terms of the NMWA.

Claims for the recovery of unpaid amounts are arbitrable in terms of section 73A of the Basic Conditions of Employment Act 75 of 1997 (BCEA).

Employers may apply for an exemption from paying the national minimum wage in terms of section 15 of the NMWA, although such exemptions are subject to strict requirements and approval processes.

For contractors involved in long-term construction projects, increases in the national minimum wage may lead to unexpected labour cost increases, particularly where tenders were submitted months or years before construction begins.

A contractor may be able to recover additional costs caused by a minimum wage increase after the submission of its tender, but this will depend on the form of contract used and the specific provisions dealing with changes in legislation or statutory costs.

The standard form building contracts used by contractors in South Africa – including the JBCC, GCC, NEC3 and FIDIC suites of contracts – generally allow contractors to claim additional costs when there is a change in legislation that affects the cost of the works.

Under the JBCC, a claim for a national wage increase would be made under the expense and loss clause (clauses 26.5 and 26.6), with specific reference to the obligation to comply with the law (clause 2.1).

Under the GCC, a claim for a national wage increase will be treated as an adjustment to the contract price due to changes in legislation, with reference to clauses 4.3.1 and 10.1.

Regarding the NEC3, clauses 16.1 and 60.1 can be invoked to create a compensation event, provided that Secondary Option X2 has been agreed to.

In respect of the FIDIC suite of contracts, contractors may claim additional costs resulting from new laws or amendments to existing laws by relying on clauses 1.13 and 20.1.

However, to recover these additional costs, contractors must ensure that they strictly follow the notice and claim procedures set out in each contract. Failure to comply with these procedures will most likely result in claims being time-barred.

In the construction industry, wages may also be determined through collective bargaining agreements or sectoral determinations, which set minimum conditions of employment and pay rates for specific job grades or regions.

These agreements may require employers to pay higher wages than the national minimum wage, depending on the relevant industry agreement.

Workers being paid below these minimum standards may seek relief in terms of section 73A of the BCEA, provided they earn below the ministerial earnings threshold.

For contractors, the annual adjustment to the national minimum wage is therefore more than a compliance requirement. It can directly affect tender pricing, project budgets, labour cost planning, and the financial viability of long-term construction contracts.

Contractors should therefore carefully review their contracts, monitor legislative changes, and ensure that notice requirements are met when wage increases affect project costs.

Failing to do so may result in contractors absorbing labour cost increases that could otherwise have been recovered under the contract, placing additional financial pressure on construction projects.