Another official decision that imposes a minimum wage to be paid to workers in the private sector has been issued by the government. In January 2024, the National Wages Council (NWC) issued a decision requiring private sector businesses—regardless of their ability or profitability—to raise the minimum monthly wage from EGP3,000 to EGP3,500, and accordingly amend all other wages paid by the institution. On 8 April 2024, NWC issued decision no. 27 for year 2024 signed by Hala Elsaid, Minister of Planning and Economic Development, and head of NWC, raising the minimum monthly wage in the private sector to EGP6000 as of 1 May 2024. The decision stipulated in its second article that in case a corporation suffers economic distress and cannot honour the minimum wage decision it may apply for exemption before a deadline of 15 May 2024. The third article of the NWC’s recent decision exempts micro-enterprises with fewer than 10 employees from the EGP6,000 minimum monthly wage decision.
The recent NWC decision reveals that the government continues to impose guardianship over the full private sector regardless of segment or activity. It appears oblivious to the hardships and economic challenges the private sector is facing because of economic and financial fluctuations, let alone inflation rates that jeopardise its ability to adjust to the market. Meanwhile, the government persists in piling burdens over the private sector’s shoulders, before which that sector often stands helpless.
In February 2024, I wrote that under flourishing and profitable market conditions, and in the spirit of competitiveness, the private sector never hesitates to reassess its wages pyramid. This is not done to comply with government decisions, but in order to hold on to skilled, experienced staff and workers that develop and enhance a business’s activity and increase its profits.
In case a private sector business flounders, whether owing to adverse economic conditions, or to flaws in its own management, it would inevitably reevaluate its position in order to overcome the crises. This involves a plethora of options that involve cost cutting through such measures as shrinking its activity, revising wages or pay, or resorting to layoffs. Such measures are intended to save the ship from sinking until the storm can be weathered, by which time manpower and wages may be reassessed according to market considerations.
In an editorial dated 18 February 2024, under the title “Recent decision to raise minimum wage: How is private sector to cope?” I posed the following questions: “Does the State believe that imposing a blanket minimum wage on the private sector, is in the best interest of Egyptians? And what would it do if the outcome is a wave of bankruptcies that leads to business closures and unleashes an army of unemployed individuals on the market? Again, what would it do if the private sector responds by rightfully aligning the raised wage burden with the size of manpower employed, resorting to layoffs? The collapse of or damage to private businesses or industries because of pressure imposed by wage policies, constitutes a very serious matter; the government will have to bear the consequences and shoulder the responsibility of remedying the aftermath.” While the government boasts of being keen on guarding ‘the interests of citizens’, it is actually taking a gamble with their job stability.
“The government,” I wrote, “has every right to legislate for minimum wage and the ensuing adjustment of wage pyramid, but only when it comes to State institutions and government apparatuses; as long as their resources allow it, then good for those Egyptians who work for them. But, as the Egyptian folk saying goes: “If you want to splurge, then splurge from your own pocket”. It is unconscionable that the government exercises an unchecked depletion of the capacity of the private sector under the pretext of championing ‘the poor citizen’, while it ends up practically jeopardising that ‘poor citizen’.” What makes government institutions or apparatuses comply with the decision to raise minimum wage without sounding any cry for help, is not that they can afford it; government institutions enjoy the protection and support of the State which covers their losses and their failure to settle any ensuing liabilities. So how can the private sector too enjoy such an umbrella of immunity and support?
On a practical note, not just to cry over spilt milk, how can we get out of this dire situation? There must be clear measures in place to handle decisions to raise minimum wage in the private sector. However, let me first highlight that, auspiciously, the recent decision included a clause that allows businesses in economic distress to appeal for exemption from raising the minimum wage. This clause was absent in the NWC’s January 2024 decision to raise minimum wage to EGP3500. In case of Watani, which has been in economic straits for several years now, it had appealed to NWC for exemption a few years ago when the House of Representatives passed legislation to raise minimum wage, and had obtained a positive response from NWC; but when Watani submitted a documented appeal for exemption from the NWC January 2024 decision, the response was that was no provision for exemptions.
There must be clear criteria announced in advance for how the private sector can deal with any decision or legislation imposing minimum wage. It is not enough to allow an organisation to apply for exemption. What is a business to do if its application is rejected? Or what can it do if NWC reduces the minimum wage that should be paid by this organisation, yet the new figure remains above its capacity? It is very important to have clear transparent criteria and measures in the first place. In this context, I suggest the following:
Businesses that submit to the relevant authorities official budgets approved by accredited auditors, proving their losses, are to be fully exempted from compliance with the minimum wage. This does not exempt them from their commitment to pay the social insurance and taxes required on the wages they pay.
Businesses that submit official budgets revealing profits, are not to be required to raise their wage pyramids so that it achieves the minimum wage requirements or the closest to it that does not jeopardise profit margins.
In all cases, no guardianship or any authority should be imposed over the right of the private sector to review the size of their workforce, whether by increasing or decreasing it, in a way that would tamper with their freedom to take necessary measures to confront market challenges, the ability to stay afloat, or the right to lay off workers.
Watani International
19 April 2024