By
Paulinus I. Iyika, PhD, FCA
It is no longer news that the Federal Government of Nigeria
has agreed to raise the Minimum Wage to N70,000. This is a whopping 133.33%
increase from the current N30,000.
The purpose of this article is not to discuss the adequacy or otherwise of this amount but to educate as many workers out there who believe they will be receiving an increased monthly salary equivalent to 133.33%.
First of all, what is minimum wage?
Strictly speaking, the minimum wage is the lowest legal
hourly pay that employers can give workers. This rate varies by country, state,
and sometimes even by city. It is set by governments through enacting into law
to ensure a minimum standard of living for employees.
However, national minimum as it is in Nigeria requires the
Federal Government to set a flat rate for all employers both public and private
sectors. This is in contrast to some countries where Sub-National governments
are allowed to fixed wages. In the US for example , some states have minimum
wages higher than the federal government.
Back to the main issue.
I came across a formula making the round on social media
which is misleading. According to the formula, everybody should expect a
133.33% increment.
X=(a*b)/c
Where :
X =New salary (based
on b)
a=Current salary
b=new minimum wage
c=current minimum
wage
Hence , an employee on #52,000 should expect about N121,000.
This is utterly misleading and it will be important to
clarify this in order to manage expectations. Don’t begin to spend money that
does not and will never exist.
For those on the lowest rung of income level, say those on
GL 1 for example who earn the lowest or some persons in private sector say
cleaners, etc. , the expectation is higher because they are the most hit in the
economy.
However, as the grade level increases, the incremental
effect reduces across board. At the end, someone earning say #300,000 will not
get same percentage increment like someone at the lowest level. Applying same
rate of increase will normally lead to #699,999 for someone earning #300,000
presently.
The responsibility to determine the variations across board
is domiciled with the National Salaries Income and Wages Commission(NSIWC).
They will carry out consequential adjustment which refers to the revisions in
the salary structure across various levels of employment that follow an
increase in the minimum wage. When the minimum wage is increased, it doesn't
only affect the lowest-paid employees; it also necessitates adjustments for
higher salary brackets to maintain wage differentials and ensure equity within
the pay structure.
The consequential adjustment typically involves:
1. Review of Salary Structures: The NSIWC reviews the entire
salary structure of the public and private sectors to determine how the new
minimum wage affects different pay grades.
2 Maintaining Wage Relativity: Ensuring that the new minimum
wage does not compress the wage structure, meaning that pay differentials
between various grades and levels of employment are maintained. This helps in
preserving the incentives for career progression and maintaining motivation
among higher-skilled workers.
3 Incremental Adjustments: Incremental adjustments are made
to the salaries of employees in different grades. These adjustments are
calculated to ensure that each grade receives a proportionate increase that
reflects the rise in the minimum wage.
4 Equity and Fairness:
Ensuring that the salary adjustments are fair and equitable
across all employment levels. This involves making sure that the salary
increases are proportionate and justified based on job responsibilities,
experience, and qualifications.
5. Budget Impact Analysis: Assessing the financial
implications of the salary adjustments for employers, particularly in the
public sector. This includes determining how the increased wage bill will be
funded and its impact on government budgets and spending.
6. Negotiations and Consultations:
Engaging with labor unions, employee representatives, and
other stakeholders to negotiate and agree on the new salary scales. This helps
in achieving consensus and minimizing disputes.
7. Implementation Timeline: Establishing a timeline for the
implementation of the consequential adjustments. This includes setting dates
for the adjustments to take effect and ensuring that all parties are aware of
the changes.
9. Compliance Monitoring: The NSIWC monitors compliance with
the new salary structures to ensure that employers adhere to the adjustments
and that employees receive their due increases.
In summary, consequential adjustment by the NSIWC ensures
that an increase in the minimum wage leads to a comprehensive revision of the
entire salary structure, maintaining fairness and equity while considering the
financial capabilities of employers.
Do not build castles in the air !
NB: The opinions expressed here are entirely mine and not
the organization I represent. It is also aimed at educating not for advisory
purposes.
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HAUSA: Kuna iya rubuto mana tsokaci ko tambayoyi a ƙasa. Tsokacinku game da abubuwan da muke ɗorawa shi zai tabbatar mana cewa mutane suna amfana da wannan ƙoƙari da muke yi na tattaro muku ɗimbin ilimummuka a wannan kafar intanet.