Lonmin wage agreement explained

On September 18 Lonmin and the National Union of Mineworkers, AMCU, Solidarity, UASA as well as employee delegates signed an amendment to an existing two-year wage agreement, which had been finalised in December 2011.

As communicated at the time, the main features of the agreement included a signing bonus of R2000 and an average rise in wages of between 11 and 22% for all employees falling between Category 3-8 bargaining units. This included the previously agreed increase of 9-10%. The agreement also addressed issues of promotion for some categories of workers as well as other allowances.

Subsequent reporting of the wage agreement has mostly highlighted a 22% increase. In the absence of any context, this figure is misleading and has contributed to widespread confusion. 

The wage settlement is detailed in the fact sheet below, which was disseminated to the market and the media on 20 September 2012.

Payment of Bonuses

In recent weeks, it has emerged that some Lonmin employees were under the mistaken impression that their once off bonus payments had been reversed, based on the data on their payslips.

The following explanation of Lonmin's payroll periods as well as a breakdown of the relevant bonus detail on pay-slips should provide useful context and assist in setting the record straight:

Most employees received their R2000 bonus on Thursday 27^th September and had access to their money within 24 hours. This was in line with the promise that bonuses would be paid on or before Monday 01^st October. It's worth noting that Lonmin's payroll department put in extra effort to make this happen so that employees had access to their money in time for the weekend.

Some employees (less than 0.5%) were paid later, either because they did not clock in correctly or because it could not be verified at the time that they were back at work. Where this was the case, the anomalies were addressed afterwards.

Lonmin's different payroll periods

Lonmin has four different payroll periods, which are detailed below. 

In each case, there is a cut-off date for payroll related input, which is generally between 9 and 11 days before the end of the period, taking weekends into account. During this time, all relevant data is processed and pay-slips are prepared for distribution. Note the cut-off dates highlighted below are illustrative but should be useful in explaining the principle. 

Relevant payroll detail as it applies to the payment of the R2000 "Checha Buya" once-off bonus

Any payment made after the relevant pay run closes and which is not part of monthly pay is reflected on pay-slips as an advance payment or ‘middle of the month payment in advance'. The R2000 bonus falls into this category. For example, those employees falling within the 01^st - 31^st payroll run were therefore paid their R2000 bonus after the 19^th September cut-off date for pay related input. Therefore, the payment would have been reflected on their October pay-slip, as follows: 

§  On the earnings side there was an entry described as an early return or "Checha Buya" bonus of R2000.

§  On the deductions side the R2000 was recorded as an advance as the money had already been physically paid into the employee's bank account on 28 September.

The two entries balance each other so that the effect at month end is ZERO. Failing to do so would result in a double payment.

§  The tax payable on the R2000 bonus was deducted from October earnings and reflected on the month-end pay slip.

While the information on our pay-slips is in line with standard payroll practice, we acknowledge that it may be confusing for some of our employees and we are already working on a simplified version. We are also working on an internal education campaign to promote a better understanding of the data.

Statement issued by Lonmin, December 11 2012

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