Minister of Employment and Labour Thulas Nxesi has increased the earnings threshold that determines whether certain provisions of the Basic Conditions of Employment Act (BCEA), the Employment Equity Act (EEA), and the Labour Relations Act (LRA) apply to an employee.
From 1 April, the new earnings threshold will be R254 371.67 a year (R21 197.63 a month), in terms of a notice published in the Government Gazette on 5 March.
The previous threshold was R241 110.59 (about R20 093 a month) a year. In other words, the threshold has been increased by R13 261.08, or 5.5%.
“Earnings” are defined as an employee’s regular annual remuneration before the deduction of income tax, retirement fund contributions, medical scheme contributions, and “similar payments”) but exclude contributions made by an employer on behalf of an employee. Remuneration also excludes subsistence and transport allowances, achievement awards, and payment for overtime worked.
Commission is remuneration if it forms part of wages. If a payment fluctuates, it must be calculated over a period of 13 weeks, or if the employee has been in employment for a shorter period, that period.
The implications of the earnings threshold for the application of labour legislation are:
Hours of work
In terms of the BCEA, employees earning above the threshold are excluded from the provisions that regulate:
- ordinary hours of work (section 9);
- overtime (section 10);
- compressed working weeks (section 11);
- averaging of the hours of work (section 12);
- meal intervals (section 14);
- daily and weekly rest periods (section 15);
- Sunday pay (section 16);
- pay for night work (section 17(2)); and
- pay for work on public holidays (section 18(3)).
Presumption of employment
In terms of section 198A(3)(b) of the LRA, employees earning below the threshold may be deemed permanent employees of the client of a temporary employment service (a labour broker) in certain circumstances. For example, if they are placed with the client for more than three months, or if they are not merely substituting for an employee who is temporarily absent. The same does not apply to those earning above the threshold – they remain employees of the labour broker.
In terms of section 198B of the LRA, employees who earn below the threshold and are employed for more than three months may be regarded as permanently/indefinitely employed if there is no justifiable reason for the limited duration of the contract. Those earning above the threshold do not have the same protection.
Monetary claims
In terms of section 73A of the BCEA, employees may refer to the Commission for Conciliation, Mediation, and Arbitration (CCMA) a dispute concerning a failure to pay any amount owing in terms of the BCEA, a contract of employment, the National Minimum Wage Act, a sectoral determination, or a collective agreement. Those earning above the threshold must refer such disputes to the Labour Court.
Unfair discrimination disputes
In terms of section 10(6) of the EEA, a dispute concerning unfair discrimination must be referred to the CCMA for conciliation. If the dispute is unresolved, employees earning below the threshold may refer the dispute to the CCMA for arbitration.
Employees earning above the threshold, on the other hand, must refer the dispute to the Labour Court for adjudication, unless the dispute relates to alleged unfair discrimination on the grounds of sexual harassment, or both parties agree to arbitration.
Impact on existing contracts
According to Labourwise, existing contractual provisions with employees who earn above the threshold that are more favourable to the employee – for example, provisions that provide for additional pay for overtime and Sunday work – remain valid and enforceable. An employer may not simply take these away. If an employer wants to remove or change existing terms and conditions of employment, it will have to be negotiated with the employee.
What about senior managers?
Most of the provisions of the BCEA that regulate working time do not apply to senior managerial employees, even if they earn less than the threshold. Although the scope of the exclusions for senior managerial employees is slightly wider than the provisions mentioned above, the differences are subtle, Labourwise says.
A senior managerial employee is “an employee who has the authority to hire, discipline and dismiss employees and to represent the employer internally and externally”.
Disclaimer: The information in this article does not constitute legal or professional advice.
