25 May 2011

Increase in the earnings threshold: repercussions for employers

The Minister of Labour increased the Earning Threshold contained in the Basic Conditions of Employment Act 75 of 1997 (the BCEA) on Friday, 13 May 2011, from R149,736.00 to R172,000.00 per year. The amendment is effective as from 1 July 2011.

The effect of this increase is that employees earning below the new threshold are entitled to be remunerated for overtime, work on public holidays and Sundays in terms of the BCEA. Employers with staff earning above the previous threshold but less than the new one should be aware of the right of their employees to the payments for overtime and work on Sundays.

“Employees may lodge a complaint with the Department of Labour for any breaches of the BCEA, including payment of remuneration where they were entitled to, for instance, payment for overtime, and this was then not paid by their employer,” she notes.

Employers may thus have to face up to an inspector from the Department of Labour investigating the employee complaint. The labour inspector may issue a compliance order to the employer which can be made an order of court.

This has significant implication for the employer, especially if faced with multiple claimants and backdated claims. It is also possible that employees may bring a contractual claim to the Labour Court where the basic condition of employment forms a contractual right between the parties.

Employees earning in excess of R172 000, are excluded from the operation of sections 9, 10, 11, 12, 14, 15, 16, 17(2) and 18(3) of the BCEA. "Earnings" means an employee's regular annual remuneration before deductions. It excludes contributions made by the employer in respect of the employee. Where the employee receives subsistence and travel allowances, achievement awards and payment for overtime worked shall not be regarded as remuneration.

Where employees earn above the earning threshold in terms of the Act, they no longer benefit from certain provisions of the Act. This includes but is not limited to overtime payments and payment for work done on Sundays.

Where employers have framed the benefit policies in accordance with the current earning threshold, they need to revisit the status quo immediately with a view to remedy any kind of bar on benefits to employees who become eligible by virtue of the increase in the earning threshold in terms of the Act.

For a number of employers it makes business sense to remunerate its employees above the Earnings Threshold. The employees are then excluded from statutory payment for overtime, work done on Sundays and certain other provisions relating to the regulation of working time. Where it is not practicable or feasible to remunerate employees above that level, as is the case with thousands of entry-level positions, employers should ensure that their employment contracts and remuneration practices are aligned with the rights afforded to employees in the BCEA.

Sherisa Rajah, Senior Associate, Employment

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