During December 2010 the Minister of Labour requested the Employment Conditions Commission to review the Earnings Threshold determined in terms of the Basic Conditions of Employment Act 75 of 1997 (the BCEA). Employees earning in excess of the Earnings Threshold are excluded from specific provisions of the BCEA, notably the obligation to pay overtime and extra remuneration for work performed on Sundays. Employers are not obliged to provide these employees with a meal interval and also receive a reprieve from certain obligations relating to night work and additional remuneration for work on public holidays.
Prudent employers have reviewed their employment contracts to ensure no contractual right to the above exclusions are created. Where this was not done, by way of example, an employee earning above the threshold may be excluded from claiming statutory overtime, but may have a claim for overtime in terms of the employment contract concluded. Employment contracts should carefully be scrutinised to ensure that such rights are not created unintentionally.
The Earnings Threshold is also an important and relevant factor to consider when reviewing employee salaries. The indirect variable salary costs arising from the BCEA (including payment for overtime, public holidays and work performed on Sundays) can play havoc with the labour portion of any employer's budget.
The employer can achieve a greater level of stability by ensuring that employees are remunerated in excess of the Earnings Threshold. Even though irregular overtime payments are not included in determining whether an employee earns in excess of the Earnings Threshold, in many instances the additional cost of increasing employee remuneration to above the Earnings Threshold may be offset by the saving achieved when the obligation to pay the variable costs falls away. Employers paying in excess of the current Earnings Threshold of R149 736,00 per annum should consider awaiting the announcement of the new Earnings Threshold before finalising decisions on annual increases for 2011.
The closing date for representations to the Employment Conditions Commission is 8 January 2011. The current Earnings Threshold has been in place since 14 March 2008.