In May 2011 the Department of Labour increased the earnings threshold for employees which exists in terms of the Basic Conditions of Employment Act. Since 2008, this threshold has been an annual remuneration of R149,736; this has now been increased to R172,000.
An employee's 'earnings' means his or her "regular annual remuneration before deductions" - that is, the employee's own contributions to income tax, pension, medical insurance and similar payments, but expressly excluding similar contributions made by the employer in respect of the employee. Such remuneration does not include subsistence and transport allowances received, achievement awards and payments for overtime worked.
For employers, the effect of this amendment is that any employee earning more than R172,000 per year will now fall outside the scope of certain basic conditions of employment which would ordinarily apply in terms of the Basic Conditions of Employment Act. These affected conditions of employment will accordingly not apply to such employees, unless otherwise agreed between the employer and employee. Some of the practical implications of the threshold are as follows:
- The ordinary working hours of employees who earn below the threshold are limited to 45 hours per week, with a maximum of nine hours per day if the employee works five days a week or less and five hours per day if the employee works more than five days a week. For employees who earn above the threshold, these limits will not apply, unless otherwise agreed between the employer and employee.
- In terms of the Basic Conditions of Employment Act, employees may be required to work overtime only by an agreement reached with their employer to that effect. Employees earning below the threshold may not be required to work overtime for more than 10 hours a week and 12 hours a day. These employees are also entitled to payment of at least one and a half times their ordinary wage for such overtime worked. An agreement to work overtime reached with an employee who earns above the threshold will not be automatically subject to these statutory conditions.
- The Basic Conditions of Employment Act also provides that a written agreement between an employer and employee may require that employee to work for up to a maximum of 12 hours a day without receiving overtime pay. Such an agreement with an employee who earns below the threshold may not require the employee to work more than 45 ordinary hours per week, more than 10 hours overtime per week or on more than five days per week. An agreement with an employee who earns above the threshold is not subject to these conditions.
- In terms of the Basic Conditions of Employment Act, a collective agreement may determine that an employee's ordinary working hours and overtime be averaged over a period of up to four months. During this period, an employee who earns below the threshold cannot be required to work more than an average of 45 ordinary hours or five hours of overtime per week. All of these conditions will not apply automatically to employees earning above the threshold, unless the collective agreement expressly includes and binds such employees as well.
- Thanks to the Basic Conditions of Employment Act, employees who earn below the threshold are entitled to meal intervals of at least one continuous hour for every five continuous hours worked, and must be compensated for work required during meal intervals. Their meal intervals may be reduced to a minimum of 30 minutes only by written agreement or be removed entirely if the employee works less than six hours a day. These employees are further entitled to a daily rest period of at least 12 hours after work and a weekly rest period of at least 36 hours, which must include a Sunday. By contrast, the meal intervals and rest periods of employees earning above the threshold are not subject to these statutory conditions.
- Employees earning below the threshold must be paid double their ordinary wage for each hour worked on a Sunday, while employees who ordinarily work on a Sunday must be paid one and a half times their ordinary wage. By contrast, employees earning above the threshold will not be automatically entitled to such enhanced remuneration for Sunday work. Their remuneration will instead be solely determined by the agreed terms and conditions of their contract of employment.
- Employees earning below the threshold who agree with their employer to work on a public holiday must, in terms of the Basic Conditions of Employment Act, be paid their normal daily wage for such public holiday, as well as the amount earned for the actual work performed on the particular day. Employees who earn above the threshold must also agree to work on public holidays, but will not be automatically entitled to such enhanced remuneration for the day. Their compensation for the day will be exclusively regulated by contract.
- Night work (work done between 18:00 and 06:00) may be required only by way of an agreement between the employer and employee. Employees earning below the threshold must be compensated for night work by the payment of an allowance or a reduction in working hours, and transportation must be available to and from work for the purposes of performing night work. Employees earning above the threshold will not be covered by these limitations and benefits pertaining to night work.
- Where employees earn an annual remuneration that falls between the old threshold and the new threshold, this may have an effect on their terms and conditions of employment going forward; in such cases employers should check to see whether their legal obligations to such employees may have increased by operation of the Basic Conditions of Employment Act.
The other practical consideration is the fact that an increase of annual remuneration to a point above R172,000 would obviously place such employees beyond the scope of the above statutory provisions. This might be logistically sensible where certain employees now earn just below the new threshold.
The amended threshold took effect on July 1 2011.
For further information on this topic please contact Alex Ferreira or Louietta Du Toit at ENSafrica by telephone (+27 11 269 7600), fax (+27 11 269 7899) or email ([email protected] or [email protected]).