The Department of Labour has during May 2011 increased the earnings threshold for employees, which exists in terms of the Basic Conditions of Employment Act (“the BCEA”). The threshold has since 2008 been an annual remuneration of R149,736.00 (one hundred and forty nine thousand, seven hundred and thirty six rands), which has now been increased to R172,000.00 (one hundred and seventy two thousand rands).
An employee’s “earnings” means his or her “regular annual remuneration before deductions”, i.e. the employee’s own contributions to income tax, pension, medical insurance and similar payments, but expressly excludes 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 R172,000.00 per year will now fall outside the scope of certain basic conditions of employment which would ordinarily apply in terms of the BCEA. These affected conditions of employment would accordingly not apply to such employees, unless otherwise agreed to between the employer and the employee. The following are some of the practical implications of the threshold:
- 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 an employee works five days a week or less, and five hours per day if an employee works more than five days a week. For employees who earn above the threshold, these limits would not apply, unless otherwise agreed to between the employer and employee.
- In terms of the BCEA, employees may be required to work overtime only by an agreement reached with their employer to that effect. Employees earning below the threshold, in addition, may not be required to work overtime for more than 10 hours a week and 12 hours a day. These employees are moreover 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 would not be automatically subject to these statutory conditions.
- The BCEA 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 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 BCEA, 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 would not be required to work more than an average of 45 ordinary hours or five hours of overtime per week. All of these conditions would not apply automatically to employees earning above the threshold, unless the collective agreement expressly included and bound such employees as well.
- Employees who earn below the threshold are, thanks to the BCEA, 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 only be reduced to a minimum of 30 minutes by written agreement, or be done away with 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, whilst an employee who ordinarily works on a Sunday must be paid one and a half times his or her ordinary wage. By contrast, employees earning above the threshold would not be automatically entitled to such enhanced remuneration for Sunday work. Their remuneration would, 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 BCEA, 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 would also have to agree to work on public holidays, but they would not be automatically entitled to such enhanced remuneration for the day. Their compensation for the day would be exclusively regulated by contract.
- Night work (work done between 18h00 and 06h00) may only be required by way of an agreement reached between the employer and employee. Employees earning below the threshold must be compensated for such night work by the payment of an allowance, or by a reduction of their working hours, and transportation must be available to and from work for the purposes of performing night work. Employees earning above the threshold would not be covered by these limitations and benefits pertaining to night work.
Where employees will now earn an annual remuneration that falls between the old threshold (R149,736.00) and the new threshold (R172,000.00), this may have an effect on their terms and conditions of employment going forward and, in these cases, employers should check to see whether their legal obligations to such employees may have increased by operation of the BCEA.
The other practical consideration is the fact that an increase of annual remuneration to a point above R172,000.00 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 will be effective from 1 July 2011.