New Earnings threshold
The regulation of working time for employees who earn in excess of certain amount per year (the “earnings threshold”), is different to that of lower earning employees.
Working time is also regulated differently for senior managerial employees even if they earn less than the earnings threshold.
How does this work, and are there other implications?
Increase in threshold
The earnings threshold, which is determined by the Minster of Employment and Labour from time to time in terms of the Basic Conditions of Employment Act of 1997 (the BCEA), has been increased to R224080,30 per year (R18673 per month) with effect from 1 March 2022.
This is an increase of 5,9%.
What is the effect of the threshold?
The effect of the earnings threshold is that the limitations, protections or the right to additional pay afforded by certain provisions of the BCEA do not apply to employees earning in excess of the new threshold.
These provisions are:
– section 9 (hours of work)
– section 10 (overtime)
– section 11 (compressed working week)
– section 12 (averaging of hours)
– section 14 (meal intervals)
– section 15 (daily and weekly rest periods)
– section 16 (pay for work on Sundays)
– section 17 (2) (night work), and
– section 18 (3) (public holidays on which the employee would not ordinarily work)
The previous threshold was R211596 per year.
This means that employees that currently earn between R211596 and R224080 per year (and were previously excluded from benefiting from these provisions) now join the ranks of those who are entitled to payment for overtime, double pay for work on public holidays, etc., notwithstanding the fact that their contracts might state that they do not qualify.
What is meant by earnings?
For purposes of the new threshold “earnings” means the regular annual remuneration before deductions, i.e., income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee.
Subsistence and transport allowances received, achievement awards and payments for overtime worked are not regarded as remuneration for the purpose of this notice.
Can existing contracts be changed?
Existing contractual provisions with employees who earn in excess of the threshold that are more favourable to the employee, for example provisions that provide for additional pay for overtime, Sunday work etc., remain valid and enforceable.
The 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 managerial employees?
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.
While the scope of the exclusions for senior managerial employees is slightly wider than the provisions mentioned above, the differences are subtle and we shall not elaborate on them in this article.
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”.
Other implications of threshold
The earnings threshold has some other implications, such as –
· Monetary claims: Employees may refer a dispute concerning the failure to pay any amount owing in terms of the BCEA, a contract of employment, a sectoral determination or a collective agreement to the CCMA (Section 73A of the BCEA).
Those earning above the threshold have to refer such disputes to the Labour Court.
· Fixed-term contracts: Employees who earn below the threshold and are employed for a period exceeding 3 months, may be regarded as permanently/indefinitely employed if there is no a justifiable reason for the limited duration of the contract (Section 198B of the LRA).
Those earning above the threshold do not enjoy the same protection.
· Unfair discrimination disputes: Unfair discrimination disputes have to be referred to the CCMA for conciliation.
If unresolved, employees earning below the threshold may refer such disputes to the CCMA for arbitration (Section 10(6)(aA) of the EEA).
Those earning above the threshold have to refer such disputes to the Labour Court for adjudication.
· Temporary employment services (TES): Employees earning below the threshold may be deemed permanent employees of the client of the TES in certain circumstances, for example if they are placed with the client for a period exceeding 3 months or if they are not merely substituting an employee who is temporarily absent (Section 198A(3)(b) of the LRA).
The same does not apply to those earning above the threshold – they remain the employees of the TES.