Amended Earnings Threshold- Effective 1 March 2023
Labour and employment minister Thulas Nxesi has announced (as indicated in the Gazette) a new annual earnings threshold under the Basic Conditions of Employment Act (BCEA), which will have implications for South African employees.
In a Gazette published on Monday, 20 February 2023, Nxesi announced that the new earnings threshold will be R241,110.59 (Two hundred and forty-one thousand one hundred and ten. Fifty-nine) per annum (approximately R20,100.00 (Twenty thousand one hundred) per month) from 1 March 2023.
Previously, the earnings threshold was R224,080.48 (Two hundred and twenty-four thousand and eighty. Four eight) per year (approximately R18,673.00 (Eighteen thousand six hundred and seventy-three) per month).
Earnings referred to in the Gazette is defined as 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.
Provided that subsistence and transport allowances received, achievement awards and payment for overtime worked are not regarded as remuneration for the purpose of the notice.
The threshold is increasing by R17,000.00 (Seventeen thousand), which amounts to a 7.59 (Seven. Five nine) % jump.
According to Global Business Solutions, this has raised some red flags as the increase is out of step with most projections for average inflation in 2023.
“This doesn’t make any sense because the threshold is going to increase by the inflation amount. The inflation amount could even be 7.2%, or the last month’s inflation was 6.9%, so we are not quite sure where the minister got 7.59% from.”
However, even at 7.2%, the in crease is substantial, the group said. Economists predict inflation at 5 (Five) % and 5.5 (Five. Five) % for the year average.
The earnings threshold is the dividing line where certain provisions of the Labour Relations Act (LRA) and the Employment Equity Act (EEA) apply.
The sections covered in these acts are intended to protect vulnerable employees and regulate, amongst other things, hours of work, overtime, work over weekends, lunch breaks and even where labour disputes need to be handled.
Employees earning under this threshold enjoy the full protection of the BCEA, and can, for example, demand overtime pay at a rate of 1.5 times, or legally refuse to do more than the 45 hours of work a week.
However, any employees earning above the threshold are precluded from these automatic protections – meaning they are not automatically entitled to overtime or weekends off, for example.
These issues are still relevant to higher earners, but are typically handled in contract negotiations with respective employers at the time of employment.
According to law firm Cliffe Dekker Hofmeyr, the importance of the new threshold should be understood under the following terms:
- Hours of work: In terms of the BCEA, employees earning in excess of the earnings threshold are excluded from the provisions which regulate ordinary hours of work, overtime, compressed working weeks, averaging of hours of work, meal intervals, daily and weekly rest periods, Sunday pay, pay for night work and pay for work on public holidays;
- De facto employee: In terms of the LRA, employees earning in excess of the earnings threshold are not subject to the deeming provision in accordance with which employees engaged by a temporary employment service/labour broker who are not performing a temporary service are deemed to be employees of the client for purposes of the LRA.
- Automatic employment: Also, in terms of the LRA, employees earning in excess of the earnings threshold fall outside the scope of the provisions relating to fixed-term employees who are deemed to be employed indefinitely after three months (in the absence of justifiable reasons for fixing the term of the contract);
- Dispute handling: In terms of the EEA, an employee earning in excess of the earnings threshold who has a dispute under Chapter two of the EEA relating to unfair discrimination, is not permitted to refer the dispute to the CCMA for arbitration (unless the dispute relates to alleged unfair discrimination on the grounds of sexual harassment, or the parties all agree to arbitration) and is obliged to refer the dispute to the Labour Court for adjudication.
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