The Earnings Threshold has been amended from the 2011 threshold of R172 000 per annum to R183 008.00 per annum with effect from 1 July 2012 and employers are urged to commence an investigation to ascertain the impact of the increased earning threshold on their salary bills. This is according to Johan Botes, Employment Director at Cliffe Dekker Hofmeyr business law firm.
Botes explains that on 26 April 2012, the Minister of Labour announced the Employment Conditions Commission (Commission) would 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,” he explains.
“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 with his employer. Employment contracts should carefully be scrutinised to ensure that such rights are not created unintentionally,” notes Botes.
He says that 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,” he adds.
The amendment was promulgated by the Minister of Labour, Nelisiwe Mildred Oliphant on 1 June 2012.
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