South Africa: New earnings threshold and its effect for employers from March 2023

published on 8 March 2023 | reading time approx. 3 minutes

On 20 February 2023, the Minister of Employment and Labour announced an increase in the annual earnings threshold in terms of section 6(3) of the Basic Conditions of Employment Act, No. 75 of 1997 (the “BCEA”). With effect from 1 March 2023, employees who earn less than R241 110.59 per year (which equates to about R20 093.00 per month) will enjoy the full protection of the BCEA, the Labour Relations Act, No. 66 of 1995 (the “LRA”) and the Employment Equity Act, No. 55 of 1998 (the “EA”). The previous earnings threshold was R224 080,30 per year (which equated to about R18 674.00 per month).

What are earnings?

“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.

Earnings excludes subsistence and transport allowances received, achievement awards and payments for overtime worked.

What is the effect of the threshold?

BCEA

In terms of the BCEA certain sections only apply to employees earning below the annual earnings threshold. These sections are as follows:

Section 9, which deals with the ordinary hours of work of employees.
Section 10, which deals with an employee’s entitlement to and rate of overtime pay.
Section 11, which deals with the compressed working weeks.
Section 12, which deals with the averaging of hours of work.
Section 14, which deals with meal intervals.
Section 15, which deals with daily and weekly rest periods.
Section 16, which deals with pay for work on Sundays.
Section 17 (2), which deals with night work.
Section 18 (3), which deals with public holidays on which the employee would not ordinarily work.

The effect of the increase in the annual earnings threshold is that employees who were previously earning less than R241 110.59 per year but more than R224 080,30 per year will now enjoy the protection/have the benefit of the aforementioned sections.

In addition to the above, employees earning below the annual earnings threshold may refer a dispute to the Commission for Conciliation, Mediation and Arbitration (the “CCMA”) concerning the failure to pay any amount owing to that employee or worker in terms of the BCEA, the National Minimum Wage Act, No. 9 of 2018, a contract of employment, a sectoral determination or a collective agreement. Employees who earn in excess of the annual earnings threshold may only institute a claim in either the Labour Court, the High Court or, subject to their jurisdiction, the Magistrates’ Court or the small claims court.

LRA

In terms of section 198B of the LRA, employees who earn below the annual earnings threshold and who are employed on a fixed term contract or successive fixed term contracts for longer than 3 (three) months, may be regarded as permanent employees if an employer is unable to prove that there was a justifiable reason for fixing the term of the contract and that the term was agreed.

Earning below the annual earning threshold has great effects on temporary employment services (what was previously known as a “labour broker”). In terms of section 198A(3)(b), employees earning below the annual earnings threshold may be deemed to be an employee of the client of a temporary employment services (as defined) and may be deemed to be employed on an indefinite basis by the client if they work for a client for a period exceeding three months.

EA

In terms of section 10(2) of the EA, if a dispute concerning unfair discrimination (such as on the basis of race, gender, pregnancy, marital status, family responsibility, ethnic or social origin, sexual orientation, age, etc.) remains unresolved after conciliation at the CCMA, employees earning below the annual earnings threshold may automatically refer such dispute to the CCMA for arbitration – employees earning in excess of the annual earnings threshold do not have an automatic right.

Conclusion

It is clear that the increase in the annual earnings threshold will have widespread impact for employers who may now employ persons below the annual earnings threshold. Should you have any queries regarding the potential or actual impact of the increase in the annual earnings threshold and/or your obligations in terms of the BCEA, the LRA and the EA, do not hesitate to contact us.