The schedule for remuneration — part of the Basic Conditions of Employment Act — came into effect on Tuesday, ending much of the uncertainty over the calculation of retrenchment packages and severance pay.
The Department of Labour said in a statement the schedule clearly defines what constitutes remuneration. Remuneration includes housing or accommodation, whether supplied in cash or in kind.
It also includes car allowances, except to the extent that it is supplied to enable employee to work, such as the car of a travelling salesperson. When a car is supplied partly for work purposes and partly for personal use, an apportionment will have to be made.
All cash payments, except those specifically excluded in the remuneration, such as gratuities and other discretionary payments and employer contributions to benefit funds, are also included in remuneration.
Leave pay, notice pay and severance pay are calculated on the basis of an employee’s remuneration.
Payments that are explicitly excluded from remuneration are those made to enable an employee to work, such as tool or transport allowances.
Also excluded are gratuities such as tips; share incentive schemes; discretionary payments not related to hours of work or performance, that is, payments in respect of which employees have no enforceable right; and allowances such as for entertainment, education and training.
The schedule also deals with the rules on calculating benefits. For example, benefits in kind must be calculated on the basis of the cost to the employer or, if it is higher, an agreed value. This prevents employers placing unrealistically low values on benefits.
The schedule also resolves the long-standing issue of whether benefits must be valued on a cost-to-employer basis or on market value. It is easy to determine the cost to the employer, unlike market value, which is considerably more subjective.
The remuneration schedule also settles the question of leave pay, the statement said. The good news for workers is that leave pay will be included as remuneration, but only from the publication date of the schedule, May 22.
On the matter of fluctuating payments, the statement said that these must be calculated over a 13-week period, while payments received in respect of a longer period must be pro-rated, meaning the employee will only receive a proportion of annual payments such as a 13th cheque as part of leave, notice or severance pay.
As with many aspects of labour law, the schedule applies only to employees’ statutory minimum entitlements.
An employer who grants additional leave or severance benefits, for example, may impose different conditions on those benefits which are higher than the legal minimum. – Sapa