New earnings threshold affects employers

A new earnings threshold announced by the labour minister entitles certain employees to now be compensated for overtime, a lawyer said on Monday.

Minister Mildred Oliphant announced on Friday an increase in the earnings threshold in the Basic Conditions of Employment Act (BCEA) from R149 736 to R172 000 per year.

“The effect of this increase is that employees earning below the new threshold are entitled to be remunerated for overtime, work on public holidays and Sundays in terms of the BCEA,” said Sherisa Rajah, senior associate at Cliffe Dekker Hofmeyr business law firm, in a statement.

The amendment is effective from July 1, 2011.

“Employers with staff earning above the previous threshold but less than the new one should be aware of the right of their employees to the payments for overtime and work on Sundays.”

Rajah warned employers to be aware of this change.

“This has significant implication for the employer, especially if faced with multiple claimants and backdated claims. It is also possible that employees may bring a contractual claim to the Labour Court where the basic condition of employment forms a contractual right between the parties,” she said.

Earnings refers to an employee’s regular annual remuneration before deductions, and excludes employer contributions made for the employee. Subsistence and travel allowances, achievement awards and payment for overtime worked are not regarded as remuneration.

Rajah said where employers had structured payments in accordance with the current earning threshold, they needed to revise this.

She said some employers found it useful to pay employees above the earnings threshold so that they were then excluded from statutory payment for overtime, work done on Sundays and certain other provisions relating to the regulation of working time.

“Where it is not practicable or feasible to remunerate employees above that level, as is the case with thousands of entry-level positions, employers should ensure that their employment contracts and remuneration practices are aligned with the rights afforded to employees in the BCEA,” she said. — Sapa

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