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Minister’s review of earnings threshold stuns lawyers

News that the earnings threshold of R172 000 is up for review again has surprised lawyers.

Employees earning in excess of this threshold do not enjoy the benefit of certain basic conditions of employment.

A higher threshold is likely to lead to additional costs for employers, especially smaller firms, who have to re-align payrolls and benefits, like overtime payments.

“It came as a surprise to many when the minister announced that the employment conditions commission is reviewing the threshold again,” said Johan Botes, director in employment practice at Cliffe Dekker Hofmeyr, on Wednesday.

“While employees would like to see the earnings threshold increase as much as possible, employers will dread a significant increase due to the additional cost associated with such a move.”

Minister of Labour Mildred Oliphant announced on April 26 that the employment conditions commission will consider representations on increasing the earnings threshold and interested parties have until May 25 to make representations to the commission.

These conditions include the right to extra pay for overtime, maximum ordinary hours of work per day and week, the right to meal intervals, payment for work done on Sundays and limitations on payment for work done on public holidays.

“Employees earning below the threshold are statutorily entitled to these rights and can demand payment for overtime, work done on Sundays and other rights that remain unaffected by the earnings threshold,” said Botes.

The earnings threshold is a significant factor influencing the labour cost of businesses.

“This is especially visible with many smaller and medium enterprises that struggle to keep this aspect of their operational expenditure under control. Every time the earnings threshold increases, employers have to audit their remuneration to ensure that employees who previously earned above the threshold still earn in excess of the new limit.”

Where employees who were previously excluded now earn below the new threshold, they are automatically entitled to the rights contained in the applicable sections of chapter two of the Basic Conditions of Employment Act.

“This means that an employer could be forced to pay overtime to an employee to whom no overtime was payable under the current threshold. This will have a direct impact on the employer’s labour cost component,” he said.

Employers who may be affected should make representations to the employment conditions commission on the proposed increase.

Prior revisions occurred less frequently, with the previous threshold (R149 736) remaining in place from March 2008. — I-Net Bridge

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Evan Pickworth
Guest Author

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