Employers paying their staff in excess of the current Earnings Threshold of R149 736,00 per annum should consider awaiting the announcement of the new Earnings Threshold before finalising decisions on annual increases for 2011. This is according to Johan Botes, director in the Employment Law Practice at Cliffe Dekker Hofmeyr business law firm. No date is set for the amendment, however, the closing date for representations to the Employment Conditions Commission was 8 January 2011, and an announcement regarding the amendment is expected to follow shortly.
"During December 2010 the Minister of Labour requested the Employment Conditions Commission to 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 nightwork and additional remuneration for work on public holidays," Botes explains.
He notes that 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 still have a claim for overtime in terms of the employment contract concluded. Employment contracts should carefully be scrutinised to ensure that such rights are not created unintentionally.
"The Earnings Threshold is 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," he says.
"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.
· Cliffe Dekker Hofmeyr is one of the largest commercial law firms in South Africa with some 115 directors/partners and 250 qualified lawyers located at offices in Johannesburg and Cape Town.
· Cliffe Dekker Hofmeyr lawyers specialise in services covering the complete spectrum of business legal needs in 11 core areas of practice. The firm also has dedicated sector-led teams consisting of lawyers with experience in a wide range of industries and the public sector.
· Cliffe Dekker Hofmeyr is the South African member firm of DLA Piper Group, an alliance of legal practices, which includes firms with offices around the globe that are affiliated to members of the DLA Piper Practice but are not themselves members of it.
· Cliffe Dekker Hofmeyr's Africa practice, in conjunction with DLA Piper Africa Group, is unrivalled in terms of pan-African legal services and geographical coverage.
· DLA Piper is an international legal practice with over 3,500 lawyers located in 30 countries and 69 offices throughout Asia, Europe, the Middle East and the US.
Written by Johan Botes, Director, Employment Practice, Cliffe Dekker Hofmeyr