A new earnings threshold was implemented today, 1 July 2011, by the labour department. The last time the earnings threshold was increased was back in 2008 when it was raised to R149 737.
With this increased earning threshold, employees earning less than R14338 per month ( or R172 000 annually) will now be protected under the Basic Conditions of Employment Act.
This new increase will have various implications for both employees and employers. While the increased earnings threshold will benefit thousands of current employees, offering more protection from exploitative employers, it carries with it many cost implications for employers.
How the new earnings threshold affects Employees
The jump in the new earnings threshold has been seen by many as a dramatic increase. But what does this mean for current employees?
Previously, employees could be divided into two groups, those who earned less than the old threshold of R149 736 per annum and those whose earnings were above the threshold. Any Employee whose earnings were below this threshold would be covered by the Basic Conditions of Employment Act. This means that the employee would enjoy protection from unfair employers as their hours are regulated by the Basic Conditions of Employment Act (BCEA).
The BCEA was generally associated with protection of Blue Collar workers however with this new increase the range of cover has definitely shifted to include many White Collar workers. Anyone that is earning between R149 736 and R172 000 annually can now enjoy regulated hours from the BCEA.
This BCEA offers many advantages to employees such as:
- Compensation for overtime, work on public holidays and Sundays
- Ordinary working hours are limited to 45 hours per week and 9 hours per day
- Entitlement to meal intervals of 1 solid hour for every 5 hours worked.
- Double pay on Sundays
Any employee who earns above this new threshold can be expected and required to work overtime, on public holidays and Sundays without receiving any additional compensation.
Implications for Employers
While many employees will be enjoying protection from the Basic Conditions of Employment Act (BCEA), employers on the other hand are faced with many cost implications. These new cost implications are seen by critics as just another way that employment is being stifled by government at a time when it is least needed, especially given the current unemployment crisis.
It would be advisable for employers to review their current employment contracts and remuneration packages with employers. If an employee is earning more than R172 000 per annum, then they fall outside the scope of the BCEA and any conditions of employment must be agreed between employer and employee. For many employers with employees that are earning close to R172 000 annually, it may be more cost effective to increase their annual remuneration to over the earnings threshold rather than having to incur additional expense by complying with the BCEA.
If an employee earns an annual remuneration that falls between R149 736 and R172 000, this may effect their terms and conditions of employment and it is recommended that employers check their legal obligations to that employee under the BCEA.
If you would like guidance on how to comply with the new earnings threshold or have any questions regarding your business, please call Brett at Dirmeik Consulting on 021 421 4444.