BCEA earnings threshold R183 008 from 1.07.2012

Government Gazette dated June 1, 2012 – see GG 35404 & GNR 429

With effect from July 1, 2012 employees whose annual ‘earnings’ exceed R183 008 (currently R172 000) will be excluded from the application of various sections of Chapter Two (Regulation of Working Time) of the BCEA – see below.

There is no change in the definition of ‘earnings’. Payments for any type of overtime will still be excluded from the calculation of earnings. Prior to July 2011 only ‘intermittent payments for occasional overtime’ were excluded.

In terms of the BCEA s 6(3) the Minister of Labour must make a determination excluding “any category of employees earning in excess of an amount stated in that determination”.

In the notice ‘earnings’ means in effect :

• regular annual remuneration [defined in BCEA sec 1 as any payment in money or in kind, or both in money and in kind, made or owing to any person in return for that person working for any other person, including the State];

but excluding subsistence and transport allowances received, achievement awards and payments for overtime worked;

before deductions [income tax, pension, medical and similar payments];

other than similar payments (contributions) made by the employer in respect of the employee.
[emphasis added]

In other words the ‘total cost to company’ will be greater than the ‘earnings’ when the employer contributes to any pension, medical and similar scheme because these payments are excluded from the definition of ‘earnings’.

Excluded sections of Chapter Two of the BCEA (Regulation of working time) as from July 1,2012

As from July 1, 2012 employees earning in excess of R183 008 (currently R172 000) per annum will be excluded from the following sections of the BCEA:

9 Ordinary hours of work.

10 Overtime.

11 Compressed working week.

12 Averaging of hours of work.

14 Meal intervals.

15 Daily and weekly rest period.

16 Pay for work on Sundays.

17(2) Night work.

(1) In this section, “night work” means work performed after 18:00 and before 06:00 the next day.
(2) An employer may only require or permit an employee to perform night work, if so agreed, and if—
(a) the employee is compensated by the payment of an allowance, which may be a shift allowance, or by a reduction of working hours; and
(b) transportation is available between the employee’s place of residence and the work-place at the commencement and conclusion of the employee’s shift
.

18(3) Public holidays.

(1) An employer may not require an employee to work on a public holiday except in accordance with an agreement.
(2) If a public holiday falls on a day on which an employee would ordinarily work, an employer must pay—
(a) an employee who does not work on the public holiday, at least the wage that the employee would ordinarily have received for work on that day;
(b) an employee who does work on the public holiday—
(i) at least double the amount referred to in paragraph (a); or
(ii) if it is greater, the amount referred to in paragraph (a) plus the amount earned by the employee for the time worked on that day.
(3) If an employee works on a public holiday on which the employee would not ordinarily work, the employer must pay that employee an amount equal to—
(a) the employee’s ordinary daily wage; plus
(b) the amount earned by the employee for the work performed that day, whether calculated by reference to time worked or any other method.

Senior managerial employees – as defined in the BCEA

An extract from the BCEA is included here as senior managers are also excluded by definition from the protection of most of chapter Two.

In terms of section 1 of the BCEA “senior managerial employee” means ‘an employee who has the authority to hire, discipline and dismiss employees and to represent the employer internally and externally’.

This is not a satisfactory definition and must surely result in considerable confusion as to when an employee is excluded from the provisions of chapter Two.

6. Application of this Chapter (Two – Regulation of working time).

(1) This Chapter, except section 7, does not apply to—
(a) senior managerial employees;
(b) employees engaged as sales staff who travel to the premises of customers and who regulate their own hours of work;
(c) employees who work less than 24 hours a month for an employer.

(2) Sections 9, 10(1), 14(1), 15(1), 17(2) and 18(1) do not apply to work which is required to be done without delay owing to circumstances for which the employer could not reasonably have been expected to make provision and which cannot be performed by employees during their ordinary hours of work.

(3) The Minister must, on the advice of the Commission, make a determination that excludes the application of this Chapter or any provision of it to any category of employees earning in excess of an amount stated in that determination.

(4) Before the Minister issues a notice in terms of subsection (3), the Minister must—
(a) publish in the Gazette a draft of the proposed notice; and
(b) invite interested persons to submit written representations on the proposed notice within a reasonable period.

7. Regulation of working time.

Every employer must regulate the working time of each employee—

(a) in accordance with the provisions of any Act governing occupational health and safety;

(b) with due regard to the health and safety of employees;

(c) with due regard to the Code of Good Practice on the Regulation of Working Time issued under section 87(1)(a); and

(d) with due regard to the family responsibilities of employees.

 

BCEA s 6(3) – new earnings threshold of R183 008 – explanation

Here is a practical example showing when an employee would not exceed the new earnings threshold of R183 008.

For the purposes of determining the earnings threshold

“subsistence and transport allowances received, achievement awards and payments for overtime worked shall not be regarded as remuneration”.

Also excluded from this example are all statutory deductions and contributions, as well as income tax deductions.

Assumptions:

An employee’s regular gross monthly remuneration is R14 077.54 (R168 930.46 per annum) plus a ’13th cheque’ of R14 077.54 = R183 008 per annum.

Contributions by employer (optional monthly): R2 393.18 (28 718.16 per annum)
7% – retirement – R985.43
8% – medical insurance – R1 126.20
2% – optional insurance – R281.55

Deductions from employee’s remuneration (optional monthly): R2 393.18 (28 718.16 per annum)
7% – retirement – R985.43
8% – medical insurance – R1 126.20
2% – optional insurance – R281.55

Employee’s net annual earnings before tax and statutory deductions will be R140 212.32 (11 684.36 x 12) with a ’13th cheque’ of R14 077.54 (before tax), making the total nett annual earnings of R154 289.84 (183 008 – 28 718.16).

Employer’s annual total cost to company [TCC] = R211 726.18 which is R28 718.18 greater than the ‘earnings’ of R183 008, as defined for the purpose of the determination].

 

It is interesting to compare the calculation of ‘earnings’ for the purposes of Compensation for Occupational Injuries and Diseases Act, 130 of 1993 which provides for compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees in the course of their employment, or for death resulting from such injuries or diseases; and to provide for matters connected therewith.

Extracts from the guidelines on the website of the Department of Labour

“Earnings” are all payments made regularly, before any deductions, whether in money or in kind, to employees.

The following list is not exhaustive but is intended only to highlight remuneration items for which there might be some doubt as to their inclusion or exclusion

Included in the gross earnings before any deductions are the following:

• Overtime of a regular nature, (not intermittent or irregular overtime).
• Bonuses of any kind, including incentive bonuses and annual bonuses.
• Commission, even though the amount may vary from month to month.
• The cash value of food and quarters supplied to employees as part of a remuneration package.
• Cash value of fringe benefits such as a Company car, free accommodation or accommodation at a reduced rate, etc.
• Travel and other allowances paid regularly, as part of the package.
• Where the employee is remunerated in accordance with a package of benefits, all items forming part of the package, other than employer contributions such as medical aid contributions.
• Earnings/Drawings paid to working Directors of a Company or Members of a Close Corporation.

EXCLUDED ARE THE FOLLOWING:

• Payments of a re-imbursive nature.
• Overtime worked occasionally.
• Payments for specific non-recurring tasks which do not form part of an employee’s normal duties.
• Ex gratia payments.
• Intangible fringe benefits such as the taxable portion of medical aid/pension contributions by the employer, etc.
• Payments to cover special expenses such as subsistence and travelling costs, lunch and costs for business meetings.
• Travel and other allowances paid occasionally.
• Profit sharing of Directors and Members.

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