With effect from July 1, 2011 employees whose annual ‘earnings’ exceed R172,000 (currently R149,736) will be excluded from the application of various sections of Chapter Two (Regulation of Working Time) of the BCEA – see below.
There is also a change in the definition of ‘earnings’. Payments for any type of overtime will be excluded from the calculation of earnings. At present only ‘intermittent payments for occasional overtime’ are 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”.
For that purpose the Minister has defined ‘earnings’ to mean the ‘gross’ regular annual remuneration (defined in the BCEA 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’) before deductions (income tax, pension, medical and similar payments).
Earnings do not include any employer contributions and the following are excluded from the definition of ‘earnings’:
- Allowances for subsistence and transport.
- Achievement awards.
- Payments for any overtime worked.
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’.
For ease of reference this is the definition of ‘earnings’ as it exists at present (until June 30, 2011) –
‘The regular annual remuneration before deductions, i.e. income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee: Provided that subsistence and transport allowance received or achievement awards, intermittent payments for occasional overtime shall not be regarded as remuneration for the purpose of this notice’.
Excluded sections of Chapter Two of the BCEA (Regulation of working time) as from July 1,2011
[GG 34287 – Regulation Gazette 9535 – GNR 422 dated 13 May 2011].
Employees earning in excess of R172,000 per annum (R14,333 per month) 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.
View or download the recent Labour Appeal Court case regarding overtime – Mondi Packaging (Pty) Ltd v Director-General: Labour [2010] 11 BLLR 1131 (LAC) in which the employer’s appeal was disallowed.
In response to the article today by Michael Bleby, quoted below, it is intended to write a post concerning the impact of the new threshold. Employers who are at present not obliged to pay overtime, etc for employees in the ‘threshold gap’ [earning above R149,736 but below R172,00 pa] will now have to do so, bearing in mind that the definition of earnings has changed to exclude all pay for overtime from the calculation of ‘remuneration’.
Article by Michael Bleby first appearing in Business Day today – “Employers face rising overtime wages” [http://www.businessday.co.za/articles/Content.aspx?id=146861]
QUOTE
Extract: Companies face rise in earnings threshold below which employees are entitled to benefits such as overtime that comes into effect on Friday
A rise in the earnings threshold below which employees are entitled to benefits such as overtime, and which comes into effect on Friday, may see employers looking to replace staff with technology to avoid extra costs, a labour lawyer warned last week.
The rise to R172,000, or a monthly wage of R14,333, from R149,730 (R12,780 a month), was inflationary and “R5,000-R10,000 too much”, said Jacques van Wyk, a labour lawyer at Werksmans Attorneys.
“I would expect most employers would respond saying, ‘We’ve got to work faster, smarter, better.’ Instead of paying one person to work overtime, they may hire two to work normal hours. Or the employer might say, ‘I may now be forced to employ technology because employees are becoming more expensive,’” Mr van Wyk said last week.
The rise in the threshold up to which staff are entitled to overtime, meal intervals, daily and weekly rest periods, pay for work on Sundays, night work and work on public holidays was gazetted last month.
An individual right under the Basic Conditions of Employment Act, it applies irrespective of occupation, whether a worker is paid by the hour or monthly, or whether they enjoy union or collective representation.
Confusion abounds, however — at a time of wariness among employers about rising labour costs — over just how much this change will increase the burden on employers.
Labour economist Andrew Levy agreed with Mr van Wyk, saying the increase would hit employers as it brought a large number of new workers into the net.
“A hell of a lot of people not being paid overtime will fall in the net. That’s going to be a significant cost for employers,” Mr Levy said.
Department of Labour spokesman Page Boikanyo said the higher threshold was linked to inflation.
The increase, in fact, may be less than inflation. Loane Sharp, a labour economist at recruitment company Adcorp , said the 14,7% rise in the threshold — the first since March 2008 — was less than both the 16,7% rise in inflation and the 28,3% increase in wage settlements over that period.
In fact, rising wage settlements since the March 2008 increase had pushed 884000 workers above the threshold for protection offered by the Basic Conditions of Employment Act and this week’s increase would bring just over half of them (an estimated 459000) back under the limit, Mr Sharp said.
“The dwindling threshold in real terms is equivalent to a relaxation of the Basic Conditions of Employment Act of 1997, amounting to fewer workplace protections for 3,2% of the country’s total workforce,” he said on Friday.
It is therefore perhaps unsurprising that employers do not seem worried about the issue.
Peggy Drodskie, an executive adviser at the South African Chamber of Commerce and Industry, said the chamber had sent a notice about the change to members but had not yet had any response.
[email protected]
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An extract from the BCEA is included here as senior managers are also excluded by definition from the protection of chapter 2.
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 2.
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 Time3 issued under section 87 (1) (a); and
(d) with due regard to the family responsibilities of employees.