Employers warned to watch costs as earnings threshold is increased

AS THE earnings threshold in the Basic Conditions of Employment Act (BCEA) increases by 6.4 percent from July 1, labour law experts have warned employers to review their contracts of employment or they may unintentionally grant their employees contractual rights over and above the statutory ones.

The earnings threshold would increase from R172 000 a year to R183 000 a year, Labour Minister Mildred Oliphant said last Friday.

Stuart Harrison, a director at law firm Edward Nathan Sonnenbergs, said employers whose workers’ earnings fell below the new threshold as a result of the change might need to review their working time arrangements with employees and their payrolls to ensure they were still compliant.

The earnings threshold in the act operates to exclude employees earning above the threshold from certain BCEA entitlements and protections.

“Employees earning above this threshold are excluded from working time protections such as maximum working hours, meal intervals, limits on how much overtime they are permitted to work, enhanced rates of pay for overtime work and work on Sundays, minimum rest intervals, shift allowances and access to transport for night work,” Harrison said.

Law firm Cliffe Dekker Hofmeyr employment director Johan Botes said prudent employers had to review their employment contracts to ensure no contractual rights to the protections were created.

He said: “Where this was not done, by way of example, an employee earning above the threshold may be excluded from claiming statutory overtime, but may have a claim for overtime in terms of the employment contract with his employer. Employment contracts should carefully be scrutinised to ensure that such rights are not created unintentionally.”

The earnings threshold was also an important and relevant factor to consider when reviewing employee salaries, he said.

The indirect salary costs arising from the act, including payment for overtime, public holidays and work performed on Sundays, could play havoc with the labour portion of any employer’s budget, Botes said.

“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 be above the earnings threshold may be offset by the saving achieved when the obligation to pay the variable costs falls away,” he said.