Many people are not aware of the “earnings thresholds” or how it impacts them as employers or employees. Briefly, an earnings threshold refers to the gross annual salary of any private person. It is a benchmark used to determine if an employee qualifies for some of the basic protections contained in labour legislation, such as the Basic Conditions of Employment Act, the Labour Relations Act and the Employment Equity Act. In other words, should an employee earn in excess of the threshold, then that employee would not be entitled to certain benefits.
In terms of section 6 of the Basic Conditions of Employment Act, the Minister of Employment and Labour must make a determination regarding what the earnings threshold will be. The previous earning threshold was a gross income of R205 433,30 per annum (or R17 119,44 per month). This amount has remained unchanged for the past seven years. However, the Minister has published a new earnings threshold which has come into effect on 01 March 2021. The earnings threshold has increased to R211 596,30 per annum (or R17 633,00 per month).
It is important to remember that the threshold is calculated on the employee’s gross salary before the deduction of income tax, pension fund contributions, medical aid contributions, etc.
As a result of the threshold increase, more employees will be able to claim for overtime work, night work and weekend work. More employees will be entitled to protections such as regulated hours of work, meal intervals and a regulated daily/weekly rest period. In terms of the Labour Relations Act, more employees will also be entitled to protection offered by the regulation of fixed-term contracts, temporary employment services employees and part-time employees.
Taking this into consideration, it is clear that the increased threshold may have a significant financial consequence for employers in South Africa and will, most certainly, result in an increase of disputes referred to the CCMA and bargaining councils.
Article by: Cathryn-Ann Gungadeen
Dispute Resolution Official – Durban