Effect of the new earnings threshold 2021

Together with the new national minimum wage that came into effect on 01 March 2021, employers also have to take note of the implementation of the increased annual earnings threshold. The previous threshold has been in effect since 01 July 2014 and increased now from R205 433.30 to R211 596.30. The earnings threshold affects provisions of the Basic Conditions of Employment Act, 1997 (BCEA), the Labour Relations Act, 1995 (LRA) and the Employment Equity Act, 1998 (EEA).

What is earnings?

“Earnings” means an employee’s regular annual remuneration before deductions (e.g. income tax, pension fund contributions, medical aid contributions and similar payments), but excludes contributions made by the employer in respect of the employee. Subsistence and transport allowances received, achievement awards and payments for overtime worked will also be excluded within the scope of remuneration.

Threshold | BCEA

In terms of the BCEA, employees earning in excess of the earnings threshold are excluded from the provisions which regulate ordinary hours of work, overtime, compressed working weeks, averaging of hours of work, meal intervals, daily and weekly rest periods, Sunday pay, pay for night work and pay for work on public holidays. This means that regulation of the aforementioned should be by mutual agreement and will not be regulated by the BCEA as is the case with employees earning below the threshold.

Threshold | LRA

In terms of the LRA, employees earning in excess of the earnings threshold are not subject to the provision deeming the employees engaged by a temporary employment service/labour broker, to be employees of the employer/client for purposes of the LRA. In addition, employees earning in excess of the earnings threshold fall outside the scope of the provisions relating to fixed term employees who are deemed to be employed indefinitely after three months (in the absence of justifiable reasons for fixing the term of the contract).

Threshold | EEA

An employee earning in excess of the earnings threshold who has a dispute under Chapter II relating to unfair discrimination, is not permitted to refer the dispute to the Commission for Conciliation, Mediation and Arbitration (CCMA) for arbitration. Such an employee is obliged to refer the dispute directly to the Labour Court for adjudication (unless the dispute relates to alleged unfair discrimination on the grounds of sexual harassment, or the parties all agree to arbitration).

It is vital for every employer to determine which employees earn in excess of the earnings threshold and which employees earn below the threshold, as this has a huge impact on the terms and conditions of employment the employer and employee can agree on. Employers must stay informed and up to date regarding labour law in order to take proactive action to protect their rights and their businesses with regards tot he employment relationship going forward.

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