Earnings threshold 2023: Newly increased
Earnings threshold 2023: 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. The earnings threshold has seen yet another increase as from 1 March 2023 and is currently set at R241 110.59 (a monthly amount of R20 092.55). The previous threshold of R224 080.48 has been in effect since 1 March 2022.
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Earnings threshold 2023: 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.
The earnings threshold 2023 has an impact on three pieces of legislation which includes the Basic Conditions of Employment Act, 1997, the Labour Relations Act, 1995 and the Employment Equity Act, 1998.
- Basic Conditions of Employment Act (BCEA): Employees earning in excess of the earnings threshold are excluded from certain sections in the BCEA. These exclusions refer to the provisions that regulate ordinary hours of work, overtime, compressed working weeks, averaging of hours of work, meal intervals, daily and weekly rest periods, pay for work done on Sundays, pay for night work and pay for work done on public holidays.
This means that if an employee earns above the earnings threshold, the regulation of the abovementioned should be by mutual agreement and will not be regulated by the BCEA as is the case with employees earning below the threshold.
- Labour Relations Act (LRA): In terms of the LRA, employees employed by a temporary employment service/labour broker who are not performing a temporary service are deemed to be employees of the client. The LRA furthermore states that employees on a fixed term are employed indefinitely and deemed to be permanent employees after three months in the absence of justifiable reasons for fixing the term of the contract.
Employees earning in excess of the earnings threshold are not subject to either of these provisions and can be employed on a fixed term basis exceeding three months without a justifiable reason.
- Employment Equity Act (EEA): If an employee earns above the threshold and has a dispute under Chapter II of the EEA relating to unfair discrimination, the matter may not be referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) for arbitration and must be referred 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 for arbitration to be held at the CCMA.
The earnings threshold is increased more regularly than in the past and employers are urged to stay informed and adjust the terms and conditions of employment accordingly for employees earning above and below the earnings threshold respectively.
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