Earnings threshold update

The earnings threshold, as provided for under section 6(3) of the Basic Conditions of Employment Act 75 of 1997 (BCEA), has once again been increased. With effect from 1 May 2026, the threshold is set at R269 600.90 per annum (approximately R22 466.74 per month), increased from R261 748.45, which had been in effect since 1 April 2025.

Employers must always be clear on which employees earn above the earnings threshold and which fall below it, as this distinction directly affects what may or may not be agreed upon in terms of conditions of employment. As with any legislative change, employers should take the opportunity to review existing contracts and confirm that they remain aligned with the latest requirements.

Applying the threshold

When applying the threshold, it is essential to understand what qualifies as “earnings.” In simple terms, this refers to an employee’s regular annual remuneration before deductions, including income tax, pension contributions and medical aid contributions. It excludes contributions made by the employer, as well as subsistence allowances, transport allowances, achievement awards and overtime payments.

In practice, this is where mistakes often occur, making it essential to double‑check how remuneration is structured before determining whether an employee falls above or below the threshold.

Legislation

The threshold plays a significant role across three key pieces of labour legislation: the Basic Conditions of Employment Act 75 of 1997 (BCEA), the Labour Relations Act 66 of 1995 (LRA) and the Employment Equity Act 55 of 1998 (EEA). For employers, the key takeaway is that employees earning above the threshold are treated differently with respect to certain rights under these laws:

• BCEA

Starting with the BCEA, employees earning above the threshold are, to a certain extent, excluded from several provisions relating to working hours and related matters. These include ordinary working hours, overtime, compressed working weeks, averaging of hours of work, meal intervals, daily and weekly rest periods, payment for work on Sundays, night work and payment for public holidays.

For employees earning below the threshold, these areas are strictly regulated and the protections provided by the BCEA apply in full. For those above the threshold, however, such matters may be determined by agreement. This gives employers greater flexibility to structure working arrangements in line with operational needs, but it also underscores the importance of properly drafted contracts to avoid uncertainty or disputes in the future.

• LRA

Under the LRA, the position is similar when dealing with fixed‑term employees. Certain provisions relating to labour brokers and fixed‑term employees do not apply where such employees earn above the threshold.

The most notable section is LRA section 198B, which governs fixed‑term contracts. Employees earning above the threshold are excluded from the protections afforded to certain employees earning below it, particularly the requirement that fixed‑term contracts must be converted to permanent employment under specified circumstances.

• EEA

Under the EEA, the threshold primarily affects how disputes are resolved. The earnings threshold determines the legal route for dispute resolution. In cases of unfair discrimination, disputes must first be referred to the Commission for Conciliation, Mediation and Arbitration (CCMA) for conciliation. If unresolved, employees ordinarily have the option to refer the matter either to the CCMA for arbitration or to the Labour Court for adjudication.

However, employees earning below the threshold may refer disputes concerning unfair discrimination to the CCMA for arbitration under section 10(6)(aA)(ii). By contrast, employees earning above the threshold must refer such disputes to the Labour Court for adjudication, except in certain cases (such as unfair discrimination on the grounds of sexual harassment), where arbitration at the CCMA remains available.

In the broader context, the earnings threshold is adjusted almost annually and employers should monitor these changes closely to avoid compliance issues in the future. More importantly, knowing whether employees fall above or below the threshold enables employers to make informed decisions regarding contracts, working hours and overall risk management.

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