BCEA Earnings Threshold Increase and Comments
The Minister of Employment and Labour has announced that the BCEA (Basic Conditions of Employment Act) earnings threshold has been increased from R211 596,30 pa to R224 080,48 pa, an annual increase of R12 484,18 (about 6% pa). Note that the notice incorrectly states that the effective date of the increase is 1 March 2021 and will be re-issued to specify the correct effective date of 1 March 2022. Aspects of the application of the BCEA Earnings threshold are discussed below. BCEA – Application of the Earnings Threshold
The BCEA earnings threshold governs the sections of the BCEA that regulate the hours of work in various ways. Abbreviated, the notice states that:
“… all employees earning in excess of R224 080,48 per annum … [must] be excluded from sections 9, 10, 11, 12, 14, 15, 16, 17(2) and 18(3) [of the BCEA]”. This means that employees who earn more than the BCEA earnings threshold are not entitled to the automatic protection and rights provided by the following sections of the BCEA:
Section 9 (Ordinary hours of work)
Section 10 (Overtime)
Section 11 (Compressed working week)
Section 12 (Averaging of hours of work)
Section 14 (Meal intervals)
Section 15 (Daily and weekly rest period)
Section 16 (Pay for work on Sundays)
Section 17(2) (Night work)
Section 18(3) (Public holidays not ordinarily worked). In other words, only employees that earn below or equal to the BCEA threshold enjoy the protection of these sections of the BCEA, and for example, are entitled to overtime pay at a rate of 1.5 times the normal hourly wage rate. Employees that earn above the threshold are not entitled to the automatic protection of these sections. Again, a commonly occurring example is that of overtime – employees that work overtime are not automatically entitled to be paid overtime if they earn above the threshold. If the employer so wishes, the provisions of the BCEA that are not automatically provided can be included in the employment contract. Note that section 18(3) of the BCEA (public holidays that are not ordinarily worked), protects only those employees that earn below the BCEA threshold, whereas section 18(2) (public holidays that are ordinarily worked), protects all employees i.e. the earnings threshold is not applied to section 18(2). What is ‘BCEA Earnings’? The notice goes on to define ‘Earnings’ to be:
“… the regular annual remuneration before deductions, i.e. income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee: Provided that subsistence and transport allowances received, achievement awards and payments for overtime worked shall not be regarded as remuneration for the purpose of this notice.”
Aspects of the definition of remuneration in the notice that equates to BCEA earnings follow. “… Remuneration …”
The notice is issued in terms of section 6(3) of the BCEA, therefore the ‘remuneration’ that is used as the base amount for ‘earnings’ in the definition of “earnings” in the notice, is ‘BCEA remuneration’, defined to be:
“… any payment in money or in kind, … made … in return for that person working for any other person, …”
BCEA remuneration is a complex subject that is beyond the scope of this Newsflash. In short, excluded from BCEA remuneration are:
Allowances
Benefits that are not granted in return for ‘work done’ (in other words, benefits that are granted in return for ‘work done’ are BCEA remuneration). “… before deductions …”
This part of the definition specifies what could be termed ‘gross’ remuneration i.e. remuneration before deductions, but the wording starting from “but excluding” is clumsily drafted and easily misinterpreted. It is clear that remuneration is not reduced by employment taxes (PAYE, SDL and UIF), and employee-paid contributions to medical schemes, retirement funds, etc. What is not clear is that the wording following “but excluding” appears to specify that remuneration must also be reduced by employer-paid contributions to medical schemes, retirement funds etc.