Kindly assist in practices used for averaging Variable pay for calculation of Leave Pay / Termination Payout?
Section 35(4) specifies how to calculate leave, notice and severance pay as follows:
If an employee’s remuneration or wage is calculated, either wholly or in part, on a basis other than time or if an employee’s remuneration or wage fluctuates significantly from period to period any payment to that employee in terms of this Act must be calculated by reference to the employee’s remuneration or wage during:
(a) The preceding 13 weeks; or
(b) If the employee has been in employment for a shorter period that period.
We however use 12 month average on variable income? Is this correct or incorrect and can anyone give guidance on their practice?
The BCEA is very specific in that variable pay must be calculated on an average of the preceding 13 weeks or less if the employee has not yet been working for 13 weeks. The Act does not allow for a longer period to be used to calculate variable pay. Averaging over 12 months is therefore not permissible.