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What exactly does the new earnings threshold mean to employers?
07-06-2013, 12:19 PM (This post was last modified: 07-06-2013 12:25 PM by LabourMan.)
Post: #1
What exactly does the new earnings threshold mean to employers?
What exactly does the new earnings threshold mean to employers?

We earlier advised that according to notice 456 in Government Gazette 36620 of 01 July 2013, the annual threshold for overtime payment has increased from R183 008.00 to R195 805 per annum, effective 01 July 2013.

What exactly does this mean to an employer?

If you have structured salaries and payments in line with the previous annual earnings threshold of R183 008 per year, you must ensure they are aligned with the new provisions which came into effect on 01 July 2013. Here is what you need to know about the change to ensure you are compliant.

This change means, that with effect from 1 July 2013, you do not have to remunerate employees earning above the new threshold for overtime pay related to the following provisions:

- Work outside of ordinary working hours;
- Overtime;
- Compressed working weeks;
- Averaging of working hours;
- Meal intervals;
- Daily and weekly rest periods;
- Pay for work on Sundays;
- Night work; and
- Payment for public holidays on which the employee would not ordinarily work.

Also excluded from these provisions are senior managerial staff, employees engaged as sales staff who travel to the premises of customers and employees who work less than 24 hours a month for you as an employer.

Any employee who earns below the new threshold amount (R193 805 per annum), on the other hand, is entitled, by law, to receive the payments and benefits provided for in the Basic Conditions of Employment Act (BCEA).

This has the following nine implications for employers:

#1: Ordinary hours of work: In terms of the BCEA, you can ask employees who earn above the earnings threshold to work longer than the standard working hours without remuneration. Keep in mind that the maximum normal working time allowed is 45 hours a week. This means nine hours per day (excluding lunch break) if your employee works a five-day week, and eight hours per day (excluding lunch break) if your employee works more than five days per week.

#2: Meal intervals: An employee who earns above the threshold isn't entitled to a fixed lunch hour or tea time and may be required to work during those periods or take a meal interval at a time that’s suitable later in the day.

#3: Daily and weekly rest period: According to the BCEA, you must allow your employee a daily rest period of at least 12 consecutive hours between ending and recommencing work. In addition, you must also grant your employee a weekly rest period of at least 36 consecutive hours, which should include a Sunday. For employees earning above the threshold, this ruling doesn't apply.

#4: Night work: The earnings threshold excludes employees who earn above the threshold from being compensated by a night shift allowance or being provided with transport home after their shift. On the other hand, employees who earn below the threshold must be compensated extra for work done after 6pm.

#5: Overtime: You do not have to pay employees who earn above the threshold at the rate of 1.5 times his hourly rate as is the case for employees who earn below the threshold.

#6: Compressed working week: An employee who earns above the threshold can work compressed working weeks without receiving overtime pay or time off.

For example, hospital workers and employees in the hospitality industry are often expected to work a compressed working week. You can also ask your employee to work on a compressed week basis in the case of an emergency.

#7: Averaging of hours of work: You are not obliged to average out the hours of work or compensate the employee for working overtime if he earns above the threshold.

#8: Pay for work on Sundays: Employees who work on Sundays are entitled to pay at twice their hourly rate, or if the Sunday is a normal shift 1.5 times their hourly rate.

If they are not paid for working on a Sunday, they should be given time off on the same basis and that is two hours for every hour worked.

Employees who earn above the threshold can be compensated, but you do not have to compensate them on the same basis.

#9: Public holidays: As with Sunday work, an employee who works on a public holiday must be compensated by being paid twice his hourly rate.

Employees who earn above the threshold can be compensated, but you do not have to compensate them on the same basis.

Remember, earnings refer to an employee’s annual remuneration before deductions. Earnings exclude employer contributions made for the employee like UIF. In addition, subsistence and travel allowances, achievement awards and payment for overtime worked are also not regarded as remuneration.

It is vital that employers ensure that they are in line with the new earnings threshold. Ignorance of the law is never an excuse.

Source: LabourMan

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