What the new annual earnings threshold means for employees

Employees should know what the new annual earnings threshold means as it affects the application of provisions of the Basic Conditions of Employment Act, the Labour Relations Act, and the Employment Equity Act.

Sections in these acts are designed to protect vulnerable employees and regulate aspects of work such as working hours, overtime, working on weekends, lunch breaks and whether labour disputes must be handled at the CCMA or in the Labour Court.

From 1 March 2023 the increased annual earnings threshold will be R241 110.59 (approximately R20 100 per month) after the minister increased it by R17 030.11 from the previous amount of R224 080.48 (approximately R18 673 per month). The new threshold was published in the Government Gazette on Monday.

For purposes of determining whether an employee earns in excess of the earnings threshold, “earnings” means an employee’s regular annual salary before income tax, pension fund and medical aid contributions and similar payments are deducted.

However, it excludes similar contributions from the employer in respect of the employee provided that subsistence and transport allowances, achievement awards and payments for overtime worked do not fall within the scope of remuneration.

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Basic Conditions of Employment Act and LRA

According to the Basic Conditions of Employment Act (BCEA), employees who earn more than the earnings threshold are excluded from its provisions that regulate ordinary working hours, overtime, compressed working weeks, average hours of work, meal intervals, daily and weekly rest periods and pay for working on Sundays, nights and public holidays, law firm Cliffe Dekker Hofmeyr says.

Employees who earn less than the threshold have full protection which enables them, for example, to demand overtime pay at a rate of 1.5 of their hourly pay or refuse to work for more than 45 hours per week.

Employees who earn more than the earnings threshold are also not subject to the provision in the Labour Relations Act (LRA) that deems employees from a temporary employment service or labour broker who are not performing a temporary service to be employees of the client for purposes of the LRA.

They are also not deemed to be employed indefinitely after three months in the absence of justifiable reasons for fixing the term of the contract.

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Employment Equity Act

In terms of the Employment Equity Act (EEA), an employee earning more than the earnings threshold who has a dispute under Chapter II of the EEA about unfair discrimination, cannot refer the dispute to the CCMA for arbitration, unless the dispute relates to alleged unfair discrimination on the grounds of sexual harassment or if the parties all agree to arbitration. In this case, the dispute must be referred to the Labour Court for adjudication.

However, the increase of 7.59% jump raises some red flags, says Global Business Solutions, because it seems that the increase is not in line with projections for average inflation in 2023. The group calls it a substantial increase while economists predict that inflation will average between 5 and 5.5%. The group questions how the minister got to 7.59%.

However, any employees earning above the threshold are precluded from these automatic protections – meaning they are not automatically entitled to overtime or weekends off, for example. These issues are still relevant to higher earners but are typically handled in contract negotiations with respective employers at the time of employment.