Our insight
Employers need to be aware of the minimum earnings threshold and the national minimum wage that has been significantly increased by the Minister of Employment and Labour with effect from 1st March 2023.
In general terms, employers need to review their contracts of employment(and to a certain extent their policies) to comply with the latest developments in the law, particularly those employers who pay some (or all) of their employees weekly or fortnightly.
The threshold has increased to R241 110. 59 per annum (R20,093 per month). This is an increase of 7.6% from the previous threshold of R224 080.48 per annum (R18 673.37 per month) introduced in March 2022. The effect of this increase is that employees who are currently earning between R18 673 per month and R20 093 per month will, effective from the 1st March 2023, now join the category of “vulnerable” workers who are entitled to additional rights and protections, including the right to increased rates of pay, in terms of the Basic Conditions of Employment Act(BCEA).
In addition to the earnings threshold, the Minister has also increased the national minimum wage by a significant 9.6%. As of 1 March 2023, the minimum wage of R23.19 per hour will increase to R25.42 per hour.
Therefore employers need to be aware of the effect of these changes to the earnings threshold – that all employees earning below the threshold are subject to the provisions of the BCEA dealing with:
- hours of work;
- overtime;
- compressed working week;
- averaging of hours;
- meal intervals;
- daily and weekly rest periods;
- pay for work on Sundays;
- night work; and
- work on public holidays.
In light of the obligations associated with this category of employees, employers’ bottom line is likely to be impacted negatively. An example is the obligation to pay these employees for overtime and work on weekends and public holidays (where they do not usually work on these days).
In circumstances where the increased threshold applies from 1 March 2023, employers will need to urgently review their contracts of employment to ensure compliance with the new threshold. Unfortunately, employers are not able to contract out of their statutory obligations. They have to comply, at whatever cost.
In addition to direct costs associated with the increased earnings threshold, there are a number of other ramifications of the increase in the earning thresholds which arise under the Labour Relations Act, 1995 (“LRA”), which could impact employers’ headcounts. In this regard:
- Any temporary employment services (“TES”) employees, ie, labour broking employees, who are earning between R18 673 per month and R20 093 per month will from 1 March 2023 be deemed the employees of the client of the TES, if they satisfy the requirements of section 198A of the LRA. If employees are not performing temporary work and are placed with the client of the temporary employment service for a period of three months or more, they may be considered permanent employees of the client and not of the TES. If this is the case, employers will also be jointly and severally liable for any non-compliance by the TES with the provisions of the BCEA, including those above, and the deemed employees will be able to institute action against their deemed employer for any non-compliance by the TES.
- The knock-on effect of having these TES employees deemed the employees of the client is that there is a positive obligation on the client, as the deemed employer, to equalise the treatment of the deemed employees with any permanent comparators. This could include the provision of provident fund benefits, increased rates of pay, bonuses etc; and
- Any fixed-term contract employees who are earning between R18 673 per month and R20 093 per month will from 1 March 2023 be deemed to be permanent employees of the employer, if they satisfy the requirements of section 198B of the LRA, namely, employees who earn below the threshold may be deemed permanent employees if they are employed for 3 months or more without a justifiable reason for fixing the term of the contract. Again, there is a positive obligation on the employer to equalise the treatment of these employees with permanent comparators.
Employers would be well-advised to conduct an audit of their respective workforces (including their fixed-term and temporary workforces) to ascertain who will be affected by the increase in the earnings threshold and evaluate whether there is any impact on their businesses.
Additionally, employers need to similarly conduct an audit of any suppliers of labour to ensure that they are complying with the provisions of the BCEA because regardless of whether or not the TES employees are deemed employees, employers using their services will be jointly and severally liable for any non-compliance by the TES provider with the BCEA.
Although the increase in the national minimum wage and earnings threshold will, without doubt, bring with it some additional expense to employers’ businesses, it is important that employers avoid failing to fulfil their statutory obligations in terms of the BCEA or the LRA and, at the same time, strive to increase the wages of employees to improve their quality of life. Failure to comply with these obligations comes at a very high cost to any affected business establishment in the country.
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Makgale Law
Labour & Employment
www.makgale.co.za