South African labour law provides for an annual earnings threshold used to establish whether certain protection provided by labour law will apply to an employee or not. Many employees do not know what this earnings threshold actually means and what impact an increase to this earnings threshold will have on them. On 1 March 2021, the annual earnings threshold was increased from R205 443.30 to R211 596.30 per year.  This article will clarify some of the questions and concerns employees may have.

What are the practical consequences of the earnings threshold?

  • Employees who earn more than R211 596.30 per year will be excluded from certain provisions in labour law. For example:
    • Basic Conditions of Employment Act 75 of 1977 (“BCEA”):
      • Employees earning more than the threshold are excluded from the provisions regulating certain basic conditions, such as ordinary hours of work, overtime, daily and weekly rest periods.
      • Employers and employees can still negotiate these conditions to be in line with the law. Although employers are not forced to provide for these basic conditions, they still have the obligation to be reasonable and fair in their dealings with these employees working hours.
  • Labour Relations Act 66 of 1995 (“LRA”):
    • Certain provisions dealing with labour brokers and fixed term employees will not apply if those employees earn more than the threshold. For example, fixed-term contracts cannot be longer than three months if the employee earns below the threshold.
  • Employment Equity Act 55 of 1998 (“EEA”):
    • In disputes about unfair discrimination, it can only go for arbitration at the Commission for Conciliation, Mediation and Arbitration (“CCMA”) if the employee earns below the threshold, it relates to sexual discrimination or if all the parties consent to the arbitration. 
  • The increased earnings threshold means that certain employees who previously could not benefit from the above-mentioned provisions, may now be able to if they fall within the new earnings threshold.

What part of an employee’s salary will be taken into account to determine whether s/he fall within the earnings threshold?

  • It is not always as easy as just taking the entire salary into account and there are some calculations that must be made.
  • As a starting point, only the regular annual salary of an employee is taken into account before deductions, such as tax, pension, medical aid and so on.
  • It does not include contributions made by the employer in respect of the employee, such as instances where the employer pays half of an employee’s medical aid allowances.
  • Subsistence and transport allowances, achievement awards and overtime are also not considered as part of an employee’s salary for the purposes of calculating the earnings threshold.

In light of the above, the earnings threshold is merely a measure to ensure lower income employees are sufficiently protected against exploitative practices by employers. The increase in the earnings threshold means that a wider group of employees are entitled to these protections provided for in labour law.