South African employers need to be aware that the minimum earnings threshold and national minimum wage have been significantly increased by the Minister of Employment and Labour, effective from 1 March 2023.
Employers will need to ensure that their contracts of employment and policies are aligned with the new threshold and national minimum wage, particularly those who pay their employees weekly and/or fortnightly, and may need to conduct audits of their workforce and suppliers of labour to ensure compliance with the Basic Conditions of Employment Act, 1997 ("BCEA").
The threshold, which was last increased in March 2022, has increased to ZAR241 110. 59 per annum (ZAR20,093 per month). This is an increase of 7.6% from the previous threshold of ZAR224 080.48 per annum (ZAR18 673.37 per month). The increase means that those employees currently earning between ZAR18 673 per month and ZAR20 093 per month will, from 1 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 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 ZAR23 19 per hour will increase to ZAR25 42 per hour.
The effect of the earnings threshold is that all those earning below the threshold are subject to the provisions of the BCEA dealing with:
- hours of work;
- 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 .
Employees who earn below the new threshold would have previously been excluded from these provisions as a result of earning in excess of the threshold. Given the obligation to pay these employees for overtime and work on weekends and public holidays (where they do not usually work on these days), the significant change to the threshold is very likely to impact employers' bottom lines where the increase to the earnings threshold is higher than the current inflation rate (and a number of employers have given below inflationary increases this year).
In circumstances where the increased threshold applies from 1 March 2023, employers will need to urgently revisit their contracts of employment and policies to ensure that they are aligned with the new threshold (and the national minimum wage, where applicable) – particularly those employers which pay their employees weekly and/or fortnightly. Unfortunately, employers are not able to contract out of their obligations to provide employees these minimum conditions and will need to comply, whatever the 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 ZAR18 673 per month and ZAR20 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 ZAR18 673 per month and ZAR20 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. 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 captured by the increase in the earnings threshold and evaluate whether there is any impact on their businesses.
In addition, 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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.