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The annual earnings threshold has increased

Peter McDermott

The annual earnings threshold refers to the gross annual earnings of any private person that form part of their employee benefits package. It is a yardstick used to see if a person qualifies for some of the more basic protections entrenched in the Basic Conditions of Employment Act (BCEA). Up until recently, this annual earnings threshold was set at R193 805 per annum, meaning that a person earning, on average, more than R16 150.41 per month would be over the annual earnings threshold. The annual earnings threshold was recently increased – what does this mean for you?

On 1 July 2014, the minister of labour increased the annual earnings threshold to R205 433 per annum, which translates to an average of R17 119.41 per month. This means that

individuals earning above this annual earnings threshold do not receive the protections or employee benefits, and are not constrained by the limitations, imposed by the BCEA in terms of:

  • Hours of work (section 9),
  • Overtime (section 10),
  • The compressed working week (section 11),
  • Averaging hours of work (section 12),
  • Meal intervals (section 14),
  • Daily and weekly rest periods (section 15),
  • Payment on Sundays (section 16),
  • Night work (section 17(2)), or
  • Payment for public holidays (section 18 (3)).
Did you know?

The annual earnings threshold is expressed as a rand-value and refers to gross earnings before deductions – such as income tax, UIF deductions, medical aid, pension fund and similar payments. It excludes secondary contributions made by the employer to the employee's benefit.

This change gives rise to four distinct possibilities:
  • Employees who earned below the old threshold will also earn below the new threshold,
  • Employees who earned above the old threshold will still earn above the new threshold.
  • An employee who earns above the old threshold but because of the threshold's upward move will now earn below the new threshold.

Such employees must now be afforded the benefit of the above-mentioned sections (if they had not previously enjoyed them) because the law prescribes that an employee's contract, and terms and conditions of employment, may not be less beneficial than the minimum benefits provided in law.

  • The fourth and last scenario would be employee who earned below the old, as well as the new, threshold and is now given a pay raise in excess of the new threshold. Such an employee loses the benefit of the above-mentioned sections and this must be reflected in the employee's new contract of employment.

As with all such amendments, conduct an investigation to determine what portion of your workforce is affected so you can make the necessary changes to their contracts of employment.


Peter Mcdermott

Peter did a Bachelor of Technology (B.Tech), Human Resources Management and Services at Technikon Witwatersrand (1994-1998) and an Advanced Diploma – Labour Law, Law at University of Johannesburg (2001-2002).

He joined Labour Net in 1997 and was a consultant there until 2000, and has been a director and shareholder in Invictus Outsourcing Solutions since November 2001.

Peter has gained extensive knowledge and experience over the past 17 years in dealing with various Human Resources (HR) and Industrial Relations (IR) matters, including but not limited to :

  • Bargaining Council
  • Black Economic Empowerment (BEE)
  • CCMA
  • Contracts of Employment
  • Corporate Law
  • Disciplinary Procedures
  • Dismissals
  • Dispute Resolutions
  • Employment Equity (EE)
  • HR Policies and Procedures
  • Labour Court
  • Labour Relations
  • Negotiations
  • Performance Management
  • Personnel Management
  • Policies and Procedures
  • Retrenchments
  • Skills Development (SD)
  • Strikes
  • Talent Management
  • Trade Unions