Earnings threshold increases by 5.5%: a balancing act for employers
By John Botha
In a pivotal announcement, the Minister of Employment and Labour has sanctioned a 5.5% upward revision to the earnings threshold, set to take effect on April 1, 2024. This landmark decision holds profound consequences for both employers and employees across South Africa.
New earnings threshold
Commencing April 1, the annual earnings threshold will stand at R254 371.67. This figure reflects a meticulous adjustment based on the consumer price index (CPI). However, the seemingly modest increase carries significant implications.
1. Balancing rationality and economic pressures
The first noteworthy aspect lies in the comparison with the National Minimum Wage. While the earnings threshold experiences a 5.5% boost, the National Minimum Wage follows a formula of CPI plus 3%. In practical terms, this signifies that the earnings threshold’s growth is notably more restrained than that of the minimum wage. This divergence underscores a pragmatic approach by policymakers, acknowledging economic pressures faced by businesses and opting for a measured increase. Straying beyond CPI could potentially impose undue burdens on employers.
2. Impact on employment costs
The earnings threshold directly influences employment costs, playing a pivotal role in the regulatory landscape. This adjustment has profound implications for employers in two key areas:
– Basic Conditions of Employment: Employees earning below the threshold are subject to specific provisions under the Basic Conditions of Employment Act. These provisions encompass aspects such as overtime, Sunday work, public holiday work, and night work allowances. As the threshold ascends, more employees become eligible for these premium payments.
– Labour Relations Act (LRA): The LRA extends protection concerning deeming and equal treatment to fixed-term, part-time contract, and Temporary Employment Services (TES) employees. Employers must navigate these complexities while ensuring compliance.
3. Navigating uncertainties
Employers now find themselves at a crossroads, balancing the imperative of sustainability against policy uncertainties. Factors such as the National Health Insurance, the National Social Security Fund, and the transition within the Quality Council for Trades and Occupations contribute to an intricate landscape. Simultaneously, socio-economic challenges, including rising unemployment rates, exert additional pressure.
As the earnings threshold undergoes a 5.5% increase, employers are at a crossroads, compelled to navigate a complex terrain. Striking the right balance between compliance, financial viability, and employee well-being is of paramount importance. While the percentage increase may seem modest on the surface, its ripple effects resonate throughout the labour market. Businesses are urged to tread cautiously, recognising that their decisions impact not only their bottom line but also the livelihoods of countless workers.
In this dynamic environment, employers must remain vigilant, adapt to changes, and ensure their long-term sustainability while safeguarding the interests of their workforce.
John Botha is the Joint CEO of Global Business Solutions.
BUSINESS REPORT