Labour Laws Affecting the PayrollBy

Ashmini Singhwww.AshminiSinghConsulting.co.za

Asingh@pas-sa.co.za

Introduction

• SA is a highly unionised country with possibly the most stringent Labour Laws relating to employee protection.

• Job protection is at the forefront and the CCMA and Labour Courts act as watchdogs in protecting employee rights.

• How do the Labour Laws impact on the Payroll?

THE MAIN ACTS

• The Basic Conditions of Employment Act (1997),[BCEA]

• The Labour Relations Act (1995) [LRA]

• The Employment Equity Act. (1998) [EEA]

OTHER ACTS

• Occupational Health and Safety Act

• The Skills Development Act

• The Mine Health and Safety Act

• The Compensation for Occupational Health and Safety Act

• The Promotion of Equality and Prevention of Unfair Discrimination Act as well as Wage determinations and Sectoral Determinations.

Basic Conditions of Employment

Governs the basic rights of employees in the workplace.

• Employer may contract in more favourable conditions.

• Sectorial Determinations takes precedence over BCEA for example determinations for Farm and Domestic Employees.

Ordinary Hours of Work

• Normal work week is 45 hours;

• 9 hours for those employees who work a 5 day week and 7.5 hours for those who work more than 5 days a week.

• 1 hour lunch break is unpaid and mandatory after 5 hours of work.

Overtime

An employee must agree to work overtime in writing (employment contract for example). • Overtime is voluntary and employee cannot be

compelled beyond 3 hours per day and 10 hours per week.

• Paid at 1.5 times employee’s hourly rate and at 2 times for public holidays and Sundays.

• Employees earning more than a certain threshold (R172,000) are NOT entitled to overtime payments (unless agreed to in Writing) – Came into effect on 1 July 2011

Employees who cannot claim OT

• Senior managerial employees (those who can hire/discipline/ dismiss, authority to represent employer externally and internally,

• Sales staff who travel to customers and regulate their own working hours,

• Employees earning more than R172 000 pa.

Threshold of Earnings (Overtime)

To calculate earnings (for the purpose of overtime only) include:

• Earnings refers to regular annual remuneration before deductions.

• i.e. before income tax , medical aid, pension.

Also Exclude:

• Employer Contributions (Medical Aid and Pension)

• Substance and Travel Allowances

• Achievement Awards

• Overtime Worked

Mondi Packaging v Dept of Labour (2008) 29 ILJ 371 LC• Should overtime be included in the calculation of

remuneration for the R170 000 threshold purposes?

• Court held that O/T is largely ad hoc and determined by employer, uncertainty would arise if included in the threshold. As such, overtime is NOT included in the calculation of annual threshold.

Payslip

Calculation of Overtime Payment

RemunerationDefined as any payment in money or in kind (or both) made or owing to a person in return for that person working for any other person.WageDefined as the amount of money paid or payable to an employee in terms of ordinary hours of work, or if they are shorter, the hours an employee ordinarily works in a day or week.

Hourly Rate of Pay (Monthly Paid )

5 Day week:

Employees who work a 5 day week are deemed to work 21.67 days to complete a full month.

Hourly Rate of Pay = Salary÷21.67 (Days per month) ÷9 (Working Hours)

6 Day week:

Employees who work a 6 day week are deemed to work 26 days to complete a full month.

Hourly Rate of Pay = Salary÷26 (Days per month)÷7.5 (Working Hours)

Hourly Rate of Pay (Weekly Paid)

Weekly Wage

First calculate the monthly wage as follows:

Monthly Wage = Weekly Wage x 4.33 (Weeks per month)

Then use the formula in the preceding slide.

Per fortnight : divide by 2 to get weekly wage, then follow formula above.

Paid public holidays (PPH)

Employees are paid a double wage if they work on a day that is a PPH. If an employee’s annual leave days fall on a PPH the employee is credited with an extra day’s leave.

Paid Public Holidays Act 1994 specifies 12 days as public holidays in the year. (PPH Act).

What happens when a PPH falls on a Sunday? • Act states that the following Monday is then deemed

a Public Holiday.

• A dispute may arise in the case of shift workers where Sundays are normal working days as part of continuous operations.

• Are both days now considered days ‘off’ as both are paid public holidays?

• Issue was dealt with in the case of Randfontein Estates v Num

Randfontein Estates Ltd v NUM JA 29/06 LAC• Production continued all year, 7 days a week except

Public Holidays. Sundays were normal working days but not public holidays.

• Employer contended that the Monday, following the PPH became a PPH and not the Sunday, hence employees not entitled to 2 days paid off.

• Union stated that BOTH days were now PPH and shift employees entitled to double pay on both Sunday and Monday.

• Court Agreed with Union.

Effect of Court’s Ruling:

• If PH falls on Sunday, and Sunday is a normal working day, then employee need not work Sunday and the following Monday either, and will be entitled to receive normal pay for both days.

• If the employee works on Sunday, or on the Monday, then employee entitled to double rate of pay for the days worked (both days if he works both days).

Types of Leave

• Annual Leave

• Sick Leave

• Family Responsibility Leave

• Maternity leave

• Does the Act provide for Study Leave?

Annual Leave

• After working a full 12 Months with an employer, the employee will be entitled to 21 consecutive days annual leave i.e. 15 Working Days (5 day work week) or 18 Working Days (6 Day work Week).

• Leave is accrued at a rate of 1.25 days per month (5 Day Work Week) or 1.5 days per month (6 Day Work Week).

• Employees on a fixed termed contract or temporary employees are granted 1 day for every 17 days worked.

When can an employee take leave?

• Leave is at the discretion of the employer, but HAS to be awarded by no later than 6 months after the end of the leave cycle.

• Employee is NOT permitted to take leave during any period of notice of termination of employment.

• Payment in lieu of leave is NOT permitted except on termination of employment.

Payment of Annual Leave:

• Employer must pay the annual leave at the employee’s rate of remuneration immediately before the period of annual leave. i.e. this is the amount the employee would have been paid before going on leave.

• Therefore includes ALL benefits and allowances.

• It is the cost to company of the employee’s wage.

• NB the calculation applies to notice payment as well as severance payment calculations as well.

What is included in annual leave pay?

• Housing/ accommodation allowance,• Shift allowances and overtime,• Car allowance of provision of car (except to the

extent that the car is provided to enable employee to work),

• Any cash payments (except those in exclusions),• Employer’s contribution to medical aid, pension or

provident fund,• Employer’s contribution to funeral or death benefit

scheme.

What is NOT included in annual leave payment?• Any cash payment/in kind to enable employee to

work, e.g. equipment, tool allowance, provision of transport to enable employee to come to work,

• Relocation allowance,

• Gratuities (tips, or gifts from customers),

• Share incentive schemes,

• Entertainment allowance,

• Education allowance

SICK LEAVE

• A sick leave cycle is a period of 36 months (3 years) from the date of commencement of an employee with the same employer.

• Equates to the number of days an employee would work in a 6 weeks cycle and is often 30 days in the 3 years (5 day work week) and 36 days (6 day work week).

• Sick leave is NOT 10 days per year. • Employer cannot restrict employee to 10 days per year. • During the first 6 months, its 1 day per 26 days worked. • On the first working day of the 7th month the rest of the 30

days sick leave kicks in.

What happens if the employee uses ALL his sick leave in the 8th month of the cycle?

• If the employee uses all 30 days by the 8th month of the 3 year cycle, he will have no further paid sick leave available until the start of the next cycle.

• If employee resigns in month 9, the employer cannot claim back the sick leave from the employee upon resignation.

When MUST a medical certificate be produced? • Where the absence is longer than 2 days, a valid

certificate must be produced, i.e. must be issued by a medical practitioner.

• Also if employee is absent from work on more than 2 occasions in any 8 week period, irrespective of how long the 2nd and 3rd absences are.

• A medical certificate of a domestic employee is valid if it is issued by a medical practitioner, a traditional healer, a professional nurse who is authorised to issue certificates, or any other person who is certified to diagnose and treat patients and is registered with a professional council.

Payment in terms of sick leave

The Act makes a distinction between payment re annual leave and sick leave.

With annual leave, the remuneration package as a whole is used, but with sick leave, it is just the employee’s ordinary hours of work.

That is, the employee is only entitled to his/her wage or control amount in calculating sick leave.

Non utilised sick leave does not get paid out on termination of employment but is forfeited.

FAMILY RESPONSIBILITY LEAVE(calculated same a sick leave)This clause applies to an employee -• who has been employed by an employer for longer than four

months; and• who works on at least four days a week for that employer.

An employer must grant an employee, during each 12 months of employment, at the request of the domestic worker, three days’ leave, which the employee is entitled to take-

• when the employee’s child is born;• when the employees' child is sick; or• in the event of the death of-

▫ the employee’s spouse or life partner; or▫ the employee’s parent, adoptive parent, grandparent, child, adopted

child, grandchildren or sibling.

MATERNITY LEAVE:

• Female employees entitled to 4 months maternity leave and she is not permitted to work for 6 weeks after the delivery of a child,

• An employee who bears a still born child is entitled to 6 weeks maternity leave.

• Does annual leave accrue to an employee during maternity leave? Yes, as the contract of employment has not been changed or terminated during pregnancy leave.

DEDUCTIONS FROM PAY

An employer may not deduct monies from the employees wage unless:

Employee authorises in writing,

If it is in terms of law (tax, UIF, garnishee orders),

If employee damages employer’s equipment/ property, then employer may claim reimbursement through a fair disciplinary process but deduction may not exceed 25% of employee’s wage at a time.

DEDUCTIONS PERMITTED

• Deductions in terms of pension and medical funds do not form part of the 25%,

• Employer has no say over garnishee and emoluments orders and these could even amount to 80% of the employee’s wage.

• Employee must challenge these via civil courts.

TAX DEDUCTIONS IN TERMS OF SETTLEMENT AGREEMENTS AND AWARDS

• Employers have to deduct tax from any compensation award, arbitration award and Settlement Agreement.

• Employers must firstly apply for a tax directive at SARS before paying the employee in terms of the award.

• Awards issued by commissioners are thus inclusive of tax.

WRITTEN PARTICULARS OF EMPLOYMENT

• This usually is in the form of an employment contract. The employer must supply the employee with the following particulars in writing at the commencement of employment:

• 1. full name and address of employer,• 2. name and occupation of the employee,• 3. place of work,• 4. date on which employment began,• 5. employees ordinary hours of work,• 6. employee’s wage or rate of pay,• 7. rate of overtime,• 8. any other cash payments,• 9. deductions to be made,• 10 leave that the employee is entitled to,• 11. period of notice for termination of employment,• 12. a list of any other documents that form part of the contract

INFO ABOUT REMUNERATION

• The employer MUST give the employee the following info in writing on the day employee is paid:

• 1. employee’s name and address,• 2. employee’s occupation,• 3. period for which payment is being made,• 4. employee’s wage in money,• 5. amount and purpose of any deduction,• 6. actual amount paid (net pay),• 7. employee’s rate and overtime (if relevant)

SKILLS DEVELOPMENT ACT

• This is the levy that had to be paid to SARS once a month by the employer for the development and training of employees.

• The amount is 1% of the total amount of salaries paid to employees. (includes overtime payments, bonuses and commissions).

• Only the employer pays this levy and hence there is NO deduction on employees’ pay slips.

•

Who Pays?

• An employer who during any month has reasonable grounds for believing that the total leviable amount by that employer to all employees during the following 12 month period will exceed R500 000.

Compensation for Occupational Injuries and Diseases Act• This Act governs injury/ill health insurance.• It is compulsory for every employer to contribute to this

insurance.• If an employee is injured or becomes sick as a result of

his/her occupation, the employee may claim compensation from COIDA.

• Casual employees and those in training are also covered.• The Act however does not apply to domestics and

employees working outside SA for more than 12 months.