May 2014

So far this year has been a year of change. Not only are we integrating new legislation into the work place, but we have had to deal with the interminable elections and the additional public holidays that have been declared. Although we have all been very busy in the first quarter of 2014, one gets the impression that no major decisions on infrastructure spending are going to be taken by Government until after the new cabinet has been formed.

We do live in interesting times!

 

ANNUAL LEAVE

Many of our clients have asked if it is possible to have an annual leave policy which allows that employees who do not take their leave within the annual leave cycle, can be made to forfeit their leave. The Basic Conditions of Employment Act is not clear on this and over the years there have been conflicting rulings from the Labour Court with regard to annual leave; however a recent judgment appears to have decided the matter.

In this recent court judgment how the BCEA should be interpreted was clarified. It was found that an employee is entitled to utilise his annual leave for a period of six months after the end of the annual leave cycle. Therefore annual leave not taken in the year that it accrues or in the six months after this period shall be forfeited. This means that an employee who is entitled to statutory leave should never have a leave balance of more than 22.5 days; being the 15 days accrued during the annual leave period and the 7.5 days that have accrued in the six months after the leave cycle. Any leave accrued during the annual leave period which has not been taken in the subsequent six months should be forfeited.

It would be a good idea to review letters of appointment to align them with this judgement (Ludick vs Rural Maintenance (Pty) Ltd. (2014).

 

LEGISLATIVE CHANGES

A number of the Acts passed last year have been assented to and are in the process of being implemented. The Basic Conditions of Employment Act was assented to on the 9 December 2013. The changes are relatively minor and focus on three main areas:

  1. To prohibit employers from requiring employees to make payments to secure employment and to prohibit employers from requiring employees to purchase goods, services or products;
  2. To prohibit anyone from requiring or permitting a child under the age of 15 years to work and to make it an offence for anyone to require or to permit a child to perform any work or provide any services that place at risk the child’s well-being
  3. To provide for the Director-General to apply to the Labour Court for an employer to comply with a written undertaking by the employer and to provide for certain offences and penalties, increasing the penalties for these offences

Employers found guilty of Clause 1 can face up to three years imprisonment and employers found guilty of Clause 2 can face up to six years imprisonment.

In discussing these changes in Employment Equity meetings it has emerged that there is wide spread abuse which has made this level of protection necessary. There are HR staff out there who are requiring staff that they place to pay them an amount of money either as a once off payment or monthly to “thank” them for finding them a position. There are also recruitment agencies that are making the applicants as well as the client pay for a placement. Please make sure that any placement agency that you are using is registered with the Department of Labour and is not requesting any payment from the applicants that they place.

The Employment Tax Incentive Act was passed on 18 December 2013 and is intended to address the high levels of unemployment of youth in the country; eligible employees being anyone who is not less than 18 years of age, not older than 29 and includes asylum seekers. It can be claimed for any employee who was employed after the 1st October 2013.

The incentive is deducted from the Company’s PAYE return and the amount of the incentive depends on the wage paid. To be eligible the wage paid must be between R2000-00 and R6000-00, or more than the minimum wage applicable for the industry in which the employee works. The incentive is R1 000-00 per eligible employee per month for the first year of employment if the salary is more than R2 000-00, but less than R4 001-00. If the salary is more than R4001-00 then a formula becomes applicable. For example, if the employee is being paid R4 500-00 per month then the incentive would be calculated as follows:
R1000 – (0.5 x (R4 500 – R4 000)) = R750.

After the first year of employment the incentive drops to R500-00 for an employee earning less than R4 001-00 or is calculated on a pro-rata amount using the same formula. It is intended that this Act will fall away in January 2017. Most payrolls have incorporated the incentive into their parameters.

The Employment Equity Act amendment was assented to on the 16th January 2014 and is a major amendment to the original act, hugely increasing the fines applicable to Companies who do not comply with the legislation. The amendment does the following:

  • It further regulates the prohibition of unfair discrimination against employees by adding the clause “or any other arbitrary discrimination” to the list of possible discriminations.
  • Provides that certain disputes can be referred for arbitration instead of Labour Court (e.g. sexual harassment cases).
  • Provides that the fines payable are paid into the National Revenue Fund
  • Establishes revised annual turnover thresholds applicable to designated employers.

In order to be considered a designated employer (one who is required to report on affirmative action measures); the employer must employ more than 50 employees or have a turnover in excess of:

  • R6 Million – Agriculture
  • R15 Million – Construction, Catering, Accommodation and other Trade, Community, Social and Personal Services
  • R30 Million – Manufacturing, Electricity, Gas and Water, Transport, Storage and Communications, Finance and Business Services
  • R45 Million – Retail and Motor Trade and Repair Services
  • R75 Million – Wholesale Trade, Commercial Agents and Allied Services

Designated employers who do not comply with the legislation face fines as outlined below:

Previous Contravention Contravention of 16, (read with 17) 19, 22, 24, 25, 26 and 43(2) Contravention of section 20, 21, 23 and 44(b)
No previous Contravention R1 500 000 The greater of R1 500 000 or 2% of turnover
A previous Contraventions R1 800 000 The greater of R1 800 000 or 4% of turnover
Two previous contraventions R2 100 000 The greater of R2 100 000 or 6% of turnover
Three previous contraventions R2 400 000 The greater of R2 400 000 or 8% of turnover
Four previous contraventions R2 700 000 The greater of R2 700 000 or 10% of turnove

It is important to understand what these fines are for. The first category of fine is failure to comply with

  • Clause 16 – Consultation with employees, i.e. the Employment Equity Committee
  • Clause 17 – Matters for Consultation, i.e. conduct of the analysis, preparation of employment equity reports and plans
  • Clause 19 – Analysis, i.e. the conduct of a qualitative analysis
  • Clause 22 – Publication of report (applicable to public companies)
  • Clause 24 – Designated employer must assign a manager – to monitor and implement affirmative action, i.e. the Employment Equity Manager
  • Clause 25 – Duty to inform i.e. to display a summary of the act in the workplace.
  • Clause 26 – Duty to keep records, i.e. an employment equity file of documentation relating to the Committees activities.
  • Clause 43(2) – Review by Director-General

Failure to comply with the following clauses will attract a larger fine. These clauses are

  • Clause 20 – having an Employment Equity Plan
  • Clause 21 – submitting a Report i.e. EEA2 and EEA4
  • Clause 23 – having successive Employment Equity Plans
  • Clause 44(b) – failing to or refusing to implement the recommendations given by the Director-General after a review.

Companies who used to be classified as designated but who have turnovers below those specified above and are therefore no longer designated must deregister from the Department of Labour. There is a deregistration process that will need to be followed and should you need assistance, kindly contact our office.

The Broad-Based Black Economic Empowerment Act was assented to on the 27th January 2014. The main purpose of the amendment is:

  • to clarify the interpretation of fronting;
  • to provide for other remuneration of Council members;
  • to promote compliance by organs of state and public entities and to strengthen the evaluation and monitoring of compliance;
  • to include the creation of incentive schemes to support black owned and managed enterprises in the strategy for broad-based black economic empowerment to provide for the cancellation of a contract or authorisation;
  • to establish the Broad-Based Black Economic Empowerment Commission to deal with compliance of broad-based black economic empowerment;
  • to provide for offences and penalties and to provide for matters connected herewith.

The penalty for fronting can be imprisonment of not more than 10 years or a fine of up to 10% of turnover.

The DTI has announced that it is delaying the implementation of the new B-BBEE codes until April 2015. This is as a result of the need to consult with those industries that have Sector B-BBEE Charters. These Sector Charters are aligned to the current codes and it would be not be fair if new Generic Codes were to be implemented and these remain aligned to the old codes. We still believe the new codes are too onerous and understand that a separate code for SMME’s is currently being drafted by the DTI.

The following pieces of legislation have been passed by Parliament, but have not yet been assented to:
–   Labour Relations Act
–   Employment Services Act

The amendment to the Unemployment Insurance Act has been passed by Cabinet and should go through Parliament before the end of this year.

 

SKILLS DEVELOPMENT

The skills development work place skills plans (WSP) and annual training reports (ATR) have been submitted as required. Now we will be focusing on funding opportunities through the PIVOT Grants and the Discretionary Grants which will become available. It seems that the SETA’s are starting to organise themselves around the requirements of the new grant systems. Your Skills Development Facilitator will be in touch with regard to the funding opportunities.

 

EMPLOYMENT EQUITY

2014 is a reporting year for all designated Companies. In the next few weeks we will be sending out the spreadsheets requesting information required for the EEA2 and EEA4 reports. The Department of Labour have sent out draft Employment Equity regulations to support the amendments to the Employment Equity Act and these should be passed in June 2014 in order for us to amend our processes to comply with the new regulations.

One of our concerns with the draft regulations is the requirement to ensure that there is no discrimination regarding equal pay for equal work. The DoL outlines a methodology for assessing whether work is equal or of equal value. They will recognise factors justifying differences in salary based on differing qualifications or skills, quantity and quality of work, etc; however they are requiring that a designated employer must consult with the Employment Equity Committee on the elimination of unfair discrimination due to differences in terms and conditions of employment of employees who are performing work of equal value.

How this is to be done in small Companies where salaries are considered confidential is going to be interesting.

When setting numerical targets the regulations indicate that a Company should use the national demographics when planning their Top and Senior Management structures and Regional and National demographics for the levels below that. They have also given a proposed format for the Employment Equity Plan and for the conduction of a Qualitative Analysis.

Once the final regulations have been gazetted we will ensure that all our clients remain compliant.

 

PERFORMANCE MANAGEMENT

Our alliance with Select Strategy Inc., a Company based in Boston USA, is proving to be very successful. Their Performance Management system is computer based, can be adapted to any work place and allows Companies to control and drive their performance management measures more effectively. If you are interested in seeing a demonstration of the system please contact Tammy Groenewald at our offices.

 

LEARNERSHIPS

As our clients become more aware of the grants that the SETA’s are prepared to give, so more of us are becoming involved in Learnerships. There is a Sectoral Agreement with regard to Learnerships that defines their rights and the minimum allowance to be paid in terms of employment law – which is different from the Basic Conditions of Employment Act. It is important to note that Learners are not considered to be employees and therefore fall outside of some of the benefits offered to staff. The minimum allowances were revised with effect from 1 April 2014 and amounts to a 6% increase.

The allowances are set out in the table below:

Existing levels of Learnerships Credit already earned by learner Percentage of wage to be paid as allowance Minimum allowance per week Minimum allowance per month
NQF 1 to 2 0 – 120 35% R253.73 R1,098.65
121 – 240 69% R507.43 R2,197.17
NQF 3 0 – 120 17% R253.73 R1,098.65
121 – 240 40% R477.88 R2,069.22
241 – 360 53% R782.33 R3,387.49
NQF 4 0 – 120 13% R253.73 R1,098.65
121 – 240 25% R507.49 R2,197.43
241 – 360 53% R782.33 R3,387.49
361 – 480 56% R1,141.75 R4,943.78
NQF 5 to 8 0 – 120 8% R253.73 R1,098.65
121 – 240 18% R549.72 R2,380.29
241 – 360 38% R822.49 R3,561.38
361 – 480 38% R1,158.70 R5,017.17
481 – 600 49% R1,480.05 R6,408.62

 

If you are contemplating entering into a Learnership arrangement and require a contract which outlines the employee’s entitlements in terms of the Sectoral Agreement, please contact our office.

This has been a long update of the current circumstances – hopefully the next one will be less filled with legislation.

Kind regards,
Desrae & staff

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