A revised earnings threshold came into effect on 1 May, raising the level at which employees automatically qualify for certain protections under the Basic Conditions of Employment Act (BCEA). On the surface, the upward adjustment of 3% – bringing the new threshold to R269 601 per year, or R22 467 per month – may appear to be a routine, incremental change. In practice, however, it fundamentally alters how a significantly larger portion of the South African workforce must be managed, compensated, and governed on a day-to-day basis.
Key Takeaways
- Reclassification demands immediate action: Employers must urgently audit payroll data, contracts, and remuneration structures to identify newly covered employees and bring working conditions into full BCEA compliance.
- Financial consequences go beyond fines: Overtime costs, shift restructuring, leave entitlements, and administrative demands all carry a price tag – making a labour cost impact assessment a business-critical priority.
- Early movers are better protected: Employers who act swiftly to update contracts, train managers, and strengthen workforce planning significantly reduce their exposure to disputes, penalties, and reputational risk.
About Arcadia Finance
Apply for a loan effortlessly with Arcadia Finance. Enjoy zero application fees and choose from 19 reputable NCR-compliant lenders offering reliable financial solutions.
What the Threshold Actually Governs
The earnings threshold determines which employees are automatically entitled to the statutory protections that regulate working hours, overtime, rest periods, and certain pay conditions under the BCEA. Employees earning below the threshold are covered by these provisions by default – meaning their working conditions are directly governed by law, rather than being left entirely to the discretion of the employment contract or the employer.
Employers often confuse the earnings threshold with the minimum wage. These are two entirely separate instruments. The National Minimum Wage sets the floor for hourly pay, while the earnings threshold determines which employees receive additional statutory protections around working time and overtime.
The Dual Impact on Employers and Employees
This threshold increase carries a dual impact that employers must carefully consider.
- Some employees whose earnings previously placed them above the threshold may now fall below the revised level, meaning they gain access to additional legal protections they were not previously entitled to.
- For employers, this reclassification means that the existing arrangements, working practices, and employment contracts of newly covered employees must be reviewed and, where necessary, updated to ensure full legal compliance.
In some sectors, such as retail and hospitality, a significant proportion of employees earn close to the threshold, meaning even a modest adjustment can reclassify large numbers of workers at once.
Defining “Earnings” Correctly
The first and most critical step for employers is to develop a precise understanding of what must be assessed. Under the BCEA, “earnings” refer to an employee’s regular annual remuneration before any deductions are made.
The following table summarises what is and is not included in the definition of earnings for threshold purposes:
| Included in Earnings | Excluded from Earnings |
|---|---|
| Basic salary | Transport allowances |
| Regular guaranteed payments | Subsistence allowances |
| Fixed monthly allowances forming part of remuneration | Overtime payments |
| Housing allowances (where contractually guaranteed) | Performance bonuses and awards |
| Commission payments |
Misinterpreting what qualifies as earnings can result in the incorrect classification of employees and expose an organisation to unintended non-compliance, which may in turn attract penalties or trigger disputes at the Commission for Conciliation, Mediation and Arbitration (CCMA).
Conducting a Workforce Audit
Once employers have a clear definition of earnings in place, they are required to review their entire workforce against the new threshold. This exercise is not limited to a straightforward examination of payroll data – it also requires a thorough audit of employment contracts, remuneration structures, and job classifications to ensure alignment with how earnings are legally defined and how the relevant protections apply in practice.
Working hours must also be closely examined as part of this process. This includes an assessment of how ordinary hours are structured within the organisation, how overtime is calculated and formally authorised, and how rest periods are managed and recorded. In many organisations, these practices have evolved organically over time and may not be consistently documented or applied across all departments and teams. Where more employees now fall within the scope of statutory protections as a result of the threshold change, these gaps become active compliance risks that must be addressed without delay.
Non-Standard Employment Arrangements Require Closer Scrutiny
The compliance challenge becomes considerably more complex for businesses that rely on non-standard employment arrangements. Fixed-term contracts, labour broking relationships, and flexible work models all require closer attention in light of the revised threshold.
Employees placed through labour brokers, for example, may be deemed to be employees of the client organisation if they are providing what amounts to a permanent service. In such cases, the client employer bears responsibility for ensuring that those workers receive the protections to which they are entitled under the BCEA.
Similarly, certain fixed-term contracts may be regarded in law as constituting indefinite employment, particularly where the work being performed is of a permanent nature. As a greater number of employees fall below the threshold, these provisions become increasingly relevant and require tighter governance and contractual clarity.
Section 198A of the Labour Relations Act provides that employees earning below the earnings threshold who have been employed by a labour broker for more than three months are deemed to be employees of the client – not the broker – for the purposes of unfair dismissal and unfair labour practice protections.
Financial and Operational Implications
The financial implications of the threshold change are not limited to the potential penalties that may arise from non-compliance. Expanding the pool of employees who are entitled to overtime pay and regulated working hours has direct and immediate consequences for labour costs and operational planning across the business. Many employers will find that the cumulative effect of reclassifying even a relatively small number of employees can translate into a material increase in monthly payroll expenditure, particularly in industries where extended working hours are common practice.
It is also worth noting that the cost impact is rarely confined to overtime alone. When an employee gains statutory protections, the full spectrum of BCEA entitlements comes into play – including prescribed rest periods, meal intervals, and limitations on night work. Each of these elements has the potential to affect how rosters are structured, how operational shifts are planned, and ultimately how much it costs to deliver the same volume of work.
Revisiting Budgets and Payroll Structures
Employers may need to revisit and adjust their budgets to account for:
For businesses operating on tight margins – particularly in the retail, hospitality, manufacturing, and logistics sectors – these adjustments may require a broader review of cost structures and pricing models. Organisations that have built their operational models around the assumption that certain employees are exempt from overtime provisions will need to revisit those assumptions with urgency.
Workforce Planning in a More Complex Environment
Workforce planning becomes considerably more complex as compliance requirements intersect with productivity targets and operational demands. Businesses that have historically relied on informal overtime arrangements or flexible working practices may find that formalising these structures carries a meaningful financial cost that was not previously factored into headcount planning or annual budgets.
Employers may need to consider whether it is more cost-effective to hire additional staff to cover peak demand periods, rather than relying on overtime from a smaller team of reclassified employees. In some cases, restructuring shift patterns or introducing part-time and job-share arrangements may offer a more sustainable and compliant solution over the longer term.
The Administrative Burden of Compliance
Beyond direct payroll costs, the threshold change introduces an increased administrative burden that should not be underestimated. Employers are required to keep accurate records of the working hours of all employees who fall below the threshold – including start and end times, overtime worked, and rest periods taken. These records must be retained for a prescribed period and made available to Labour Inspectors upon request.
Organisations that do not currently have robust time-and-attendance systems in place may find that investing in appropriate tracking technology becomes a practical necessity rather than a discretionary upgrade. Manual record-keeping, whilst permissible, is time-consuming and prone to errors that can create compliance exposure during audits or inspections.
The Importance of Consistent Policy Application
The threshold change also presents a significant practical challenge for organisations at the level of day-to-day management. Policies must be applied consistently across all teams and departments, and decision-making must be informed by a clear and shared understanding of where statutory protections apply and to whom.
Training and internal communication are essential components of an effective compliance response. Those who are responsible for managing teams – including line managers, supervisors, and HR business partners – must be equipped to implement changes correctly and to handle related employee queries with confidence and accuracy.
What This Means for Employees
For employees, the shift in the threshold has direct and tangible implications. Those who now fall below the revised level gain access to a set of statutory protections that are designed to support fair working conditions and prevent exploitation. These protections include:
- Legally prescribed limits on ordinary working hours (generally a maximum of 45 hours per week)
- Entitlement to overtime pay, calculated at 1.5 times the ordinary rate for hours worked beyond the standard limit
- Mandatory rest periods, including a daily rest period of at least 12 consecutive hours and a weekly rest period of at least 36 consecutive hours
- Meal intervals of at least 60 minutes after five consecutive hours of work
Failure to grant these protections to newly covered employees – or to properly entrench them in updated employment contracts – could result in disputes being referred to the CCMA or the Labour Court.
Structuring Employment Agreements for Compliance
The threshold change places greater importance on how employment agreements are structured and what they contain. Employers need to ensure that contracts are brought into full legal compliance whilst also being written in plain, accessible language that is clear and fair to the employee, and aligned with the genuine operational needs of the business.
When updating employment contracts to reflect the new threshold, avoid simply inserting boilerplate BCEA language. Instead, ensure that the specific working hours, overtime arrangements, and rest periods applicable to that employee’s role are clearly set out in the contract itself – this reduces ambiguity and the potential for future disputes.
An Opportunity, Not Just an Obligation
Beyond mere compliance, the threshold adjustment presents employers with a genuine opportunity to strengthen workforce planning and improve transparency in their pay structures. A clear and well-documented alignment between remuneration, role expectations, and legal requirements supports both long-term operational stability and the kind of employee trust that contributes to lower turnover and higher engagement.
The threshold change has effectively shifted a line within the South African workforce. It is now the responsibility of employers to ensure that this line is properly understood, consistently applied, and accurately reflected in day-to-day management practices. Taking action now allows businesses to address compliance risks directly and to build systems, processes, and contractual frameworks that will remain robust and defensible as further adjustments are made in future years.
Conclusion
The revised earnings threshold is not merely an administrative adjustment – it is a meaningful shift in the legal landscape that demands a deliberate and well-structured response from South African employers. Businesses that treat this change as an opportunity to audit their practices, strengthen their contracts, and invest in better workforce planning will emerge in a stronger compliance position whilst also building greater trust and transparency with their people. Those that delay risk not only financial penalties and CCMA referrals, but also the deeper operational disruption that comes from managing a workforce without a clear and legally sound framework in place. The time to act is now, and the groundwork laid today will determine how resilient and prepared an organisation is when the next threshold adjustment inevitably arrives.
Fast, uncomplicated, and trustworthy loan comparisons
At Arcadia Finance, you can compare loan offers from multiple lenders with no obligation and free of charge. Get a clear overview of your options and choose the best deal for you.
Fill out our form today to easily compare interest rates from 19 banks and find the right loan for you.
