HR and Employment #5: An unwelcome (and little known fact) for many employers…

by Claire Stewart on 16/01/08 at 10:00 am
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Aye caramba!

Two things most South Africans have very little of in January is cash and leave… a sad fact in life.

This leads me to my post today on annual leave payment calculations. Did you know that if you have any employee whose salary/ wage is calculated in any way other than time (i.e. commission or partly commission based) or fluctuates significantly (i.e. overtime pay), then these amounts have got to be included in their annual leave pay calculation?

In terms of the calculation, you have to average their commission and / or overtime over the past three months, and then add this to their normal basic pay.

So how does this actually work?

Well, here’s an example that should illustrate it more clearly:

You have an employee who earns R5,000 basic a month and an average commission of R15,000 per month. If you were to think that, over their 15 working day December holiday, you’d only need to pay them their normal basic of R5,000, you would be wrong.

In terms of the Basic Conditions of Employment Act, you would actually be required to pay them both amounts i.e. R20,000. The same works for overtime. If the employee had averaged R3000 overtime over the past 3 months, you would have to add that to their basic for their holiday pay.

This is an unwelcome (and little known fact) for many employers – and it’s best you know it upfront so you can take it into account when you structure packages for new employees…

Hope that 2008 is an interesting, exciting and prosperous year for you!

Claire Stewart is the founder of PeopleWise, an HR and Employment consulting service. Like Neo in the Matrix, Claire sees through the convoluted mess of SA employment law and makes sense of it for you, loyal Ideate reader. View more articles by Claire Stewart.

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