Metal & Engineering Industry Bargaining Council (MEIBC) – Notice

Metal & Engineering Industry Bargaining Council (MEIBC) – Notice by MEIBC on dispute resolution collective agreement.

This notice is replicated from a circular by the MEIBC dated 24 July 2017.

On 21 July 2017 a Special MANCO of the MEIBC resolved to amend and extend the period of operation of the Dispute Resolution Agreement which provides for the dispute resolution procedures in the industry as well as a dispute levy, for a further period ending 31 March 2020.

Parties have also resolved that an application be made to the Minister of Labour to extend this agreement to non-parties.

DISPUTE RESOLUTION LEVY (Per employee):

Per Week Per Fortnight Per Month
R0.71 R1.42 R3.07

The employer pays a matching contribution per employee – thus total contributions per month per employee:

Dispute Resolution Levy Total: R6.14 per month

Note that the dispute resolution levy is also payable by administration staff.

Changes to the Official Interest Rate for Fringe Benefits

The Official Interest Rate for calculating Fringe Benefits decreased by 0.25 % effective 1st August 2017.

Where an employer gives an employee a loan that is less than the official interest rate or interest free, the difference between the two must be taxed as a taxable Fringe Benefit. This Fringe Benefit should be processed via the payroll and reported on the Employees IRP5 against SARS Code 3801.

The Official Interest Rate is defined in the Seventh Schedule as the rate of interest that is equal to the Repo Rate, plus 100 basis points (1%).

The repo rate was decreased from 7% to 6.75% on the 21st of July 2017, which means the deemed interest rate dropped from 8% to 7.75% effective 1st August 2017.

Temporary Workers Ruling – Assign Case – Impact of Appeal on Employers

In our July edition, we talked about the recent Assign Case in which the Labour Appeals Court concluded labour broker supplied temporary workers who worked for an employer (and earned below the BCEA threshold) were effectively employees of that employer and not dual employed with their labour broker.

The case has been appealed to the Constitutional Court.

The implication for employers is that the practical situation reverts back to the treatment of these temporary workers as being “dual” employees of the labour broker and the client until the Constitutional Court rules on the matter.

Postponement of Annuitisation Requirement for Provident Funds to March 2019

In 2015 amendments were made to the Act regarding the tax treatment of provident funds in order to enhance preservation of retirement fund interests during retirement. As a result, provident funds will be treated like pension and retirement annuity funds and will be required to annuitise benefits. This implies that on retirement, members of the provident fund will be permitted to take up to a third of the retirement benefit as lump sum and annuitise at least two thirds. However, this will only be applicable for contributions made to a provident fund after the implementation date. All contributions made before the implementation date, and growth on those contributions, may still be taken as a lump sum on retirement.

The above-mentioned amendments were supposed to come into effect on 1 March 2016. Government came under pressure from the unions regarding this proposal and in February 2016 postponed the annuitisation requirements for provident funds for two years until 1 March 2018. The reasoning behind this postponement was to provide sufficient time for the Minister of Finance to consult with the various interested parties. These included the National Economic Development and Labour Council (NEDLAC), who would be consulted regarding the annuitisation requirements for provident funds after the publication of the comprehensive policy document on social security. The Minister of Finance would also need to report back to Parliament on the outcome of those consultations no later than 31 August 2017.

Several changes have taken place since the postponement of these amendments and the discussions on the comprehensive paper on social security are still underway in NEDLAC. In view of the above it is proposed that the provisions relating to the annuitisation requirements for provident funds be postponed for 1 year from 1 March 2018 to 1 March 2019.

The proposed amendments will come into effect on 1 March 2019 and apply in respect of years of assessment commencing on or after that date.

2017 Draft Taxation Laws Amendment Bill

On 19 July 2017, National Treasury published the following amending legislation:
1. Draft Taxation Laws Amendment Bill (TLAB)
2. Draft Tax Administration Laws Amendment Bill (TALAB)

While the draft legislation still needs to be approved, the following items in the legislation are most relevant to payrolls.

TLAB Main Proposals

1. Bargaining Councils PAYE non-compliance.
Some bargaining councils have for many years not withheld PAYE from members for holiday, Sick leave and end-of-year payments. It is proposed that a levy is introduced as form of limited recovery of the taxes owing. At this stage, the impact on payrolls is uncertain, although there is a strong likelihood that payrolls will have to assist non-compliant councils with calculations going back over 5 years.

2. Introducing further changes to the anti-avoidance rules for certain share schemes, mainly to do with trusts.

3. Removing the 183/60 day tax exemption for South African tax residents earning income from services provided outside of the borders of South Africa.
The purpose of this change is to prevent double non-taxation, but it is certainly not going to be popular.

4. Increasing the tax exemption threshold for bursaries granted in respect of the education of those employees (or their relatives) with disabilities.
Various forms of tax relief for different circumstances are proposed.

5. Clarifying the rules relating to the taxation of employee-based share schemes, and introducing more anti-avoidance rules.

6. Making a number of changes to the taxation rules regarding retirements funds, including the postponement of the annuitisation requirement for provident fun payouts to 1 March 2019.

7. Clarifying that the hours used for the ‘160-hour’ determination for section 4(1)(b)(ii) of the Employment Tax Incentive Act are the hours defined as “ordinary hours” by the Basic Conditions of Employment Act (which would then exclude ‘premium’ hours).

TALAB Main Proposals

1. Spreading the R350 000 pa monetary cap that limits the deduction allowed in respect of contributions to retirement funds over 12 months.

2. Including only the portion of the travel reimbursement that is calculated at a rate per kilometre that exceeds the prescribed rate per kilometre in remuneration.

Note, the 2017 budget proposal to reduce or remove medical tax credits (as discussed in the recent NHI White paper) to help fund the National Health Insurance project, has not been taken forward in the draft Amendment Bills.

Recent SARS and Department of Labour Amendments

For interest, we have included on our website the following documents from SARS and the Department of Labour for you to access:

Agreement summarising the implications of the National Minimum Wage (published 27 February 2017)

Interpretation Note 16 – Exemption on Foreign Employment Income

Interpretation Note 34Exemption for Remuneration of Officers or Crew Members on board Ships
This interpretation note needs to be looked at closely. It creates a challenge in looking only at “this tax year” instead of a broader test of “any 12 months” leading to an inconsistency where employers will most likely have to deduct PAYE, SDL and UIF for employees until they can show these employees have been out of the country for more than 183 days. They cannot however then refund the PAYE (strictly prohibited) nor request refunds of SDL and UIF leading to potential unhappiness amongst employees who will need to reclaim PAYE on assessment.

R1 Million Fine for Striking Workers in Contempt of Court

Editor: This is a landmark ruling and reflects a very pragmatic approach by the Labour Court to reclaim some sense of discipline in strike action by employees.

In a recent Labour Court ruling (Betafence South Africa (Pty) Ltd v NUMSA & Others (C194/2016) [2016] ZALCCT 33) the Court took a ground breaking position and fined striking employees for contempt of court.

In this case, Betafence and NUMSA agreed to the terms of a Court order which suspended a strike with immediate effect and time-limits were agreed for both parties to file affidavits in the Labour Court application. Despite this court order, employees continued striking. Betafence applied to the Court and the Court found the striking workers themselves (not the union) to be in contempt of court.

In their ruling the Court concluded:

“An observation that needs to be made in this Court is that employees, especially in the face of strike interdicts, routinely disregard the orders of this court for no reason other than that they simply do not like them. This contemptuous approach towards orders of this court is in some or most instances, aggravated and/or encouraged by Unions, their officials and/or shop stewards. In some instances, as in this case, employees refuse to even heed the advice of their union representatives and leaders. In the latter instance, and where unions even confirm in papers before the court that employees have indeed refused to heed court orders, the invariable conclusion to be reached is that the non-compliance by the employees was indeed both wilful and mala fide.”

“This level of contempt has reached a point where if unchecked, the rule of law will become meaningless. In the end, anarchy and mayhem, which normally characterises most industrial actions we have witnessed, will become the new normal. This cannot bode well for our constitutional democracy, and only a stern approach by the courts can stop this slippery slope.”

Is length of service reason to pay different salaries?

Source: Werksmans Attorneys (By Jacques Van Wyk, Director, Andre van Heerden, Senior Associate and Staci Jacobs, Candidate Attorney, Werksmans Attorneys)

Issue
Whether length of service is a justifiable reason for paying employees performing the same functions differently.

Court’s decision
In Pioneer Foods (Pty) Ltd v Workers Against Regression (WAR) & others (Case no: C 687/15, 19 April 2016), the Labour Court considered the interpretation of section 6(4) of the Employment Equity Act 55 of 1998, as well as the newly enacted section 10(8).

This matter arose as an appeal against an arbitration award in which the Commissioner upheld a claim of unfair discrimination brought by the First Respondent, Workers Against Regression (“WAR”). At the CCMA, the Commissioner held that the fact that Pioneer Foods (the Applicant) paid, for an initial period of two years, their newly appointed employees 80% of the rate paid to their longer serving employees who performed the same work, amounted to unfair discrimination.

In evaluating WAR’s claim the Court noted that in order to establish ‘pay discrimination’ it is necessary for a complainant to show that:

1. The work performed by the complainant is equal or of equal value to that of a more highly remunerated comparator; and
 
2. Such difference in pay is based on a prohibited ground of discrimination.

On appeal the first hurdle was establishing the ground on which the alleged discrimination was based. WAR had not based its claim on any of the listed grounds and therefore the Court accepted that the claim was based on an unlisted or arbitrary ground (as a result the onus was on WAR to prove such claim). However, at the CCMA, WAR conceded to the Commissioner that they did not know on which unlisted arbitrary ground they relied. It was only in their heads of argument in Court that WAR alleged, for the first time, that the grounds upon which they based their discrimination claim was the fact that newly appointed employees were being paid less merely because they had started working later than their long-serving colleagues.

The Court held that “nothing in the EEA precludes an employer from adopting and applying a rule in terms of which newly appointed employees start at a rate lower than existing, long-serving employees.” The Court held further that the Code of Good Practice on Equal Pay / Remuneration for Work of Equal Value (“Code”) expressly recognises seniority or length of service as a consideration that could justify differentiation in remuneration, as do the regulations to the EEA.

As a result, the Court held that in order for ‘mere differentiation’ to amount to discrimination the reason for the differentiation must be irrational. In the instance where one relies on an ‘arbitrary ground’ one must be able to show, objectively, that the arbitrary ground is ‘based on attributes and characteristics which have the potential to impair the fundamental human dignity of persons as human beings or to affect them in a comparably serious manner’. If one were to adopt a wider interpretation of the term ‘arbitrary ground’ arising out of the amendment to the EEA then one must show that the differentiation was capricious or for no good reason (i.e, irrational). Even if discrimination, however, is found to be present it must nonetheless be found that such discrimination is also ‘unfair’.

On the facts the Court found that there was in fact a rational connection between the difference in remuneration and the length of service, i.e. to reward long service and loyalty of existing employees. Therefore the differentiation was not arbitrary and, as a result was not discriminatory. However, the Court went further and noted that even if the differentiation were found to be arbitrary, and discriminatory, it was in any event not unfair.

Importance of this case
This case advances the view that differentiation in remuneration of people performing the same work on the basis of length of service does not if itself amount to arbitrary or unfair discrimination. The Code of Good Practice specifically refers to the practice of distinguishing between employees’ length of service when determining appropriate remuneration.

COIDA – What if an employee is injured outside of South Africa?

As an employer what are your obligations in terms of reporting and/or claiming for an Injury on Duty whilst duty outside the Republic of South Africa?

Chapter IV Section 23 of the Compensation for Occupational Injuries and Diseases Act refers to Accidents outside the Republic of South Africa.

In the event that an employee, who ordinarily works within South Africa has an injury on duty whilst on business in another country, that employee shall be entitled to compensation and therefore the employer must treat the IOD as per normal.

If an employee is employed to work primarily outside of South Africa then he or she would not be entitled to compensation unless the Employer has previously agreed this with the Director-General.

Can temporary workers be a member of an employer’s pension fund?

There is nothing preventing temporary workers from becoming a member of a company pension scheme. The prerequisite is for there to be an employer/employee contractual relationship.

The membership and eligibility criteria of a Fund is determined by the conditions of the employment contract. As such, there is nothing in law that prevents an employer from contributing to a retirement fund in respect of contract and temporary workers.

Typically an employer does not contribute toward temporary employees’ pension benefits in the light of the temporary nature of their employment. As a result, the eligibility criteria are usually defined to include all full time employees under normal retirement age.

Importantly, the rules of the fund must comply with the SARS requirements for registration and approval.

In brief the SARS requirements include the following:

“The fund is a permanent fund bona fide established for the purpose of providing annuities for employees on their retirement from employment or for dependents or nominees of deceased employees or mainly for that purpose:

  • The rules of the fund provide that
  • Recurring annual contributions shall be in accordance with specified scales; and
  • Membership shall be a condition of employment for all eligible categories of employees.”

An employer-employee relationship is therefore a prerequisite.