In an arbitration award on 27 June 2024, the Commission for Conciliation, Mediation
and Arbitration (“CCMA”) was faced with the issue of determining whether the
employer’s policies were against the National Minimum Wage Act, 2018, by including
loyalty bonuses and retirement funds in the employee’s wages.
Background
In the case of Mr Price t/a Sheet Street / Department of Employment and Labour -
Gauteng [2024] 10 BALR 1082 (CCMA), Mr Price t/a Sheet Street at Dobsonville Mall
Store (“the employer”) was issued with a compliance order by the Inspector of the
Department of Labour for failure to comply with section 4(5) of the National Minimum
Wages Act, 2018 (“the Act”), which places the obligation on employers to pay
employees wages that are not less than the applicable national minimum wage. The
employer referred a dispute to the CCMA claiming that it was in compliance with the Act.
The employer asserted during the arbitration that it was in compliance with the Act
because it had a policy that guaranteed loyalty bonuses to all permanent employees
without any conditions. The employer further argued that it contributed 7.5% of the
employee’s pensionable salary towards a retirement fund.
The Department of Labour argued that the employer awarded loyalty bonuses to
employees based on their performances and that was contrary to section 5(1) of the Act
and the law laid down by the Labour Appeal Court in the case of Quantum Foods (Pty)
Ltd v Commissioner H Jacobs (2024) 45 ILJ 71 (LAC).
Commissioner’s analysis
The Commissioner correctly noted that the Labour Appeal Court in Quantum stated that
gratuitous bonuses granted by employers are excluded from employee’s wages as per
section 5(1) of the Act. However, contractual bonuses are enforceable obligations
included in the calculations of wages of employees. The court in Quantum further stated
that retirement fund contributions are included in the employee’s wages if they form part
of the Act’s definition of “payable in money for ordinary hours of work”.
Based on the law laid down by the court in Quantum, the Commissioner stated that
since the employer’s policy only requires employees to be permanent employees to
receive loyalty bonuses, these bonuses are enforceable contractual benefits and thus
form part of the employee’s wages. With regards to the retirement fund contribution, the
Commissioner followed the principle in Quantum by stating that the wording “payable”
means “that which is required to be paid in money to the employee, which includes the
payment to be made on his or her behalf”. The 7.5% of the employees’ pensionable
salary paid to the retirement fund fulfills this criteria and forms part of wages.
In light of the above, the Commissioner found that the compliance order issued be set
aside as the employer’s policy and calculations of the employee’s wages was in
accordance with the Act.
Conclusion
The above case is a great outline of the principle set out in Quantum. When calculating
the wages of the employees, bonuses that are granted as a form of gratitude (e.g
performance-based bonuses) are different from contractual bonuses. The latter form
part of the calculation of the employee’s wages, whereas a performance bonus is
excluded from the employee’s wages. Furthermore, retirement funds paid on behalf of
the employee as per the employment agreement, form part of the employee’s
contractual wages.
