| Notes:
· Paragraphs (a) and (b) are unchanged and their wording reflects the labour law work/reward principle “where an employer employs and pays remuneration to a qualifying employee” to emphasise again that there must be a legitimate employment relationship.
· The difference between the two paragraphs is that paragraph (b) provides that remuneration must be ‘grossed-up’ if less than 160 hours are worked for the month.
· The ‘remuneration’ referred to in paragraphs (a) and (b) is remuneration as defined by the Fourth Schedule.
The Proviso:
Note that the requirements of the proviso must be applied first (potentially reducing the value of Fourth Schedule remuneration), before ‘grossing-up’ the reduced remuneration amount if necessary.
· “Provided that in determining the remuneration paid or payable …” means:
· Fourth Schedule remuneration amounts that are not a cash payment are the taxable fringe benefits specified by the Seventh Schedule to the Income Tax Act. If there are any taxable fringe benefits, their value must be ‘disregarded’ when calculating the value of ETI monthly remuneration.
· “..an amount other than a cash payment … must be disregarded” means:
· Fourth Schedule remuneration amounts that are not a cash payment are the taxable fringe benefits specified by the Seventh Schedule to the Income Tax Act. If there are any taxable fringe benefits, their value must be ‘disregarded’ when calculating the value of ETI monthly remuneration.
· “..a cash payment that is due and payable to the employee” means:
· The remuneration portion of cash net pay after deductions, and not to the total cash remuneration before deductions.
· “..after having accounted for deductions in terms of section 34(1)(b) of the Basic Conditions of Employment Act” means:
· The “cash payment that is due and payable” must be increased by the value of any deductions in terms of BCEA section 34(1)(b) that were made from the employee’s remuneration.
Summary of the Proviso
Monthly remuneration is therefore limited to cash amounts paid to the employee plus any amount that the employer has legally deducted under section 34(1)(b) of the BCEA.
Monthly Remuneration value:
· Starts as Fourth Schedule remuneration;
· Then reduced by:
· “an amount other than a cash payment” (fringe benefits) that ‘must be disregarded’
· BCEA Section 34(1)(b)¹ deductions “in terms of a law, collective agreement, court order or arbitration award”
· The ‘net’ amount is used to calculate the value of monthly remuneration by ‘grossing-up’ if hours are < 160.
The remuneration qualifying condition of Section 6(g) of the ETI Act |
