South African Labour Law on Deducting Pay
Employer sometimes wishes to make deductions from an employee’s salary to recover a debt which the employee owes to the employer. The debt could have arisen in different ways – such as a loan, damage to company property, theft, fraud, or even overpayment of salary. At first glance, it seems practical that an employer should be allowed to simply deduct the debt from the employee’s salary.
However, the BCEA protects the employee’s entitlement to be paid his or her salary for work done. If the employee agrees in writing that the employer can make a deduction – then there is no problem. But if the employee does not agree – the employer can only deduct in certain limited circumstances defined in the BCEA.
The purpose of the limitations is to prevent employers from abusing employees by allowing them the discretion to decide when and how much to deduct. This is because an employer is not a court or an arbitrator – and thus has no power to make judgements on debt issues. Nor would it be proper for an employer to act as both prosecutor and judge to the employee’s disadvantage.
The Basic Conditions of Employment Act (BCEA)
What does not constitute “Remuneration” in the context of deductions?
There have been conflicting interpretations about what “remuneration” means – in particular, what it includes and what it excludes. The BCEA defines “remuneration” as –
“…any payment in money and/or kind made or owing to any person in return for that person working for any other person.”
Labour Court and CCMA decisions have indicated that “remuneration” does not include leave pay or an agreed settlement amount. The employer therefore cannot deduct or set-off these amounts from remuneration due to an employee.
What does the BCEA say about deductions and consent?
Section 34 (1) of the Basic Conditions of Employment Act prohibits an employer from making deductions from an employee’s remuneration without the employee’s consent and if the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award.
Even if the employee has consented to the salary deduction, sub-section (2) limits the scope of the consent by providing that –
“…if a deduction is made to reimburse an employer for loss or damage caused by the employee, it may be done only if:
- the loss or damage occurred in the course of the employment of the employee and was due to the fault of the employee;
- the employer followed a fair procedure and gave the employee a reasonable opportunity to show why the deduction should not be made;
- the total amount of the debt does not exceed the actual amount of the loss or damage; and
- the total deductions from the employee’s remuneration do not exceed one quarter of the employee’s remuneration in money.
Salary Deduction Rules – Brief Q&A:
What deductions are allowed?
Lawful deductions from salary in South Africa include:
- Personal or study loans – which an employer makes to an employee. The amount of the loan and terms of repayment should be agreed upon and recorded in a formal signed acknowledgement of debt.
- “Loss or damage” – which the employee has consented to and includes the value of work-related loss, damage, or waste which an employee causes either deliberately or negligently to the employer’s property – such as vehicles, machines, equipment, materials, etc. The employer and the employee can also agree to apportion the amount of the losses in proportion to the degree of the employee’s fault.
- Statutory deductions – such as UIF, PAYE, and Workman’s Compensation contributions.
- Union subscriptions – provided for in a relevant collective agreement that covers the employee.
- Garnishee orders – where a court has ordered an employer to make monthly deductions from an employee’s salary to pay off a judgement debt owed to a third party.
- Overpayments – where an employer has mistakenly overpaid any salary or benefit to an employee. The monthly repayments must not exceed the 25% limit on the employee’s salary referred to in section 34 (2).
What deductions are not allowed?
Unlawful deductions from salary in South Africa include:
- Loss or damage – which the employee has not consented to either on the issue of liability or if the amount is disputed.
- Fines – which an employer imposes on an employee as punishment for an alleged act of misconduct.
The core legal and labour law principle relating to deductions from employee salaries in South Africa is that the employee must give his or her prior consent to the deduction.
However, there is some scope to accommodate an employer for any loss or damage it may suffer on account of an employee’s deliberate act or negligence. If the employee has caused loss or damage and does not consent to the deduction – the employer can make a claim in the civil court for compensation based on common law principles.