COVID-19 has wreaked havoc in the world’s economy, and South Africa was not spared the wrath of the COVID-19 storms, poor economic growth coupled with fears of a third wave has sent shivers down the spine of many businesses.
The reality of another lockdown is a frightening one, more so as dwindling turnovers threaten the livelihoods of many South Africans. So what happens when a business is struggling financially, so much so that they cannot honour paying salaries on time?
This is the question on many employer’s minds. Let’s look at the rights of the employer and employee faced with this situation. Employees refusing to work due to late payments of salaries can land themselves in hot water, and the employer may institute disciplinary action against the said employees.
Many are unaware that the aforementioned scenario is covered in terms of the Basic Conditions of Employment Act 75 of 1997, and all employers have a seven days grace period to make good on salary payments.
In terms of Section 32(3) of the Basic Conditions of Employment Act, employers are obligated to pay employees’ salaries and provides for the following:
(3) An employer must pay remuneration not later than seven days after –
(a) the completion of the period for which the remuneration is payable; or
(b) the termination of the contract of employment.
So what does this mean if you are an employee? An employee has a right to refer the matter to the department of labour after the 7-day grace period has lapsed. An inspector will ordinarily be appointed, and if it’s established that there has been non-compliance with the aforementioned provisions, the department of labour has the power to issue a compliance order against the defaulting employer.
As an employer, it is very important to note that in terms of Section 75 of the Basic Conditions of Employment Act, you will be liable to pay interest on any outstanding balance at a rate set out in the Prescribed Rate of Interest Rate Act 55 of 1975. This can be a very costly exercise and could worsen the financial plight of the business, so employers should always be mindful of the consequences of not paying employees’ salaries on time.
Therefore, it is advisable for business owners to engage staff should they find themselves staring down a barrel of a gun and unable to pay salaries on time. These consultations can be very helpful and will enable staff to make provisions for debit orders that may be set to go off in the coming days; In addition, these consultations may also avert any unwanted industrial action.
Contact your nearest SEESA office for labour assistance, alternatively, leave your contact details on our website for a legal advisor to contact you.
About The Author
Atish Panday is a legal advisor and Branch co-ordinator at SEESA Richards Bay. He obtained his LLB degree at the University of Kwa-Zulu Natal in 2006. After completing articles at the Legal Aid Board of South Africa he commenced work at SEESA in 2008.
References: Basic Conditions of Employment Act 75 of 1997 as amended.