Understanding the Legality of Deductions in Employee Dismissals

In this article, we delve into the legality of deductions made by employers in accordance with Section 34 of the Basic Conditions of Employment Act (BCEA). By exploring the provisions of Section 34, we aim to provide readers with a clear understanding of the rules governing deductions in employee dismissals.

When an employment relationship comes to an end, employers issue a final payslip to employees, which may include various deductions. Often, employees express dissatisfaction and confusion about these deductions, leading them to seek some form of redress.

While certain deductions from an employee’s salary are allowed, employers must adhere to the provisions outlined in the Basic Conditions of Employment Act (BCEA) to ensure the lawfulness of such deductions.

Section 34(1) of the BCEA explicitly prohibits employers from deducting any amount from an employee’s remuneration without obtaining the employee’s written consent. This provision also clarifies that deductions can only be made if they are required or permitted by law, a collective agreement, a court order, or an arbitration award. Even with the employee’s consent, sub-section (2) places limitations on deductions made to reimburse employers for losses or damages caused by employees. These deductions can only be made if the following conditions are met:

1. The loss or damage occurred during the employee’s course of employment and was due to the employee’s fault.
2. The employer followed a fair procedure and provided the employee with a reasonable opportunity to contest the deduction.
3. The total amount deducted does not exceed the actual loss or damage incurred.
4. The deduction does not exceed one-quarter of the employee’s remuneration in money.

In addition to these conditions, certain statutory deductions can be made, including contributions to the Unemployment Insurance Fund (UIF), Pay-As-You-Earn (PAYE) taxes, contributions to a provident fund, and leave pay owed to the employer. Section 34(5) of the BCEA allows employers to request repayment of wages or money mistakenly paid, which can be deducted upon the termination of an employee’s employment if not already reimbursed.

Deductions for staff loans are also permissible, but specific requirements must be met. The loan agreement must be in writing, clearly stating the loan amount, repayment period, and other relevant terms. Furthermore, the loan agreement should include a clause authorizing the employer to deduct the outstanding loan amount in full upon dismissal.

Despite the exclusive jurisdiction of the Labour Court (LC) over disputes arising from the BCEA, the Commission for Conciliation, Mediation, and Arbitration (CCMA) continues to receive numerous referrals concerning deduction disputes. The case of O’Reilly v CCMA and Others JR 2395 19 affirmed that the CCMA lacks jurisdiction to adjudicate claims regarding alleged breaches of Section 34(1) of the BCEA.

As a result, the CCMA can only adjudicate disputes related to owed amounts under Section 73A, which encompass salaries, bonuses, amounts due according to the National Minimum Wage Act (NMWA), and any other amounts the employer is obligated to pay under the BCEA. Disputes concerning deductions should be redirected to the Labour Court by raising a preliminary objection at the CCMA.

Key Points to Consider:

1. Employers can lawfully deduct specific amounts from an employee’s salary with written consent and if authorized by law, collective agreements, court orders, or arbitration awards.
2. The deduction from an employee’s salary must not exceed one-quarter of their remuneration per payment.
3. Disputes regarding deductions made under Section 34 of the BCEA should be referred to the Labour Court, as the CCMA lacks jurisdiction in such cases.

Information Sourced from: https://labourguide.co.za/employment-condition/remuneration/unlawful-deductions-when-employees-are-dismissed/