Whether or not a business has been directly affected by the national lockdown or the Covid-19 pandemic directly, it is simply fact that all businesses in South Africa will be impacted by the anticipated global recession in the coming days. Sadly, it is the small to medium business that are likely to be the most affected. There are numerous forms of support and options available for businesses who are suffering, from financial to governmental interventions. However, we felt that it was important that small businesses do not forget that they have far greater flexibility regarding the terms and conditions they can impose on their staff. Minor tweaks to the terms and conditions of employment for a few months could lead to substantial cost-saving. We explore these options in this article.
MINISTERIAL DETERMINATION FOR SMALL BUSINESS VS THE BASIC CONDITIONS OF EMPLOYMENT ACT
The Ministerial Determination: Small Business (MDSB) applies to all employers employing fewer than 10 employees, and not operating more than one business. This could be the case for employers meeting this definition today or those who may become small businesses after being forced to reduce staff as a result of the recession. What the MDSB does is it provides for deviations, in certain instances, that are permitted from the usual default position provided in the Basic Conditions of Employment Act (BCEA). Specifically, it allows for deviations and greater flexibility for overtime payments, the averaging of working hours, and the payment of family responsibility leave.
Overtime
The BCEA provides that an employee may not be required or permitted to work more than 10 hours’ overtime per week. The MDSB allows for this limitation to be extended up to 15 hours’ overtime per week. In addition, the BCEA provides that all overtime hours be remunerated at 150% of the ordinary hourly rate. The MDSB allows for the first 10 hours of overtime to be remunerated at 133% of the ordinary hourly rate, then only the further five hours of overtime are required to be paid at 150%. This flexibility allows for more hours of work to be performed at a reduced cost to company.
Averaging of Working Hours
Averaging of working hours is not permitted at all by the BCEA, except when in terms of a collective agreement. Collective Agreements are rare for small to medium businesses as unions are less active and prevalent in smaller companies. Therefore, for the most part, this is not something readily available to employers. However, the MDSB does allow for this by individual agreement between the employer and the employee. An employer may average the ordinary working hours and overtime hours of employees for a period of up to four months. The only caveat is that, on average, the employees must not be working for more than 45 ordinary hours per week and 10 hours overtime per week (note that it is capped at 10 hours when averaging and 15 hours when averaging is not used).
While four months is administratively burdensome, even utilising this option to average on a monthly basis could result in a substantial cost-saving. What this would mean is that the hours are totalled at the end of the month, and only if the hours exceed 195 for the entire month, would overtime hours (and thus overtime payments) accrue. The above is subject to the BCEA provisions of minimum rest periods, etc. However, it allows flexibility in that employers can ask employees to work overtime here and there without necessarily incurring the higher cost to company.
If an agreement to average working hours is concluded, it will automatically lapse after 12 months. Therefore, this is well-place to assist as an interim measure to recover financially. If necessary or desired, a further agreement can be concluded on an annual basis.
Family Responsibility Leave
The BCEA provides for a minimum entitlement of 15 paid annual leave days for an employee working a five-day week (18 days for a six-day week) and three paid family responsibility leave days. The MDSB allows for the employer and the employee to conclude an agreement to reduce the annual leave entitlement by the number of family responsibility leave days claimed by the employee in any given year. Therefore, should the employee take no family responsibility leave, then the annual leave entitlement will be unaffected by this. Should the employee take two days’ family responsibility leave, then his or her annual leave entitlement would be reduced by two days, and so on.
This, again, provides for a cost-saving for the employer as fewer paid leave days are available to employees. This is not to say that unpaid leave cannot be granted at the employer’s discretion, but the entitlement to be paid for time off is reduced.
IMPLEMENTING THE FLEXIBILITY
As we have outlined, small business employers can play around with the terms and conditions of employment of their staff and effect fairly considerable savings to the monthly wage bill. The only requirement would be gaining the consent of staff to amend their terms and conditions of employment for this temporary recovery period. This can be implemented by way of an employment agreement addendum which is signed by the employer and employee. Given the economic climate, it should not be likely that employees would refuse to agree to these changes – especially if these changes are being made to avoid having to contemplate retrenchments in future. If this is explained to the employees, we do not envisage there will be insurmountable resistance. Please contact us for assistance in having these consultations with your staff, as well as to draft the necessary addendums. These quick and fair processes will lead to the flexibility many small businesses need to see themselves through the aftermath of this pandemic.