Summary of facts
In 2019 when The National Minimum Wage Act became effective, Quantum Foods (Pty)
Ltd had restructured in their payslips that all employees and union members are entitled
to a pro-rated bonus that could be paid either annually or monthly, either method of
payment was completely at the employer's discretion however the employees had a
choice for either payment method and even if an employee were to leave during the year,
the employee is still entitled to the pro-rated bonus for the period worked. The
contributions to be paid by the employer to the provident on behalf of the employees were
always made and up to date, however, the arbitrator had falsely stated that no
contributions to the provident fund were made by the employer.
the dispute arose when the union stated that Quantum Foods (Pty) Ltd was not complying
with The National Minimum Wage Act and claimed that the contractual bonus and
provident fund contributions should not be included in calculating wages to determine
adherence to The National Minimum Wage Act. The dispute was brought before the
CCMA, where the arbitrator ruled in favour of the union, the matter was reviewed by the
Labour Court where the arbitrator's decision on behalf of the CCMA was upheld ruling
that the exclusion of any bonus or provident fund contributions from the calculation of
minimum wage.
issues in the dispute
The issues in the dispute were whether the contractual bonus paid by the employer is in
coherence with section 5(1)(c) of The National Minimum Wage Act. the union argued that
the contractual bonus cannot be considered a "gratuity" as employees are entitled to the
contractual bonus, therefore excluded from wage calculation and argued that the
provident fund contributions should not be included in the wage calculations.
court decision
Ultimately the appeal Court held that section5(1) excludes contractual gratuities, including
bonuses from wage calculation as the act specifically refers to discretionary and non-
contractual bonuses. The contractual bonus is stipulated in the employment contract and
cannot be considered a gratuity and cannot be included in wage calculation. The court
ruled that the employer's contributions to the provident fund should be included in the
wage calculation to comply with section 5(1), therefore since the contributions forms part
of the total cost of employment, the court found that the provident fund contributions made
by the owner is "payable" amounts under section 5(1).
Legal Opinion
This case importance of this case indicates the need for employers to structure and
explain compensation packages in legally compliant ways to avoid future disputes
regarding wage calculations, as well as to define contractual or discretional payments
and ensure compliance with the National Minimum Wage Act and the consideration of the
nature of the payments made by employers. The misinterpretation of the National
Minimum Wage Act is probably what led to the misunderstanding The provident fund
contributions, as these contributions were misunderstood to be non-payable amounts
hence requiring to be excluded from employer's total renumeration.
In conclusion the courts should be the last resort for disputes like these and proper
attention to detail should be utilised during arbitration and by the Labour Court to review
the rulings of the CCMA correctly.
