Employee termination and its impact on deductions

Section 34 of the Basic Conditions of Employment Act (BCEA) holds a pivotal position in safeguarding employers’ and employees’ rights and interests. This critical section establishes clear directives regarding the deductions an employer may make from an employee’s salary. At its core, it necessitates obtaining written permission and consent from the employee, ensuring that these deductions conform to the BCEA and/or pertinent bargaining councils.

Section 34 of the BCEA 

An employer is not allowed to make any deductions from an employee’s salary unless:

  1. the employer has written permission and consent from the employee in respect of the debt specified in the agreement,
  2. The deduction is required or permitted in terms of law, collective agreement, court order, or arbitration award.

When is the employer allowed to deduct, and how to deduct from an employee’s salary:

Lawful deductions may be made to reimburse an employer for loss or damage caused by the employee only if:

  1. The loss or damage occurred in the course of employment and was due to the fault of the employee;
  2. the employer has followed a fair procedure and has given the employee a reasonable opportunity to show why the deductions should not be made (i.e. by way of disciplinary inquiry);
  3. The total amount of the deduction is not more than the actual loss or damage;
  4. The deduction is not more than 25% of the employee’s remuneration.

Understanding Employee Salary Deductions: Rights, Procedures, and Double Jeopardy

When an outstanding loan is deducted from an employee’s final salary, there must be a clause in the loan agreement/acknowledgement of debt allowing the employer to deduct the outstanding monies from the employee’s last paycheck. 

Thus, the loan agreement must be in writing, where both parties have agreed to the loan amount, the repayment period, the amount payable per month, and what will become due on termination of employment. 

An employer can make statutory deductions such as UIF, Provident Fund, PAYE and leave pay owed to the employer. An employer also has the right to seek payment of monies paid incorrectly to the employee.

The question is often asked if it is considered double jeopardy when the employer makes a deduction (as a result of the employee’s negligence) and also imposes a sanction:

Section 34(2) states that the employer may make a deduction from the employee’s remuneration to equal damages or losses incurred due to the employee’s fault such as dishonesty, sabotage, negligence and the like. To do so, a fair procedure must be followed, and specific requirements must be followed.

Suppose the company has suffered a financial loss or damage to company property as a result of the employee’s fault. In that case, the company is well within its rights to be reimbursed (either by acknowledgement of debt or guilty finding after a disciplinary inquiry), and possible sanction (warning/dismissal). 

Thus, a deduction may be imposed, along with a sanction and will not be viewed as double jeopardy. 

This was further confirmed by Solidarity obo Mohammed / Air Traffic and Navigation Services Ltd (2011) 20 CCMA 7.22.2. A financial manager transferred a large amount of money into the wrong account, resulting in the company incurring interest charges. 

The financial manager received a final written warning, and the employer made a deduction to reimburse the company for the interest charges resulting from the financial manager’s mistake. The financial manager disputed this action, claiming that it constituted double jeopardy. However, the commissioner disagreed with this, to which the commissioner clarified that the recovery of money from the employee is not considered part of the disciplinary sanction, as it is viewed as a right of the company to deduct funds that the employee lost due to the employee’s error.

Essential to Keep in Mind:

  1. The deduction may not exceed 25% of the employee’s salary per payment cycle.
  2. Deductions may only be made from an employee’s salary if there is written consent from the employee, or by an award, legal conclusions or under a bargaining council’s main agreement. 
  3. In the absence of an agreement, a disciplinary inquiry must be followed.

If you seek further insights into the BCEA and how it affects your business, don’t hesitate to contact our legal team. Contact our Call Centre at 0861 737 263 for expert guidance and support.