Employers are regularly faced with the question whether or not their employees should
receive salary increases.
The basic rule is that employees do not have a right to an annual salary increase, unless it is
so stipulated in an employee’s contract of employment; or determined by a collective
agreement between the employer and a trade union; or a bargaining council agreement; or a
sectoral determination applicable to the sector within which the employer operates. In the
absence of any of these, salary increases remain within management’s prerogative.
Obviously, if the right to an increase is catered for in any of the aforementioned, the
employer cannot unilaterally remove this right and replace it with, e.g., a discretionary annual
salary increase or take away the right all together. This would amount to a breach of
contract. The employee’s agreement would have to be obtained to effect such a change.
However, even if an annual salary increase is not guaranteed, not providing an increase to
an employee may still amount to an unfair labour practice. This would be the case, for
example, if an employee meets all the requirements of a discretionary increase but the
employer, without a valid reason, refuses to increase the employee’s salary. The employee
who relies on this ground, would need to prove that:
- he/she has some entitlement to receiving an increase (e.g., it has become established
practice in the company to provide annual increases, or all other employees received
one); and - the employer acted unfairly in not increasing the employee’s salary (e.g., by deciding
arbitrarily not to give the employee an increase).
Even if there is no guarantee of an increase, employers who are running into financial
problems, but whose employees might expect an increase, should at least inform the
employees of its difficulties and decision not to implement an increase well in advance. Not
doing so is harmful to good workplace relations and also opens up the risk of an unfair
labour practice complaint.
Unless an employer is contractually or through a collective agreement or sectoral
determination bound to give an increase; it is good practice to include a clause in the
contracts of new appointees that there is no right to an increase and that the decision
whether or not to award an increase fall squarely within management’s discretion. At the
same time, of course, when awarding increases, employers should be clear about the
criteria used to grant them, inform the employees about them and ensure that the criteria are
applied fairly and consistently.
Finally, it is important to communicate the basis on which salary increases are awarded to all
employees. If the employer has a written policy regarding this, it should make reference to it
in any contract of employment and ensure that existing staff, whose contracts might not
contain such a clause, are provided with a copy of the policy. Employees should know in
advance, what the criteria is for receiving increases, how regularly they are awarded and on
what basis they are calculated. This creates certainty and clarity for employees in relation to
increases and would result in fewer disputes regarding salary increases. The actual increase
received by each individual employee, however, like other information that is personal to an
employee, should be kept confidential.
March 2010
Author: Elsabé Huysamen