Do salary reductions arising from erroneous overpayments constitute a salary deduction under section 34(1) of the Basic Conditions of Employment Act 75 of 1997? An appraisal of Mhlontlo Local Municipality & 2 others v Ngcangula and Another (Case no 1154/2

3 1 High Court (Ngcangula v Mhlontlo HC)

Before addressing the merits, the High Court considered and rejected the Municipality’s jurisdictional challenge (pars 7-14). The court held that it had concurrent jurisdiction to hear the matter in line with section 77(3) of the BCEA because the dispute concerned an alleged breach of the employment contract (par 14).

Turning to the merits, the court held that the 2.5% increment paid by the municipality to the employees was lawful and could not be withdrawn, as it had been applied across the board and was paid to the employees for a significant period (par 12). The court further held that the entitlement -or lack thereof- to the 2.5% notch increment by the two employees was immaterial, because it was not their fault (par 15). Accordingly, the court held that the reduction constituted a salary deduction prohibited in terms of section 34 of the BCEA.

To support this finding, the court cited the Constitutional Court’s judgment in Public Servants Association obo Ubogu v Head of the Department of Health, Gauteng and Others (2018) 39 ILJ 337 (CC) (Ubogu), which emphasised that a deduction under these circumstances constitutes unfettered self-help, whereby the employer took the law into its own hands (par 15).

The court ordered the reinstatement of the 2.5% notch increment and backpay in respect of the months for which the reductions were effected (par 17). The Municipality subsequently took the matter on appeal.

3 2 Supreme Court of Appeal (Mhlontlo)

During the appeal, the employees raised two special pleas viz, the doctrine of peremption as well as mootness (pars 12-18). Both special pleas were dismissed by the SCA (para’s 16-17)

The court then turned its attention to the pivotal issue of whether the employees had established that the reduction of their salary by 2.5% constituted a breach of their employment contracts (par 19). The employer submitted evidence to show that the High Court judgment was incorrect (par 29). This was based on the fact that the employees could not establish their contractual entitlement to the increment (par 27). One of them even attached a copy of their employment contract, but could not point out any clause that created such an entitlement (ibid). Attached to Mr Ngcangula’s affidavit was a letter from the South African Local Government Bargaining Council (SALGBC) which stated that the 2.5% notch increment would be applied only to employees who had not reached the top of their salary scales. This also confirmed that the notch increase was not intended to apply to all employees (par 28).

The SCA disagreed with the findings of the High Court. The fact that the increments were paid over a considerable period of time did not make them lawful (par 30). The court explained that an erroneous payment from one’s employer, even over an extended period, could not create a contractual entitlement, instead, it would entrench illegality (ibid).

This finding distinguished between remuneration to which employees are legally entitled and payments mistakenly made by an employer. Since the employees could not demonstrate any contractual basis for the 2.5% increment, the Municipality’s decision merely restored remune-ration to its correct contractual level. The court therefore rejected the High Court’s characterisation of the adjustment as a deduction under section 34. The appeal was thus upheld (par 35).

This judgment effectively authorised the employer to reduce the employees’ salaries by the 2.5% that was erroneously given. Moreover, this did not amount to a prohibited deduction in terms of section 34 of the BCEA.

4 1 Alignment with the Basic Conditions of Employment Act

Section 34(1) of the BCEA prohibits deductions from employees’ remuneration unless the conditions listed therein are met, namely, the employee consents in writing or the deduction is required or permitted in terms of a law, collective agreement, court order, or arbitration award (See Malumane v Member of the Executive Council, Mpumalanga Department of Health and Others (2026-095555) [2026] ZAMPMBHC 47 (11 June 2026) (Malumane) par 33).

The purpose of section 34(1) is to protect employees against arbitrary and unilateral conduct by employers and to prevent employers from engaging in self-help in relation to remuneration that is due and payable to employees (Malumane par 35; Hlwatika at 514). In this regard, the section creates an important statutory safeguard by ensuring that deductions occur only within the limits expressly recognised by law. The protection afforded by section 34(1) is significant because remuneration occupies a central place in the employment relationship. Employees depend on remuneration for their livelihood and are therefore vulnerable to arbitrary reductions or deductions by employers. It follows that an employer who wishes to deduct monies from an employee’s remuneration must demonstrate compliance with one of the statutory grounds listed in section 34(1) (Malumane par 17).

In terms of section 1 of the BCEA, a salary, also known as remuneration, is generally an agreed payment of money payable to an employee by the employer for work performed. It is defined as any payment in money or in kind, or both in money and kind, made or owing to any person in return for that person working for any other person, including the State, and ‘remunerate’ has a corresponding meaning. Remuneration becomes due and an entitlement to an employee once the work has been performed. If for whatever reason it is not paid, or part thereof has not been paid, it must generally be paid within the time periods contemplated by the BCEA (Malumane par 32; see also North West Provincial Legislature and Another v National Education Health and Allied Workers Union obo 158 Members (JA17/22) [2023] ZALAC 12 (North West Provincial Legislature) par 8).

The protection created by section 34(1) therefore presupposes the existence of remuneration to which the employee is legally entitled. It is only logical that the consent requirement contained in section 34(1) was developed with the understanding that consent can be obtained only from a person who possesses a legitimate entitlement to the payment concerned (Ncube at 7; See also Mpanza pars 30-32). If no entitlement exists, the conceptual foundation for invoking section 34(1) becomes considerably weaker (ibid).

The BCEA itself recognises that erroneous overpayments may occur (Jonker v Wireless Payment Systems CC (J1137/09) [2009] ZALC 150 (Jonker) par 21). Section 34(5) specifically contemplates the repayment of remuneration where an employer has overpaid an employee as a result of an error in calculating remuneration (Jonker pars 21-22). The subsection serves an important practical purpose. Employers who make genuine payroll or administrative mistakes must be able to correct those errors without being forced to tolerate ongoing losses or resort immediately to expensive litigation. Section 34(5) therefore operates alongside section 34(1). Whereas section 34(1) protects employees against unlawful deductions from remuneration to which they are entitled, section 34(5) acknowledges that there may be instances where an employee receives remuneration to which they were never entitled and which would need to be recovered. The legislature thus recognised that the protection of employees and the correction of payroll errors must be balanced.

It is at this point that the distinction central to Mhlontlo emerges. In Mhlontlo, the employer never attempted to deduct the overpayments from the employees’ salaries as a debt owed to it, which would have triggered the application of section 34(5). Instead, the employer simply sought to reduce the salaries to correct the anomaly and restore them to the level that should always have applied. The concepts of salary deduction and salary reduction are not defined in the BCEA. Grammatically, to reduce is to lessen or to make something smaller, while to deduct is to subtract or remove an amount from an existing total (Oxford English Dictionary (Oxford University Press 2026). Although the two concepts may appear similar in their practical effect, they are not necessarily identical in law (See Jonker par 22).

A deduction involves taking away remuneration that is due to an employee, whereas a reduction which serves to correct an erroneous overpayment involves removing an amount that should never have formed part of the employee’s remuneration in the first place. The employer’s action in Mhlontlo therefore constituted a correction of remuneration rather than a deduction as envisaged by section 34(1). The judgment highlights the subtle yet crucial distinction between these concepts and demonstrates that not every reduction in the amount reflected on a payslip amounts to a statutory deduction.

A salary reduction is generally a contractual issue (Hartley v SMD Trading Group CC (D138/21) [2024] ZALCD 16 pars 45-46 & 51 (Hartley); see also Solidarity obo Members v Sahara African Living (Pty) Ltd (JS829/21) [2024] ZALCJHB 166 (17 April 2024) pars 32-37 (Sahara African Living) albeit in the context of an employer who breached the contract of employment by unilateral salary reductions during COVID-19 to protect the company’s finances), and the SCA was therefore correct to approach Mhlontlo from a contractual perspective. The court accordingly required the employees to demonstrate which clause of their contracts of employment had been breached, which they were unable to do (Schloemann v Goldstone Resources Ltd (C 658/16) [2018] ZALCCT 40 (13 December 2018) par 49). The distinction between a lawful correction of remuneration and a unilateral variation of contractual remuneration is important. Where an employer seeks to alter an employee’s contract by reducing remuneration that is contractually due, the matter concerns a contractual breach. By contrast, where the employer merely restores remuneration to the level contractually agreed upon after an error has occurred, is one of correction rather than variation.

The SCA’s interpretation is consistent with both the structure and purpose of section 34. Section 34(1) protects employees against unauthorised deductions from remuneration to which they are entitled, while section 34(5) recognises that erroneous overpayments may require correction. The approach adopted in Mhlontlo gives effect to both objectives. It protects employees against arbitrary employer conduct without preventing employers from correcting genuine administrative mistakes. For this reason, the court was correct to reject the employees’ characterisation of the adjustment as a deduction falling within section 34(1).

4 2 Alignment with judicial authority

4 3 A contrast with Ubogu

A separate discussion of Ubogu is necessary because the High Court relied heavily on the Constitutional Court’s reasoning in that matter when finding in favour of the employees. The SCA, however, reached the opposite conclusion and did not place any reliance on Ubogu. It is therefore important to consider whether the SCA’s lack of reliance on Ubogu was justified.

In Ubogu, the Constitutional Court declared section 38(2)(b)(i) of the Public Service Act unconstitutional (par 80). The employee had been incorrectly placed on a higher salary scale and the State later sought to recover more than R794 000 through deductions from her salary (pars 5-7). The Constitutional Court’s concern was not merely that deductions were made. Rather, the impugned provision authorised the State to determine the existence and amount of a debt and to recover it unilaterally without first obtaining judicial sanction (par 64). The provision therefore sanctioned self-help and unjustifiably limited the right guaranteed by section 34 of the Constitution to have disputes determined by a court or independent tribunal (pars 65 & 67).

The crucial distinction lies in the nature of the employer’s conduct. In Ubogu, the State sought to recover historic overpayments by making deductions from the employee’s ongoing remuneration. In Mhlontlo, however, the Municipality did not seek to recover past overpayments through deductions. Rather, it corrected the employees’ remuneration prospectively by removing an increment to which they had never been entitled. Accordingly, Mhlontlo did not involve the type of deduction that triggered the constitutional concerns identified in Ubogu, which explains why the SCA did not find it necessary to engage with Ubogu.

While both section 38 of the Public Service Act and section 34 of the BCEA may arise in circumstances involving erroneous overpayments, they operate differently. Section 34(5) represents a legislative mechanism specifically designed to address payroll errors within the employment context. By contrast, the constitutional difficulty in Ubogu stemmed from a statutory authorisation of unilateral self-help by the State (Garbers et al ‘The Essential Labour Law Handbook’ (8ed Mace LLP, 2024) (141); Boffard pars 27 & 40). For this reason, Ubogu cannot be read as undermining section 34(5) of the BCEA. The two provisions address different concerns and operate within different legal frameworks. The SCA’s non-reliance of Ubogu in Mhlontlo is therefore convincing and sound. Mhlontlo concerned the correction of remuneration to the contractual level, whereas Ubogu involved the unilateral recovery of alleged debts through deductions from remuneration. Properly understood, the two decisions are complementary rather than contradictory.