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Article 7/2025

What is the difference between compensation (in terms of s193(1)(c) and s194(1) of the LRA) and back pay?

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The constitutional court, in Booi v Amathole District Municipality (2022) 32 SALLR 51 (CC), made it clear that compensation and back pay are two very different remedies and, in this regard, furthermore, indicated the following:

  • compensation is to be awarded if the dismissal is found to be unfair because:
    • the employer did not prove that the reason for the dismissal was a fair reason relating to the employee’s conduct or capacity, or the employer’s operational requirements (i e the dismissal being substantively unfair), or
    • the dismissal is procedurally unfair, or
    • the dismissal is both substantively and procedurally unfair
  • compensation awarded must be just and equitable in all circumstances
  • however, it may not be more than 12 months’ remuneration calculated at the employee’s rate of remuneration on the date of dismissal and, in the case of an automatically unfair dismissal, may not be more than 24 months’ remuneration so calculated on the date of dismissal
  • however, in respect of back pay, there is no such capping in terms of s194(1), read together with s194(3), of the LRA and, in this regard, the following principles are applicable:
    • back pay is not to be calculated from a date earlier than the dismissal date
    • the amount of back pay is to be determined with reference to the amount of money that the employee was ‘out of pocket’ during the period of employment – entailing, if the employee did not suffer such loss, there should not be any back pay
    • the amount of back pay must also be just and equitable

See, further, Union for Police and Security Corrections Organisation v SA Custodial Management (2021) 42 ILJ 2371 (CC)

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