It is important that the status of an employee be established from the beginning of the employment relationship – permanent, fixed term, temporary, and so on.
The Basic Conditions of Employment Act, in section 29, provides for certain written particulars of employment to be provided as a minimum, and every employer is legally obliged to provide all employees with these minimum particulars in writing not later than the first day of employment. Employers are well advised to enter into a written contract of employment with every employee. But what is the contract of employment, and what type of contracts can be used?
“A contract of employment is a reciprocal contract in terms of which an employee places his services at the disposal of another person or organisation, as employer, at a determined or determinable remuneration in such a way that the employer is clothed with authority over the employee and exercises supervision regarding the rendering of the employee’s services”
The independent contractor contract is another method used by that certain class of employers to escape their legal obligations and to defraud the employee of his/her legal entitlement. The true independent contractor’s contract is not a contract of employment at all – it is a contract of work. This contract can be defined as follows:
“The letting/hiring of piece work is a reciprocal contract between an employer and an independent contractor in terms of which the latter undertakes to build, manufacture, repair or alter a corporeal thing within a certain period and the employer undertakes to pay the contractor a reward in return therefore.”
An example of a true independent contractor is the plumber you call in when your hot water geyser bursts – he comes in, quotes you for the job – you accept his quote (thus enter into a contract of work) he replaces your old geyser, you pay his invoice and the Contract is ended.
A true independent contractor:
• will be a registered provisional taxpayer
• will work his own hours
• runs his own business
• will be free to carry out work for more than one employer at the same time
• will invoice the employer each month for his/her services and be paid accordingly
• will not be subject to usual “employment” matters such as the deduction of PAYE or UIF from his invoice, will not receive a car allowance, annual leave, sick leave, 13th Cheque and so on.
Employers who outsource their labour requirements to a Labour Broker are not in contravention of the Act, but they must realize that they are not hiring “Independent Contractors.” The benefits provided for in the BCEA must be provided to these workers by the Labour Broker. More and more employers are going the route of outsourcing labour requirements. It solves a lot of problems, and in many cases can prove to be far more economical. For example, the employer does not have to provide pension or medical aid, can easily reduce staff requirements during “valley” periods, increase staff during peak periods and level out staff requirements for the plateau periods.
But it is imperative to note that the Company and Labour Broker can be held equally responsible should a worker refer a matter to the CCMA / Bargaining Council.