Is the person an Independent contractor OR an Employee? How to tell the difference
A frequently asked question asked is “Is the applicant or person working for me an Independent contractor OR an Employee?” We see employers using Independent Contractor agreements to escape their legal obligations of offering employee leave benefits such as annual, sick, parental leave, and fringe benefits such as retirement savings plans, pension funds, wellness benefits and medical aid or bonuses and allowances.
Luckily we have a guideline (The Code of Good Practice: Who is an Employee? Published in GG 29445 of 1 December 2006) to help you in interpreting the labour law and understand the variety of employment relationships present in the labour market, atypical employment, and those disguised employment relationships.
Legally both the terms (independent contractor and employee) are mutually exclusive and are direct opposites.
How to Identify Independent Contractors
The person is presumed to be an employee if you can establish that ONE of the magnificent seven listed factors or conditions (S200A of the LRA) below is present in their relationship with a person who they work for or to whom they render services.
The Seven Factors:
- The person is subject to the control/ direction of another person– are they required to obey lawful and reasonable orders, or instructions from managers, or supervisors?
- The person’s working hours are subject to the control/ direction of another person– if the contract defines the total number of hours the person is required to work within a specified period, sufficient control may be present.
- The person’s services form an integrated part of the employer’s operations.
- The person has averaged 40 hours of work a month for the last three months.
- The person relies on the remuneration from the person to whom they render their services.
- The person uses the other person’s tools, equipment, technology, OR methodology.
- The person does not work for anyone else.
Where the employee earns above the BCEA Threshold earnings amount the seven factors may be used as a guide for the purpose of determining whether a person is in an Employment relationship or is Self-employed.
Just because you label something a certain way doesn’t mean that’s what it is. This concept is known in law as the principle of “substance over form.” For example, even if you and someone else sign a contract agreeing that one of you is a unicorn, it doesn’t make it true. The courts will look at factors like control and dependency to determine what’s really happening. Regardless of what the contract says, they’ll conclude the person is a human being, not a unicorn—unless they have a horn, hooves, and a magical sparkle!
Still unsure if your applicant or person working for you is an independent contractor or an employee? Avoid costly legal mistakes and let us help you! Book a consultation today.
Disclaimer: We take great care to ensure the information on our website is accurate and up to date, readers are advised to always consult with an HR Consultant before acting on information. This information does not constitute legal advice.