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:

1. 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?
2. 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.
3. The person’s services form an integrated part of the employer’s operations.
4. The person has averaged 40 hours of work a month for the last three months.
5. The person relies on the remuneration from the person to whom they render their services.
6. The person uses the other person’s tools, equipment, technology, OR methodology.
7. 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.

Running a small or medium-sized business in South Africa is no easy task, where juggling compliance, employee satisfaction, and day-to-day operations can feel overwhelming. If you don’t have an in-house HR team, you’re not alone. Many SMEs face similar challenges but still manage to build thriving, compliant, and motivated workplaces.

Here are some key HR focus areas with practical solutions to address them effectively:

1. Navigating South African Labor Laws

South African labour laws, like the Basic Conditions of Employment Act, (BCEA), Labour Relations Act (LRA) and its Amendments and the new Employment Equity Act and its recent Amendments in 2025 can be tricky to navigate. Missing a step could result in costly penalties or even disputes with employees.

Start with getting a good understanding of the basics. Use free resources like the Department of Employment and Labour’s website or simple online guides. Templates for employment contracts, timesheets, and leave policies can also be lifesavers.

2. Managing Payroll and Benefits

Payroll errors can lead to disgruntled employees and compliance issues with tax authorities. Without in-house HR, you might feel lost when calculating UIF, PAYE, or other deductions.

Invest in an affordable payroll software tool designed for small businesses, such as Sage Payroll Software or PaySpace. Alternatively, consider outsourcing payroll management to a local payroll provider.

3. Recruiting the Right Talent Without Overspending

Recruitment can feel like searching for a needle in a haystack—especially when you’re on a tight budget. Leverage free or low-cost platforms like LinkedIn for high turnover roles, when it comes to Specialist, Senior or Executive positions we source quality talent at highly competitive rates.

4. Keeping Employees Happy and Motivated

High employee turnover is expensive, not to mention disruptive to your business. But keeping your team engaged doesn’t have to cost a fortune.

Small gestures go a long way. Recognize employees for their hard work, whether it’s through a thank-you email or an Employee of the Month program. Offer flexible work hours where possible, and take the time to listen to their feedback. We can’t overemphasize the importance of acknowledging your employees, and the positive impact this gesture will have on employee morale and engagement.

5. Avoiding Common HR Risks

Without proper policies and processes, small mistakes can spiral into big problems—think unresolved conflicts or poor performance management.

Set up the basics, like a written code of conduct, onboarding checklists, and a simple grievance procedure. We have developed an affordable HR /Employee Handbook to protect your business, available for download here.

6. Building a Strong Company Culture

Your company’s culture has a direct impact on employee satisfaction and retention. A positive culture can boost morale, attract talent, and increase productivity.

Define your company’s core values and ensure they’re reflected in everyday operations. Celebrate team achievements, encourage open communication, and foster an environment of trust and respect. Employees who feel valued and included are likelier to stay and contribute to your company’s success.

7. Upskilling Your Team Without Breaking the Bank

In a fast-changing world, continuous learning is key to staying competitive. But providing training can feel like an expensive luxury.

Look into free or low-cost training platforms such as Coursera, Udemy, or Google Skills for Africa. Additionally, explore SETA (Sector Education and Training Authority) funding opportunities for skills development programs relevant to your industry. We assist with preparing your Skills Development Plan and report to on your annual training to claim your mandatory and discretionary grants available from your sector SETA.

8. Supporting Employee Well-being

Mental health issues and burnout can reduce productivity and morale. Ignoring well-being is a costly mistake for any business.

Promote well-being initiatives, even if they’re small. For example, encourage regular breaks, offer access to free counselling services through NGOs, or start a wellness challenge. Creating a supportive environment goes a long way.

9. Infusing Purpose Into Work

More employees today want their jobs to mean something beyond just a salary. Purpose-driven workplaces are more engaging and productive.

Share your company’s mission and values with employees regularly. Get them involved in community projects or sustainability initiatives. When employees see how their work contributes to something bigger, their connection to your business deepens.

Where to Start?

Start by focusing on one or two areas that will have the biggest impact on your business. For example, set up a simple payroll system, and a handbook outlining various HR policies and processes defining HR touchpoints along the employee journey.

Small, consistent steps will make a big difference over time.

Remember, you don’t need an HR department to build a compliant, motivated, and happy workplace. With the right tools, resources, and mindset, you can handle these challenges head-on.

Need More Help?

For tailored HR solutions and support that suits your company’s unique requirements, reach out to Hands-on Human Resources. We specialize in helping SMEs navigate HR challenges without needing a full-time HR team.

Visit us at www.hohr.co.za to learn more about how we can support you.

Disclaimer: While we have mentioned certain tools and platforms as potential resources, Hands-on Human Resources is not affiliated with any of these service providers. Our recommendations are based purely on their suitability for SMEs and the value they may offer to business owners like you.

In the current South African economic climate we understand that the cost of employing a full-time HR expert does not make financial sense if your employee headcount doesn’t warrant it. As with most businesses,  SMEs are no different, we generally require new starters to hit the ground running. So then recruiting an employee who is the right fit with the right skill set is not negotiable right? Whereas Larger organizations have the luxury of possibly re-deploying their staff and/or investing in training to bring the new employee up to speed.

Assessing the employee during their probation period is critical for managing good and bad performance. Poor performance issues need to be addressed while they are hot, and documented clearly and follow-up in the application of the process is essential. We want you to stay focused on the operation and not keep you busy with HR matters,  these we can handle for you. We guide you through these processes and facilitate the assessment period confirming the permanent appointment of great talent.

We have seen that “Ignorance is not bliss” when you find yourself having to pay out an award at the CCMA to a non-performing employee.

It’s imperative that SMEs understand the implications of all aspects of labour laws applicable to their respective industries as legislation does not differentiate between sizes of organisations so it’s advisable to develop and implement a sound labour relations framework, which may prevent CCMA referrals. Investing in partnering with an HR expert to protect your company from any potential legal non-compliance is your financially viable solution.

With over twenty years of hands-on working experience practicing and consulting in Human Resources in both small and medium size companies and industries in South Africa has equipped us with mastered HR Skills which we transfer to your business. We serve as an impartial sounding board to business owners giving you a fresh perspective on internal matters, processes, communications and interpretation of labour laws within your business environment. We upskill your line managers with people management skills and empower you with best people practices.

Is this enough to prompt you to enquire about our affordable Virtual HR Consultant options?

How can we help?

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Retaning the services of an HR Consultant should be one of the first SLA’s you enter into when starting up your business, and here’s why.

Common start-up business scenarios that play out:

You and a few partners have marketed your profitable product or service and your business has grown substantially after a year or two. The orders are increasing and the pressure is picking up, placing more demands on existing staff and in areas unfamiliar to you which may be quite daunting. Your sales, production and operations teams are in place, so now you are good to go and in business!

20 Benefits of Virtual HR Support

In today’s rapidly changing business environment, the shift to remote work and the increasing pace of digital transformation has made virtual HR support an invaluable resource, particularly for small and medium-sized enterprises (SMEs). Virtual HR services offer a flexible, cost-effective solution that enables businesses to streamline their HR processes, enhance employee engagement, and focus on strategic growth.

Twenty benefits of virtual HR support and why it’s a smart choice for modern businesses:

1. Cost-Efficiency and Flexibility
   • Reduced Overhead Costs: Eliminate the need for physical office space and other overhead expenses associated with an in-house HR department.
   • Pay for Services Only When Needed: Engage HR professionals on an as-needed basis, allowing for better budget management.
   • Flexibility to Scale HR Support as Your Business Grows: Easily adjust the level of HR support to match your company’s growth without the hassle of hiring and training new staff.
2. Access to Expertise and Specialized Skills
   • Tap into a Wide Range of HR Experts: Gain access to a diverse pool of HR professionals with varied expertise, from recruitment to employee relations.
   • Benefits from Up-to-Date Knowledge of Labour Laws: Ensure your business is always compliant with the latest employment regulations and labour laws.
   • Access to Specialized HR Services like Talent Sourcing and Performance Management solutions: Leverage specialized services such as talent acquisition to help you find the unfindable scarce skills and performance management systems that are tailored to your industry.
3. Improved Compliance and Risk Management
   • Regular Compliance Audits and Updates: Stay ahead of regulatory changes with ongoing audits and updates that minimize the risk of costly penalties.
   • Support in Drafting Legally Compliant HR Policies: Receive expert guidance in creating HR policies that are not only compliant with legal standards but also aligned with best practices.
   • Guidance on Handling Complex Employee Issues: Navigate difficult employee situations with the help of seasoned HR professionals who can offer objective advice and solutions.
4. Enhanced Employee Experience and Engagement
   • Employee Handbook for South African SMEs: Designed with the employee experience in mind, attract like-minded talent and protect your business. Easy read.
   • Digital HR Templates: Empower SMEs with HR best practices Ready-to-use, affordable Downloadable HR templates.
   • Streamlined Communication Channels for Remote Teams: Foster a strong company culture by facilitating clear and consistent communication among remote teams using digital tools and platforms.
5. Focus on Core Business Activities
   • Free Up Time for Strategic Business Growth: Allow your leadership team to concentrate on core business activities by outsourcing time-consuming HR tasks.
   • Let HR Professionals guide you in the right direction:  Virtual Human Resources consulting and processes to help you to navigate your human matters as they arise.
   • Reduce the Burden on Internal Management Teams: Alleviate the workload on your management team, enabling them to focus on driving business innovation and achieving long-term goals.

Virtual HR support offers significant advantages for businesses looking to optimize their HR functions while focusing on growth and innovation. By leveraging our services, companies can ensure compliance, improve employee engagement, and enjoy cost savings, all while maintaining the flexibility to adapt to the ever-changing business landscape.

Curious about our consulting options and rates, check them out here.

Speak to us.

Running a small or medium-sized enterprise (SME) in South Africa can be challenging, when it comes to complying with the country’s complex labour laws. From the Basic Conditions of Employment Act (BCEA) to the Labour Relations Act (LRA), the regulatory environment can be daunting for SMEs, if you lack the in-house resources to manage these requirements.

In this digital age, virtual HR support services have emerged as a lifeline for SMEs, offering you the flexibility and expertise you need to stay compliant while focusing on growth.

The key South African labour laws that SMEs need to be aware of, the risks of non-compliance, and how virtual HR support can be an essential part of your business strategy.

Understanding the Key South African Labour Laws

South African labour laws are designed to protect employees’ rights and ensure fair treatment of the workforce.

Some of the most critical regulations that every SME should be familiar with:

1. The Basic Conditions of Employment Act (BCEA) sets the minimum standards for employment in South Africa, including working hours, leave, and termination of employment. Non-compliance can lead to severe penalties and legal disputes.
2. Labour Relations Act (LRA), referred to as the LRA governs the relationship between employers and employees, focusing on collective bargaining, dispute resolution, and unfair dismissal. Misunderstanding this law can result in costly legal battles.
3. Employment Equity Act is aimed at promoting equal opportunity and fair treatment, this act requires businesses to implement affirmative action measures and report on their progress. SMEs need to be vigilant in ensuring their policies align with these requirements.
4. The Occupational Health and Safety Act mandates that employers provide a safe working environment for their employees. Failure to comply can lead to fines, workplace accidents, and damage to your business’s reputation.

The Importance of labour laws

For SMEs, the consequences of non-compliance with labour laws can be severe, you may face:

• Legal Penalties are enforced for Non-compliance such as fines, legal fees, Arbitration awards, and court orders which can lead to you having to close your doors.
• Reputational Damage caused by unfair labour practice disputes and negative publicity can harm an SME’s reputation, making it harder to attract Top Talent and customers.
• Disruption in your Operations as Labour disputes can lead to strikes, work stoppages, and a decrease in productivity, all of which can affect an SME’s ability to compete in the market.

Leveraging Virtual HR Support

Given the complexities of South African labour laws, many SMEs are finding great value in investing in virtual or remote HR support services. These services offer a cost-effective and efficient way to manage HR functions, ensuring compliance without the need for a full-time, in-house HR team.

Virtual HR support can assist SMEs with:

• Policy Development and Implementation: Creating and updating company policies that comply with South African labour laws.
• Employee Handbook and bespoke customisation protecting your business from any potential risks and serve as an invaluable tool in contributing towards building a great company culture.
• Employee Relations Management: Guiding you in handling disputes, disciplinary actions, and grievances in line with legal requirements.
• Training and Development: Offering training on labour laws and best practices to ensure that your management team is well-equipped to handle HR issues.
• Performance management: implementing continuous performance feedback– a People-focused, Ongoing, Holistic approach to managing performance.

Top HR Strategies for SMEs

To stay compliant and avoid the pitfalls of non-compliance, SMEs should consider the following HR strategies:

1. Regular Policy Reviews: Ensure that your company policies are up-to-date and reflect the latest labour laws. Virtual HR consultants can help review and update these policies regularly.
2. Sign up for HR Mentoring to stay on top of the ever-changing labour laws and best practices in managing your people.
3. Proactive Conflict Resolution: Address employee grievances and disputes early, before they escalate into larger issues. Virtual HR support can offer impartial advice and mediation services.

Navigating South African labour laws is no small task, by leveraging virtual HR support services, you can ensure you remain compliant while focusing on what you do best—growing your business.

Virtual HR support offers the flexibility, expertise, and cost-efficiency that SMEs need to thrive in today’s competitive market.

Don’t let the complexities of labour laws hold your business back. Invest in virtual HR support and safeguard your business against non-compliance risks.

If you’re an SME looking for reliable HR support with seasoned HR Professionals tailored to South African labour laws, we’re here to help.

Contact us today to learn more about our virtual HR services and how we can help your business stay compliant and thrive.