Draft!: Independent Workers Contract / Agreement
Please see the difference between an employee and an independent worker in the infographic under the generation form.
Independent Contractor Agreement Generator
Services to be provided by the Consultant
Employee vs Independent Contractor
Understanding the legal distinction in South African employment law
Employee
- Works under supervision and control of employer
- Typically works fixed hours at employer’s premises
- Uses employer’s equipment and resources
- Receives regular, fixed remuneration
- Entitled to employee benefits (leave, medical aid, etc.)
- Protected under Labour Relations Act, Basic Conditions of Employment Act
- PAYE tax deducted by employer
- Work is part of employer’s business
- Generally cannot work for multiple employers
Independent Contractor
- Works independently with minimal supervision
- Can determine own working hours and location
- Typically uses own equipment and resources
- Remuneration based on output or contract terms
- No employee benefits, provides own insurance
- Governed by law of contract, not labour legislation
- Responsible for own tax as provisional taxpayer
- Provides specialized service outside employer’s main business
- Can serve multiple clients simultaneously
Section 200A of the Labour Relations Act
Section 200A of the Labour Relations Act establishes a rebuttable presumption as to who is an employee. This presumption applies to workers earning below the annual earnings threshold.
A person is presumed to be an employee if ANY ONE of these factors is present:
- The manner of working is subject to control or direction
- The person’s hours of work are subject to control or direction
- In the case of a person who works for an organization, the person forms part of that organization
- The person has worked for that other person for an average of at least 40 hours per month over the last three months
- The person is economically dependent on the other person for whom they work or render services
- The person is provided with tools of trade or work equipment by the other person
- The person only works for or renders services to one person
If any one of these factors is present, the burden of proof shifts to the employer to prove that the person is not an employee but an independent contractor.
Annual Earnings Threshold
For workers earning above the annual earnings threshold, the presumption in Section 200A does not automatically apply. Instead, the “Dominant Impression Test” is used to determine employment status.
Current threshold as of April 1, 2024 (approximately R21,197.64 per month) – Subject to change by ministerial determination
The Dominant Impression Test
For workers earning above the annual earnings threshold, courts use the “Dominant Impression Test” to determine if a person is an employee or independent contractor. This test examines multiple factors to create an overall picture of the working relationship.
Control and Supervision
The extent to which the employer has the right to control the work and how it is done. Employees typically have more supervision and less autonomy than independent contractors.
Integration
Whether the person is integrated into the organization or is an outside consultant. Employees are typically part of the organizational structure.
Economic Dependence
Whether the person is economically dependent on the employer as their only or main source of income.
Tools and Equipment
Whether the employer provides work tools and equipment or if the worker uses their own.
Obligation to Work
Whether there is an obligation to personally perform the work and whether the person can refuse work.
Risk and Opportunity for Profit
Whether the person bears financial risk and has opportunity for profit beyond simple remuneration for work done.
Exclusivity
Whether the person works exclusively for one employer or is free to work for multiple clients.
Payment Method
How payment is structured – regular salary/wage (typical for employees) vs. payments per task or project (typical for contractors).
Why Does This Classification Matter?
The distinction between employees and independent contractors has significant implications for both parties:
For Employers
- Tax obligations (PAYE vs. no withholding)
- UIF and SDL contributions
- Liability for employee actions
- Obligation to provide benefits
- Compliance with labour legislation
For Workers
- Legal protections under labour laws
- Rights to leave, overtime, and minimum wage
- Protection against unfair dismissal
- UIF and workers’ compensation benefits
- Tax responsibilities and deductions