Independent Contractor Or Employee?

It can be particularly difficult to establish whether a person is an employee or an independent contractor when no written agreement exists between the parties. This becomes even more complex when a dispute arises and the individual approaches the Commission for Conciliation, Mediation and Arbitration (CCMA) asserting that they are, in fact, an employee.

Definitions

The Basic Conditions of Employment Act 75 of 1997 (BCEA) defines an “employee” as any person—other than an independent contractor—who works for another and receives, or is entitled to receive, remuneration, as well as anyone who assists in the employer’s business in any capacity. This definition applies uniformly, regardless of whether the individual is employed permanently, on a fixed‑term basis, or for a specific purpose.

An independent contractor is a self-employed individual who operates their own business and delivers services to clients under a defined contract, characterised by personal independence, project-based fees, and the absence of traditional employee benefits.

Presumption of Employment (Section 83A)

If a worker’s status is disputed, the BCEA presumes employment if any of the following seven factors exist, regardless of the contract label:

• Control over work, hours, or direction is exercised by another.
• The worker is integrated into the organisation.
• The worker is economically dependent on the employer.
• The worker has worked an average of at least 40 hours per month over the past three months.
• Tools or equipment are provided by the employer.
• Services are rendered to only one person.

Key Characteristics and Differences. An Independent Contractor:

• Decides how, when, and where the work is done. The client only cares about the final result.
• Can work for many different people or companies simultaneously.
• Must use their own gear, tools, and tech to do the job.
• Gets paid by sending invoices for completed projects, not through a regular payroll salary.
• Does not fall under standard labour laws, such as the Basic Conditions of Employment Act, meaning no paid annual leave, sick leave, or CCMA access.
• Does not have Unemployment Insurance Fund (UIF) money or tax (PAYE) deducted from their pay.
• Must register with the South African Revenue Service (SARS) as a provisional taxpayer and pay their own taxes

Business owners should carefully consider these aspects when entering into agreements with independent contractors. We can assist with ensuring the correct agreement is concluded.