Home

Breaking News



 

Who is an Employee ? The question addressed. (Part 5)

 

Last week, we listed the 6 factors stated by the Appellate Division as factors which may be relevant in the issue of deciding who is an employee and who is an independent contractor. 

 

 Employee 

  1. Object of the contract is to render personal services.
 
  1. Employee must perform services personally.
 
  1. Employer may choose when to make use of services of employee.
 
  1. Employee obliged to perform lawful commands and instructions of employer.
 
  1. Contract terminates on death of employee.
 
 
  1. Contract also terminates on expiry of period of service in contract.

 Additional factors may be: 

  1. An employee pays PAYE/SITE tax and UIF.
 
 
  1. The employee is entitled to paid annual leave, paid sick leave etc. And possibly (but not necessarily) other benefits like pension, provident or medical aid.
 
  1. Employee works the hours stipulated by the employer.

 Independent Contractor

Object of contract is to perform specified work or produce a specified result.

Independent contractor may usually perform through others.

Independent contractor must perform work (or produce result) within period fixed by contract.
 
Independent contractor is subservient to the contract, not under supervision or control of employer.

Contract does not necessarily terminate on death of employee.

Contract terminates on completion of work or production of specified result.

The independent contractor is usually a provisional tax-payer and does not pay UIF for himself.

The independent contractor must make his own financial provision for annual leave, sick leave etc., and provide his own benefits.

 
Independent contractor regulates his own working hours – is bound usually only by the "deadline" date specified in the contract.

 

 Point 1 – Rendering of personal services.

 

An employee renders personal services. An independent contractor produces a specified result. The object of a contract of employment is the provision of Labour. The object of a contract of service (Independent contractor) is to deliver a completed product. The Code informs us that the author Brassey described the difference as follows: " an employee is a person who makes over his or her capacity to produce to another ; an independent contractor is a person whose commitment is the production of a given result by his or her Labour."

 

This definition has been approved by the Supreme Court of Appeal. The object of the contract remains one of the factors to be taken into account. To put it more simply, an employee says to the employer " I hereby offer you my labour - tell me how you wish to use it. ' The independent contractor says " what task do you wish me to perform, and by when must it be completed ?"

 

Therefore, a person who has been engaged to perform a specified task  - to deliver a specified result - may still be classified as an employee if other aspects of the relationship indicate that the true nature of the contract is an employment relationship,

 

This might be indicated where, for example, the ' independent contractor' pays PAYE/SITE tax, and is given membership of the company medical aid and pension, a 13th cheque or performance bonus, and so on. Point 2 - employee must perform services personally.

 

One of the key factors, states the code, is that in a contract of employment, the employee is required to perform the services himself in his personal capacity when required to do so by the employer. Therefore, the employee cannot send someone else to do the work, nor can he employ someone else to do the work.  The employee remains at the "beck & call" of the employer.

 

On the other hand, an independent contractor does not necessarily need to perform the work himself - he can send his own staff to do the work, or he can employ somebody to do the work, unless the contract specifically states otherwise.

 

Therefore, a contract that requires a contractor to perform personally does not necessarily mean that it is a contract of employment.  By the same token, the fact that an employee may be permitted or required to arrange for somebody else to do the work during his absence, also does not necessarily mean that he is an independent contractor.

 

The fact that a person is entitled to employ, or does employ, other people to assist him in performing the contractual tasks is not always inconsistent with an employment relationship, but it will be a strong indicator that the relationship is one of Independent contractor or a strong indication that the intention of the relationship was to be an independent contractor relationship.

 

The code states that in some sectors of the economy (it does not say which sectors) it is the practice for subcontractors to be engaged to work and are required to recruit other workers to assist them. The code states further that this requirement does not in itself exclude the subcontractors from the possibility of being classified as employees - in other words, all other factors must be considered - no single factor can be considered in isolation - it must be considered in the context of all other factors.


Point 3. Employer may choose when to make use of services of employee. The courts hold that the employer has the right to determine whether or not to require an employee to work. On the other hand, an independent contractor is bound to perform or produce a result specified by the contract. Put differently, an employee says to the employer " I am here to provide you with my labour - tell me how you wish to use that labour."

 

The employer will then decide at what times he wants the employee to work, when he wants him to work, and what he wants him to do. For example, the employer would be entitled to say to the employee " I have no work for you at present - go and sit down somewhere and read a book." Obviously in most instances the employer will still be liable to pay that employee, even if he does not require the employee to actually perform in the work.


Point 4. Employee obliged to perform lawful commands and instructions of employer. The employer has the right of control and supervision over the employee. The employee is subject to the direction and control of the employer. The independent contractor is usually subject to his own direction and control, and not that of the employer, but obviously in terms of the specifications in the contract. Those specifications might include that the required work must have reach a certain stage of completion by the end of each day or each week.

 

With an employee, the employer decides what work the employee would do and how he will perform that work. With an independent contractor, the contract stipulates what work is required - and the independent contractor decides how he will perform that work, or he will perform as specified in the contract.

 

We are informed that the right of control is a very significant indicator of an employment relationship - the greater the degree of supervision and control to be exercised, the greater the probability that the relationship is one of employment. We are informed further that the right of control may be present even where it is not exercised.

 

In other words, the fact that an employer does not exercise control over an employee, but allows him to work largely or entirely unsupervised, does not necessarily mean that it is an independent contractor relationship.


Point 5. Contract terminates on death of employee. Usually, when an employee passes away, any contract of employment will obviously terminate. The death of an independent contractor will not necessarily terminate the contract - the employees of the independent contractor can continue to perform the work in terms of the contract. The death of the owner of a business does not necessarily mean that the business also dies.

 

If the independent contractor is a person who has no employees, and performs all the work himself, then of course with his death the contract will also terminate because there is no one else to carry on the work in terms of that specific contract.

 

Point 6. Contract also terminates on expiry of period of service in contract

 

A contract of service - employee -  terminates on the expiration of the period of service. The employee or the employer can also terminate the contract for various other reasons, such as resignation or dismissal. A fixed term contract would normally state a termination date, or a temporary contract of employment would state details of a specific event that would bring about termination of the contract, or a project contract of employment would say to that upon completion of the project, termination would occur.

 

A contract of work - independent contractor - terminates on completion of the relevant work or task as specified in the contract, or upon delivery of the specified and required result. This is regarded as a minor point of consideration.

 

These six factors listed by the appellate division is not an exhaustive list, and must not be solely relied upon as the only factors to be considered in determining the nature of the relationship. Next week we will look at remuneration and benefits, the provision of training, and the place of work as other factors to be considered.

 

For further information, contact  This email address is being protected from spambots. You need JavaScript enabled to view it.

Join SALG Today

Join SALG Today

Contact us at (012) 661 3208 or info@labourguide.co.za or click here for more information

 

 

Newsletter Signup

 

Android App On Google Play

Courses and Workshops

Our Clients

The OHS Act and the Responsibilities of Management

31 May 2017

Ratanga Junction: Century City: Cape Town

28 June 2017

Emperors Palace: Convention Centre

Occupational injuries and diseases in the workplace

01 June 2017

Ratanga Junction: Century City: Cape Town

29 June 2017

Emperors Palace: Convention Centre

06 July 2017

Southern Sun: Elangeni & Maharani, Maharani Towers: Durban

Health and Safety Representative Course

02 June 2017

Ratanga Junction: Century City: Cape Town

30 June 2017

Emperors Palace: Convention Centre

Skills Development Legislation and Review

09 June 2017

Emperors Palace: Convention Centre

Basic Labour Relations

22 June 2017

Southern Sun: OR Tambo International Airport

Employment Equity Committee Training

22 June 2017

Emperors Palace: Convention Centre

26 July 2017

Southern Sun: Elangeni & Maharani, Elangeni Towers: Durban

02 August 2017

Ratanga Junction: Century City: Cape Town

How to prepare for your unfair dismissal dispute/case at the CCMA/Bargaining Council

28 & 29 June 2017

Emperors Palace: Convention Centre

Managing Day to Day Issues/ Problem Employees Full day workshop

07 July 2017

Southern Sun: Elangeni & Maharani, Elangeni Towers: Durban

14 July 2017

Emperors Palace: Convention Centre

Workshop Chairing Disciplinary Hearings

20 & 21 July 2017

Emperors Palace: Convention Centre

27 & 28 July 2017

Southern Sun: Elangeni & Maharani, Elangeni Towers: Durban

03 & 04 August 2017

Ratanga Junction: Century City: Cape Town

Hazard Identification & Risk Assessment Course

27 July 2017

Emperors Palace: Convention Centre

17 August 2017

Protea Hotel By Marriott Tyger Valley: Cape Town

Workshop Incident/Accident Investigation Course

28 July 2017

Emperors Palace: Convention Centre

18 August 2017

Protea Hotel By Marriott Tyger Valley: Cape Town