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Labour Law

Drafting Contracts of Employment

Taking on staff is a sign that your business is growing and flourishing, but it is certainly not without its risks.

Juliet Pitman

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DraftContracts

South African Labour Law makes it difficult to dismiss employees and the process can be a long, time-consuming and costly one. Employment contracts provide the key to avoiding such disputes and to protecting you and the employee. According to the Basic Conditions of Employment Act, Section 29, there is certain information that you as an employer are legally obliged to provide new employees with. This includes:

Businesses that employ more than five staff will also need to include information pertaining to:

  • Any period of employment with a previous employer that counts towards the period of employment
  • List of any other documents that form part of the contract and details of where the worker can get copies
  • Description of any council or sectoral determination which covers the employer’s business

Many small business owners make the mistake of believing that they can ‘get around’ the labour law by employing people on a contract basis, instead of as permanent employees. It is true that contractors are not entitled to annual leave, sick leave or the right to claim unfair dismissal. However, the Labour Relations Act and the Basic Conditions of Employment Act are extremely specific in their definition of an employee and a contractor. Irrespective of the contract you might have with a worker, the law deems them to be an employee if they fit one or more of the following criteria:

  • Another person has control or direction over the manner in which they work
  • Their working hours are subject to the control or direction of another person
  • They form part of the organisation
  • They have worked for your company for an average of at least forty hours per month over a three-month period
  • They are economically dependent on your business
  • Your business provides them with work equipment
  • You are their only ‘client’

Ultimately, your contract of employment should be as specific as possible, outlining your expectations in detail and the company’s policies on things such as smoke breaks, email and use of the Internet. Sean Snyman, Director at Labournet, explains that there are three company specific clauses that should be included.

Company Specific Clauses:

Employer And Worker Details

  • Employer’s full name
  • Employer’s address
  • Worker’s name
  • <Worker’s occupation, or a brief description of the work

Employment Details

  • Place/s of work
  • Date of employment
  • Working hours and days of work

Payment Details

  • Salary or wage, or the rate and method of calculating wage
  • Rate for overtime
  • Any other cash payments
  • Any payments in kind and their value
  • Frequency of payment
  • Any deductions

Leave Details

  • Any leave to which the worker is entitled
  • Notice/Contract Perio
  • Period of notice required for termination
  • Period of contract

Other clauses to consider

  1. A confidentiality undertaking to keep company information confidential
  2. A restraint of trade
  3. Indentions clause: any systems or procedures generated by staff during their employment belong to the company

Juliet Pitman is a features writer at Entrepreneur Magazine.

Labour Law

When To Collaborate And When To Employ

To help you navigate the maze we have constructed some key questions.

Nicolene Schoeman-Louw

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labour-law

Given the complexity of the labour legislation in South Africa, entrepreneurs are often reluctant to employ and rather look at other forms of agreements to achieve the same outcome. There are instances when it is more appropriate to contract in a different way, but it is important that these reasons are sound.

A number of alternatives could be plausible to consider, these include: Agency, Distribution, Independent Contractor or Supplier Agreements. To help you navigate the maze we have constructed some key questions.

1. Supplier

Question: Is this a unilateral arrangement (to some degree)? In other words, will one party supply or provide something to th other in exchange for payment?

Required Document: Clients or customers are typically engaged by agreement, usually a form of terms and conditions or perhaps even an agreement detailing credit terms. An important provision to include is the aspect of confidentiality and data protection / security. This is crucial from both a customer and supplier perspective.

Related: What Is The Legal Impact Of Acknowledgements?

2. Agency

Question: Do you want to engage multiple people or organisations to sell the goods or services you supply?

Required Document:  An agency agreement could either relate to an individual or an organisation. This means an individual or a business could represent the supplier of the goods or services and earn a commission or remuneration for actual sales. One of the advantages is that this does not create the commitment usually associated with an employment relationship, however, a number of aspects should be carefully considered or constructed including the agent’s powers of representation and some checks and balances should ideally be in place to ensure that these are not exceeded. The process of adjusting commissions in certain instances such as customer complaints or returns.

3. Distribution

Question: Do you sell and market goods? Are you concerned about multiple people or organisations selling the goods you supply, overstepping? Rather prefer that the goods be purchased and delivered to the end consumer from there?

Required Document: A distribution agreement detailing the price to be paid, passing of risk, storage and logistics. This is usually a more appropriate arrangement for a larger scale manufacture or export business. It could also be suitable (where logistics and storage would be less important) for software products. 

Related: The Differences Between A Supplier Relationship, Agency And Distributor

4. Independent Contractor

Question: Have you contracted with an organisation and require a skill you don’t have, to perform the contract only for purposes to finish the contract or project involved? There is no need for the person only working for you.

Required Document: An independent contractor agreement detailing remuneration and term being linked to the contract or project. There is a fine line between these arrangements, labour broking and employment. It is therefore crucial to understand the risks involved and to seek professional guidance when electing to proceed this way. 

Conclusion

It is best to strategically assess your risks, intentions and needs before electing which agreement to use. Contact an expert at SchoemanLaw today.

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Labour Law

An Ongoing Debate: Labour Brokers And Outsourced Labour To Keep Businesses Lean

Every business reaps the consequences of political actions in some way; coupling this with political uncertainty, slow economic growth and an underperforming Rand has brought some businesses to their knees.

Kristly McCarthy

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labour-law

Creating scalable businesses in a tough economy has become particularly eminent in 2018. No stranger to uncertainty, the construction sector, for instance, further plummeted in 2017 and these results have rippled through into this year.

Every business reaps the consequences of political actions in some way; coupling this with political uncertainty, slow economic growth and an underperforming Rand has brought some businesses to their knees.

Wayne Bartlett, Contracts Director for Bartlett Construction says that more than 19 000 jobs were lost in the construction sector alone last year. With the company’s long-standing history of more than half a century in South Africa, Wayne says that we are now seeing more diversification and lean business practices than ever before.

“We are seeing established companies reinvigorating their brands and business strategies. This is not a bad thing – it helps to grow the economy in other areas and establishes more resilience and perhaps more effort by businesses today. Complacency is no longer an option and as such as property management, social housing, renewable energy projects and road infrastructure are just some of the ways that traditional construction companies have branched out,”

Discussing the role that labour brokers in the construction industry and outsourced labour the country over plays, Wayne says: “While physical labour is key in every industry, we see companies reducing their risk by outsourcing work. This creates employment opportunities, funds small businesses and nurtures fresh thinking”.

Related: SA’s Labour Laws: Key Changes And How They Will Affect You And Your Business

Speaking to the topic of mechanisation in industry, Wayne says that while this is on the rise, bricks and mortar still plays a crucial role in business. “More than ever, consumers want value. We want to touch, see and experience what we pay for”.

Skilled labour shortage in South Africa has always been an issue. “We couple this with the need to compete on price whilst factoring in labour issues, BEE policies, trade unions, various regulatory changes and labour brokers”,

In February of this year, third-party suppliers once again came into the spotlight with labour brokers arguing that removing them from the employment equation would trample the rights and protection of employees.

“Despite conflicting views, labour brokers still have a role to play in uncertain economic times, provided that they are properly regulated. This market is huge for people wishing to enter the workplace and needing a platform to do so” Wayne continues.

Wayne concludes saying: “With the YES initiative soon coming into effect, the construction industry looks to empowering and upskilling the youths both in-line with labour brokers and as individual entities.”

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Labour Law

Alternatives To Traditional Legal Services – What Options Do Entrepreneurs Have?

In reality, small businesses that see legal compliance as a priority are often not in the position to hire attorneys.

Nicolene Schoeman-Louw

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Legal Services

Times are tough, especially for entrepreneurs. In order to succeed in the business world, you need “grit” as the Americans say. In addition, to you need access to markets and access to funding.

The problem with accessing sustainable markets, is that it often is a David versus Goliath situation. As a result, long and complex contracts or requirements are set. What is more, because most smaller businesses are more concerned about making sales or simply making ends meet, getting to the legal side of things – well that simply does not happen. This leads to businesses being non-complaint and thus viewed as a risk – as a result cannot access funding.

In reality, small businesses that see legal compliance as a priority are often not in the position to hire attorneys. As a result, their options are:

1. Purchase a template from a news agency

Although very cost effective, the problem with this is that templates are often outdated and the instructions on completion are unclear. If outdated and incorrectly compiled, businesses are, in my view, simply better off without.

Many businesses do not buy templates but actually download it from the internet. The problem with this is that the sources of these are often unclear – so in reality, you really don’t know what you are getting.

Related: SchoemanLaw Shakes Up The Legal Industry To The Benefits Of SMEs

2. Subscribe to legal insurance or legal consultancy

Subscriptions for in case you require legal representation are usually insurance policies. The problem herewith is that often some disputes are excluded, or some advisory needs are not included. Resulting in the business being left without access to these services, in some cases when they need it the most.

In terms of consultancies, these are businesses that are not law firms. In many instances, their service delivery and prices are much more competitive than law firms are. However, should a client be dissatisfied, they have limited recourse. All professionals belong to professional bodies that set and enforce standards. So, contracting with a consultant bears the risk of no specific quality standard guarantee and, in case of dissatisfaction, recourse lies in ombud structures or courts and often cost money.

3. A different way of thinking

It seems that small businesses are really left out in the dark. However, technology and developments in the legal industry may hold the answer. A select few consultancies, and now a law firm, have embarked on automating the documentary needs of small businesses and start-ups. SchoemanLaw Inc. in Cape Town is one of those firms.[1] In essence, this development is addressing a challenge faced by every other purported solution to date. Some benefits of this mind shift include:

  1. Users have access to up to date documents;
  2. It’s instantly accessible and the source is clear;
  3. Some systems include sophisticated help functions so as to ensure correct completion and implementation;
  4. The prices cannot complete with the traditional way of obtaining legal advice;
  5. Those supported by a law firm, are guaranteed the standards and quality associated with a law firm;
  6. Advisory support is often included or can be accessed additionally.

Related: Master The Ins And Outs Of South Africa’s Labour Laws

In addition, relying on more efficient ways of accessing these crucial services also standardises, manages and organises the legal and contractual needs of any businesses. Something that will serve them well whenever they wish to pitch to that large company for that contract that will really change things or access to funding when needing to expand.


[1] For more information: https://www.schoemanlaw.co.za/online-legal-services/

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