Connect with us

Labour Complexity

Legal Complexities of Working with Contractors

Just because you employ someone on a fixed-term contract doesn’t mean you don’t have legal obligations as their employer.

Juliet Pitman

Published

on

LegalComplexofContractors

There are many different kinds of ‘atypical labour’’ and each carries with it specific obligations on the part of the employer. But perhaps the one most often abused and misused is the fixed-term contract. “Recently, fixed-term contracts have become a point of contention in law because of the fact that many employers have started to use them in order to avoid potential unfair dismissal liability,” says Peter Le Roux, director at Brink Cohen Le Roux Inc. And while there are instances where fixed-term contracts make sense from both an employer and employee point of view, employing someone on a fixed-term contract basis does not absolve employers of certain legal obligations. Understanding what these are is vital to ensuring that your company doesn’t end up on the wrong side of the law.

As its name suggests a fixed-term contract is one in which the duration of the contract has a definite start and finish, as agreed by the employer and the contractor. This can be determined either by actual dates, or on the basis of the start and completion of a specific project. This means that the contract naturally and automatically comes to an end when the date is reached, or when the specific project is completed. “Because the contract comes to an end with the effluxion of time, it is not deemed to be a dismissal and the Labour Relations Act (LRA) does therefore not apply,” explains Le Roux. In such instances, the employer is not required to give the contractor notice or go through a dismissal procedure. There is also no obligation on the part of the employer to afford the contractor the same benefits as are given to ordinary employees (things like medical aid cover).

“However, apart from the above a fixed -term contractor is treated in every other respect as an employee for the duration of the fixed-term contract and is protected by the Basic Conditions of Employment Act (BCEA) and the LRA. This means that the employer has certain legal obligations to the fixed-term contractor, as they would to ordinary employees,” explains Le Roux. For example, the contractor will accrue annual leave at the rate of one day for every 17 days worked, as well as sick leave. As the company is deemed to be the contractor’s employer for the period of the fixed-term contract, it is also its responsibility to pay PAYE contributions on behalf of the fixed-term contractor.


Renewals & Termination

There are a few other important areas to be aware of. One is the issue of renewals. If an employer creates a reasonable expectation that a contract is going to be renewed, and then does not renew the contract, they are guilty of unfair dismissal. For example, if a contract with the same terms and condition, is renewed every year, it creates a reasonable expectation that this will continue to be the case. If you renew a date-defined fixed-term contract because the project has not yet been completed, it can be argued that the contractor cannot reasonably expect the contract to be renewed again once the project is finished. (Incidentally, to avoid any confusion surrounding this issue, it’s probably wiser to determine the contract’s term based not on dates but on the start and end of a project). There is much debate about the number of renewals that create a ‘reasonable expectation’, and the courts will usually judge each case on its own merits, but to be on the safe side, be aware that whenyou have renewed a contract once, you are opening your company up to potential risk.

Its also important to be aware that if you continue to renew or roll over contracts each time they expire, you will not be protected by a clause typically included in fixed-term contracts stating that “the employee acknowledges that he/she has no right of expectation in this contract and has no expectation that the contract will be renewed on expiry”. Once you create the expectation, you negate that clause.

It’s also important to be aware that, should a fixed-term contract need to be terminated for any reason other than the effluxion of time, you will need to comply with the Labour Relations Act in terms of fair dismissal procedure. For example, if the fixed-term contractor is guilty of misconduct (things like theft, sexual harassment, being under the influence of drugs or alcohol, or if they are not complying with the terms of the contract, you will need to go through the same process of dismissal as you would with an ordinary employee.


The purpose of these stipulations in law is to prevent unscrupulous employers from putting people who are to all intents and purposes employees, onto fixed-term contracts simply to avoid their obligations as set out in the LRA and BCEA. Understanding your fixed-term contractor’s rights, like understanding your employees’ rights, is the safest way to ensure you don’t expose your company to the risk of litigation.

Juliet Pitman is a features writer at Entrepreneur Magazine.

Advertisement
Click to comment

You must be logged in to post a comment Login

Leave a Reply

Labour Complexity

Charity Begins At Home This Festive Season

3 Ways to invest in your own employees.

Nation Builder

Published

on

_festive-season

We often only think of corporate social investment (CSI) as an organisation’s actions in the surrounding communities (philanthropy and volunteering), but CSI is also inward facing. By promoting employee well-being, your business can be a vehicle for change, not only in the society around it, but also directly in the lives of those working there.

Here are some ways you can invest in your own employees during the festive season:

1. Involve your employees in a higher purpose

This might sound like a bit of circular reasoning, but studies have shown that involving employees in CSI activities has several benefits. People involved in meaningful activities tend to be more motivated and willing to go that extra mile because of the higher good associated with the work. CSI programmes also:

  • Increase co-operative behaviour and employee relationships
  • Enhance the sense of company identity
  • Improve employee retention and commitment
  • Create an attractive company culture.

Related: What’s The Fuss About Corporate Social Investments?

2. Provide the space for physical and mental breaks

The end-of-year and festive period is often a very stressful period. Balancing festive and family duties with increased pressure at work due to colleagues taking leave, looming year-end targets and planning for the next year can take a toll.

You, as the employer, can ease this stress by ensuring that there are systems in place that define holiday working policies. Promote time and productivity management to plan workflows and keep the momentum going in these last weeks of the year. Also make sure you have effective communication strategies in place for plans that are in the pipeline for the new year, so that employees can get their heads around upcoming changes. This will allow employees to plan ahead and build in time to switch off, knowing that all of the boxes have been ticked.

3. Constructive feedback/motivation

Also, take the time to acknowledge and show appreciation for the hard work that your staff has put in throughout the year. As the saying goes “valued employees are valuable employees.”

Continue Reading

Company Posts

How Medical Savings Accounts Are Changing – For The Better

By Jeremy Yatt, Principal Officer of Fedhealth

Fedhealth

Published

on

medical-savings-accounts

The concept of medical savings accounts (MSA) emerged in the industry in the early 1990s, reputedly when Discovery founder Adrian Gore was working at Liberty. At that time medical scheme benefits for different kinds of day-to-day healthcare were specified, so for example, you’d get a certain amount of Rands to spend on your over-the-counter medicine, or for optometry services. But this was problematic, as people’s daily medical needs are all so different. So, you’d have medical aid members calling their medical schemes saying, “I haven’t used my spectacle limit this year, so can I transfer it to use on medication instead?”.

The idea for MSAs was to pool these separate benefits into a total Rand amount, that you could then spend how you wanted, and more importantly, retain if you didn’t use them all. Initially, medical schemes were reluctant to follow this idea, as they thought it would lead to under-servicing: medical aid members might be unwilling to spend their savings, and so might not get the proper day-to-day medical attention until it became a crisis and they were hospitalised. However this was not the case, and MSAs proved very popular.

At first, there was no real limit on how much of your contributions as a member could go into your MSA, so most schemes allocated around 40-50%. Many schemes also pushed major medical procedures like MRI scans into savings, which was effectively a way of forcing members to self-fund these costly medical expenses. As a result, the Medical Schemes Act was amended in 1998 to impose a 25% limit on the benefits that could be put into MSAs, which largely forced the schemes to be responsible for these major costs.

Related: Why Your Employees’ Health Is Your SME’s Wealth

Under the previous structure there was no disincentive not to use your benefits, particularly as they didn’t roll over from year to year like Medical Savings do. It was therefore not uncommon for a call centre to get queries from members asking how much was available in their different benefit areas, so that they could make sure they used them all up.

MSAs solved these sorts of problems by giving medical aid members increased convenience and autonomy, which is why schemes have been using them for the past 20+ years.

The concept of an MSA isn’t far removed from a loan. Like a loan, an MSA lets you use a sum of money when you want to, but you still have to pay for it regardless of whether you use it or not. It forms part of the registered gross contribution to the medical scheme. Take the example of a member who has R12 000 they can access in their MSA each year. Effectively they are paying for this “loan”, contributing R1000 a month, starting in January. However an MSA means they can use all of that R12 000 upfront, such as if they need expensive dental treatment (crowns etc.) at the start of February that costs R12 000.

In this situation, the member has only paid for R1000 worth of that R12 000 “loan” (with their January contribution), so they effectively “owe” the medical scheme R11 000, which they then pay off over the remainder of the year. If the member left the scheme straight after their dental work, the scheme would then contact the member to repay the R11 000, as they still owe that amount.

Related: Is There A Link Between Physical And Financial Wellness?

The concept of giving members access to medical financing led us to develop our new MediVault offering for day-to-day medical expenses. Describing it as a loan holds negative connotations for some, but it’s not that different from the concept of an MSA: in fact, we see the MediVault as a natural evolution. All it means is that you won’t need to pay for day-to-day savings upfront. Instead, you’ll be allocated money for these everyday medical expenses in your personal MediVault and, once you’ve taken the money out, you only have to pay it back over a period of 12 months – completely interest-free. This is a far better option than taking out an expensive loan from a traditional loan company, or getting it from an unscrupulous loan shark.

Our MediVault offering is not at all about loaning funds to people irresponsibly. We’re not creating a monster that’s going to indebt you – we’re just changing the way you can access funds for your healthcare. After all, health is everyone’s most worthwhile investment, and we want to give people the flexibility to make it their top priority.

Continue Reading

Labour Complexity

Year-End Reviews Are Not Always A Positive Experience

This is largely due to parties entering into it without proper preparations, thinking that it can be done in one meeting.

Adri Dörnbrack

Published

on

year-end-review

Performance reviews are similar to entering a race. It’s all about race day, but what you put in before the event (the discipline to wake up and train, the commitment to push yourself and stick to your training plan) is what makes race day either a great positive journey or a terrible experience. The same principle applies to performance reviews. It should not be a once-a-year meeting. It should be part of the monthly job description for both the manager and employee to be able to compare, adjust and review on an ongoing basis. Then, once a year, all the insights gathered during the year should be reviewed to plan for the next year. 

Performance excellence reviews contribute to the culture of a company

We always say that attitude determines outputs or achievements. Personal attitudes, and the character of the business, is the culture. A great culture will lead to great achievements.

Performance excellence reviews are the tool we use to compare, adjust and shape what we want to achieve and then benchmark to know if it has been achieved. 

Employee performance reveals a lot about the business’ achievements. A business is great when it is profitable, cares about and looks after their people, and contributes towards the wellbeing of society and/or the planet. It is all about performance. What you put in is what you get out. And this is what we need to understand. 

Related: How to Set Up Employee Assessments

Performance excellence reviews can be a positive experience

Know the individual and their needs. There are really no one size fits all generic option.

There are however a few general good practices :

  • Managers should firstly understand the value that performance excellence reviews contribute towards overall achievements.
  • When the manager is positive about the reviews and the value it adds, automatically the employees follow.
  • On a monthly basis, review the employee’s feedback relating to the progress of the functions / tasks.
  • Be understanding as a manager – not all functions might haven been able to be completed due to job changes or the complexity of a growing job function.
  • As employee, understand that a manager is employed to manage the performance of the team, the department and the business. This entails understanding the employees’ performance.
  • New employees need to be reviewed more frequently eg. Bi weekly. When the employee has found their feet, review monthly or bi monthly.
  • Do not review performance once a year only. Review frequently, and once a year have a focused meeting around performance to discuss what was achieved during the last 12 months.
  • Managers should be responsible, and held accountable, to get all staff to complete their reviews (monthly, quarterly etc). It is the managers responsibility and it should be one of their functions.
  • Employees should know that performance reviews are simply there to understand the job, and help to align the job and the person’s talents to get the best outputs. It’s about continuously striving towards efficiency and effectiveness.
  • As a manager: Communicate progress feedback and offer assistance.
  • Be consistent. Review frequently.
  • Celebrate achievements.

Continue Reading
Advertisement

SPOTLIGHT

Advertisement

Recent Posts

Follow Us

Entrepreneur-Newsletters
*
We respect your privacy. 
* indicates required.
Advertisement

Trending