Types of employment contracts – what you need to know
According to Vermeulen Attorneys the primary employment related issue that they are most often approached with by employees is that of fixed terms contracts. Attorney, Chante Mouton says that employees often don’t read or understand the terms of their employment contracts before accepting resulting in them wanting to lay a grievance against an employer.
An employment contract should be read in its entirety before being accepted. It is important to understand who is considered an employee and what the difference is between a permanent, fixed term and independent contractor.
Section 83A of the BCEA says that a person who works for or renders a service to another person, is presumed, until the contrary is proven to be an employee regardless of the form of contract if the following factors exists. The person’s hours and manner of work are subject to the control and direction of another, works on average of at least 40 hours per month over the last three months, is economically dependent on the person and is provided with the tools of trade or work equipment by that person or organisation.
A permanent contract is an indefinite contract where an employee is taken on by a company until the employee no longer wishes to work there or the contract ends in a termination of some sort. This type of employee is entitled to all forms of benefits provided by the specific organisation for which he works.
A fixed term contract runs from an agreed start date and ends on a specified date or on the completion of a specific project ending the employment relationship, the duration of which should be agreed upon in advance. Fixed term employees are entitled to the same rights and benefits as those of permanent employees depending on the time frame of the contract length. This form of contract is legal provided that it is used for the intended purpose of fulfilling a short term assignment.
The Labour relations Act states that if an employee is compensated below the legal threshold of R205 433.30 per annum a fixed term contract is limited to a period of 3 months and may only be extended if there are justifiable reasons for doing so. These may include but not limited to, the employee is replacing a permanent employee who is temporarily absent, is completing a specific project for a determined period, is a seasonal worker or is a student obtaining vocational training. It is also provided that should the contractor be employed for longer than 3 months without justifiable reason, this employee would be deemed to be permanent and would be entitled to all the rights and benefits of a permanent employee. However, it must be noted that other factors do apply.
An independent contractor on the other hand is not an employment contract at all but a contract of work. A true independent contractor would be a person who is registered as a provisional tax payer, will work his own hours and runs his own business. This type of contractor is free to carry out work for more than one employer simultaneously and is not entitled to any additional benefits as provided to permanent employees. The contractor issues an invoice, which is not subject to statutory deductions of PAYE and UIF, to the company.
When presented with an employment offer it is essential to read the contract. You should understand and be clear on the terms offered before accepting. Consult a professional or discuss with your prospective employer immediately to avoid unnecessary future disappointments.