Employment Contracts for Employers in South Africa – Essential Tips

One would think that every employer will have written employment contracts in place for their employees but you will be surprised at how many neglect this crucial aspect when it comes to hiring someone for their business. Negligence like this is particularly prevalent in many small businesses where there is a relaxed atmosphere where MD’s assume that their dealings with employees can be handled verbally and if they have, more often than not, these contracts of employment are poorly drafted and inadequate.

When it comes to saving time and money, nothing beats having a strong and solid written employment contract in place. You can save yourself a mountain of trouble in the long-term by ensuring that both the employer and employee agree to certain terms and conditions before they start their employment. A good written employment contract will massively reduce employment disputes.

Employment disputes can harm your business in so many ways. They lead to a drop in productivity, employee engagement decreases, and the business usually has to carry the legal costs if unresolved matters get referred to applicable tribunals. Also, people talk so your business will most likely suffer a bad reputation if a dispute does occur between the employer and the employee. Lastly, you suffer unnecessary stress and worry during the whole process. Is it really worth it?

With this article the aim is to provide you with some essential guidelines to take into consideration when it comes to employment contracting.

What is an employment contract and does it have to be a written contract?

An employment contract is an agreement signed by the employee and employer regarding the rights, responsibilities and obligations of both parties during the period of employment.

In terms of our common law, parties are not required to observe any formalities when concluding a contract of employment. The Basic Conditions of Employment Act however does require an employer to provide certain written particulars of employment to be provided as a minimum, and every employer is legally obliged to provide all employees with these minimum particulars in writing no later than the first day of employment.

This minimum requirement, however, is not enough. Employers are advised to enter into a written contract of employment with every employee to avoid arguments down the line regarding who said what, or what was promised and what was not promised, and so on.

The terms and conditions of verbal contracts are very difficult to prove – it is your word against the employee’s word, and verbal contracts are not at all adequate.

What are these written particulars that the law prescribes?

• The full name and address of the employer;
• The name and profession of the employee, or a brief description of the work for which the employee is employed;
• The place of work, and, where the employee is required or permitted to work at various places, an indication of this;
• The commencement date;
• The employee’s ordinary hours of work and days of work;
• The employee’s wage or the rate and method of calculating wages;
• The rate of pay for overtime work;
• Any other cash payments that the employee is entitled to;
• Any remuneration in kind that the employee is entitled to and the value of the remuneration in kind;
• How frequently remuneration will be paid;
• Any deductions to be made from the employee’s remuneration;
• The period of notice required to terminate the employment, or if employment is for a specified period, the date when the employment is to terminate;
• A description of any council or sectoral determination which covers the employer’s business;
• Any period of employment with a previous employer that counts towards the employee’s period of employment;
• A list of any other documents that form part of the contract of employment, indicating a place that is reasonably accessible to the employee where a copy of each may be obtained.

Which employees should sign an employment contract?

All employees should generally sign an employment contract. However, terms and conditions in your agreement could differ based on the type of employee you’re hiring. Here’s a breakdown of the most common types of employees:

Full-time: Employees who meet the requirements for full-time hours (usually 40 hours per week) and are employed on a permanent basis with no predetermined end date.

Part-time: Employees who work fewer than 40 hours per week (typically 25-35 hours per week) and are employed on a permanent basis with no predetermined end date.

Fixed-term: Employees who are employed for a specific period of time with an agreed-upon end date. These employees are different from independent contractors, because they are treated as employees throughout the duration of employment.

What are the benefits of employment contracts?

Creating an employment contract for each new hire has advantages for you and your employees. Here are a few of the key advantages of employment agreements:

1. Employment contracts are legally binding documents that employers and employees agree to. This reduces the chances of disputes later on.

2. Your employment contract lets employees know exactly what is expected of them and what actions will be taken if they don’t comply.

3. If your business deals with confidential information, you may choose to add a confidentiality clause that prohibits your employees from disclosing sensitive information.

These particulars mentioned will form the bare prerequisites of the contract of employment. However, as the contract of employment forms the basis of the relationship between the employer and the employee, it is particularly advisable that the employer ensures that the contract of employment is properly fleshed out so as to regulate the scope of the employee’s services and appropriately deal with issues such as, amongst other things, probationary periods, the protection of the employer’s confidential and/or copyrighted information and whether the employee will be subject to a restraint of trade.

Clear and accurate written contracts of employment are particularly important in cases involving the hiring of high-ranking employees to oversee a particular department or to oversee a project successfully, as the contract of employment should clearly and precisely record the performance expectations of the employer. Such a contract should also record whether there is a share option, commission, bonus or other compensation aspect payable to the employee.

A contract of employment also shields the employer as it regulates the behaviour of the employee in the workplace. This is crucially important because all company policies, as well as an employer’s disciplinary code, should form part of the contract of employment. If there is no contract regulating these matters, it is extremely difficult to take disciplinary action against a non-compliant employee.

FIC Consulting is here to assist you in drafting not only the minimum particulars but also ensures that the contract is fit for your business and its needs.

If there is something I want you to know about me right away, it’s that I have a passion for supporting business owners. I believe in the future of South Africa and that there are so many opportunities out there to be successful and to make a change to our economy.

I want to be part of that change by providing businesses with core HR and Labour Solutions that will not only result in legislative compliance but actually positively impact their bottom line.

Over the years I have gained practical HR experience working in various sectors such as mining, construction, financial services, and corporate legal. As a business owner myself, I can relate well to businesses and what their needs are.