Appointing the right person is a challenge in itself, but using the right contract can be just as confusing. Each type of employment contract has a specific purpose and employers must use the right employment contract to minimise legal and financial consequences. Here is an explanation of the most common employment contracts, including permanent employment contracts, fixed-term employment contracts and the use of independent contractors.

Permanent employment contracts

A permanent employment contract is for positions where employment is for an indefinite period. This type of contract is typically used for key and other positions in the workplace that form part of the business’s day-to-day operational activities, such as managers, machine operators, general and administrative staff, etc.

Example: If you hire a foreman to manage the daily operations in your warehouse, a permanent employment contract would be appropriate. This agreement specifies that it is a permanent contract, which ends when the employee reaches the workplace’s retirement age, and sets out the responsibilities, working hours, compensation and other benefits such as paid leave. The employee remains in employment until the employment relationship is legally terminated – resignation, retirement, disciplinary action, retrenchment, etc.

Fixed-term employment contracts

A fixed-term employment contract is used when the employee’s position is of a temporary nature, usually for a specific period of time or project. Depending on certain factors, such as the size of the business, the employee’s compensation level, etc., there is a great deal of risk involved in using this type of contract.

If the employee is employed on a fixed-term basis for longer than three months, he/she may be considered to be a permanent employee in terms of legislation, unless there is a justifiable reason for the extended contract. Legislation sets out some valid reasons for fixed-term employment contracts lasting longer than three months, including:

• To replace another employee who is temporarily absent
• Temporary increase in work volume
• Student or postgraduate internships
• Project work
• Non-citizens who have a valid work permit for a specific period
• Seasonal work
• Public works or job creation schemes
• After reaching retirement age

Example: An employer in a coastal town hires extra workers at their store to help with the increased work volume over the holiday period from November to January. After the season ends, their contract expires without any further obligations to each other.

It is important to note that using fixed-term employment contracts to circumvent permanent employment is illegal. For example, repeatedly renewing a fixed-term employment contract without a justifiable reason of an employee who performs continuous work may be considered an unfair labour practice.

Independent contractors

With an independent contractor, there is no employer-employee relationship. They are a service provider who provides services to your business, but are not considered an employee. Independent contractors usually work on specific tasks or projects that are not related to the operation of the business, and are responsible for managing their own work and tax affairs. They are not entitled to the benefits or protections offered to employees.

Example: If the employer contacts a tractor agency to send a tractor mechanic to come and put a new tire on the tractor, the mechanic is used as an independent contractor. He will repair the tractor according to agreed rates and timelines, but will not be subject to the employer’s day-to-day management like a regular employee. They are also free to offer their services to other businesses. Independent contractors offer flexibility and can be cost-effective for specialised tasks. However, it is important to make a clear distinction between an independent contractor and an employee, as the incorrect classification of a worker can lead to legal complications.

Conclusion

To effectively manage an employer’s workforce, it is essential to understand the different types of contracts, as well as to ensure legal compliance. An employer must be able to distinguish between permanent staff, fixed-term employees and the use of independent contractors so that they know where their obligations lie towards these individuals.

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An arbitration award is a legally binding decision issued and handed down by a commissioner in either the Commission for Conciliation, Mediation and Arbitration (CCMA), or a Bargaining Council.  These awards usually specify the outcome of the dispute and are issued after the parties have concluded their arbitration proceedings at the CCMA or Bargaining Council. For the commissioner to conclude the matter the parties must state their cases and produce all their evidence relevant to the matter during the arbitration proceedings. It is critical to understand that these awards are binding on all parties to the proceedings and can be legally executed in the event of non-compliance.

When the arbitration award is issued

Once process is concluded the arbitration award will be issued within a couple of weeks and, if the employee was successful the award will contain remedial action against the employer such as to pay the employee compensation, or to re-instate or re-employ the employee.

After the award has been issued and the employer has not complied with the award, the employee may elect to enforce the award against the employer to secure compliance with it.

Enforcing an arbitration award

Section 143 of the Labour Relations Act, Act 66 of 1995 as amended (LRA), provides an effective and accessible way to enforce an arbitration award if the award has not been complied with. The LRA allows a certified award to be enforced as if it was an order of the Labour Court in respect of which a writ has been issued, unless it is an advisory arbitration award.

Arbitration awards can be referred to the director of the CCMA for certification and this is done on application by the party seeking enforcement. The process to certify the arbitration award changes the award into an executable legal document, which allows for enforcement through the court system.  Therefore, without certification the award cannot be enforced as an order of the court.

Non-compliance

Employers should note that non-compliance with arbitration awards can be very risky. Once certified, the arbitration award can be enforced in the same manner as an order of the Labour Court, or Magistrate’s Court. Essentially enforcement methods can include a writ of execution for the attachment of property, garnishee orders, or contempt of court proceedings.

In cases where a written undertaking, or a compliance order, has not been honoured by either party against whom the order has been issued, an application or request may be made to the CCMA to make the undertaking, or compliance order, an arbitration award in terms of sections 68(3) or 73(1) of the Basic Conditions of Employment Act, Act 75 of 1997 as amended (BCEA).

In terms of section 143(5) of the LRA an arbitration award that orders the payment of a sum of money, is to be enforced or executed as if it is an order of the Magistrate’s Court. Where an arbitration award orders the performance of an act other than the payment of money (e.g. reinstatement), any party to the award may, without further order, enforce it by way of contempt proceedings instituted at the Labour Court.

It is of paramount importance for employers to ensure that they are present at the arbitration itself and present their case to the best of their ability.  If an award is issued against the employer, it is of vital importance that the employer get advice from a labour advisor on the award, so that they can look at options to challenge the award, or alternatively to ensure they comply with the award within the specified time period to avoid any further repercussions for non-compliance.

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Running a business not only involves managing day-to-day operations, but also ensuring compliance with complex labour legislation. This includes the Basic Conditions of Employment Act 75 of 1997 (BCEA), Employment Equity Act 55 of 1998 (EEA), and Occupational Health and Safety Act 85 of 1993 (OHSA) amongst others. Adherence is essential for protecting your business from legal penalties and disputes with employees.

Here’s a closer look at four basic documentation compliance tools:  how they help your business, and the risk of not having them in place.

1. Attendance register

The BCEA requires employers to keep detailed records of all employees’ working hours. This can be done manually with an attendance register, or electronically by using a clocking system. Regardless of the method, these records must be accurate and up to date.

How it helps: Keeping an attendance register ensures you keep track of hours worked:  normal working hours, overtime and public holidays. The register provides a paper trail, which can be crucial in resolving disputes regarding pay disputes. Additionally, it simplifies the payroll processes for wage calculations.

Risk of non-compliance: Wage disputes, claims of unpaid overtime or other compensation issues. If records are incomplete or incorrect, problems with the business’s labour inspections or legal battles with employees could follow.

2. Incident books

The incident book is an essential documentation tool for recording any significant occurrences in the workplace, such as accidents, injuries, or disciplinary actions. This book is a key part of managing workplace recordkeeping and employee conduct.

How it helps: Maintaining an incident book assists in complying with the BCEA and OHSA, which requires employers to keep records of workplace occurrences, injuries or accidents. It also provides valuable documentation for internal use, allowing you to track and address potential risks in the workplace. Should any disputes arise related to workplace misconduct or safety, having a written records of incidents will be critical in protecting your business.

Risk of non-compliance: Not keeping a thorough record of workplace incidents can leave you unable to defend disputes at the Commission for Conciliation, Mediation and Arbitration (CCMA), bargaining councils and also with government departments such as the Department of Employment and Labour, especially when dealing with matters of misconduct, poor work performances and accidents or injuries. Employers who fail to document incidents may struggle to defend themselves if legal action is taken, leading to costly fines and awards against them.

3. Payslips

The BCEA (as well as sectoral determinations and collective agreements) require employers to provide employees with payslips every time they are paid. These payslips must include detailed information, such as:

• the employer’s name and address,
• the employee’s position,
• the employee’s wage rate, as well as the ordinary-, overtime-, Sunday- and public holiday hours worked,
• any deductions and contributions made from the salary, and
• the employee’s contribution to the Unemployment Insurance Fund (UIF), to name but a few.

How it helps: Payslips provide employees with documentation and clear breakdown of their earnings and deductions. This transparency helps prevent misunderstandings or disputes regarding pay.

Risk of non-compliance: Failure to timeously provide accurate and detailed payslips can lead to disputes regarding pay or deductions. Without proper documentation, employees may challenge the accuracy of their wages, and the employer may face legal action.

4. Required legislative posters

Labour legislation such as the BCEA, EEA, and OHSA require employers to display specific posters about the legislation in the workplace in areas where they are visible to all employees. Along with these it is also good practice to displaying the business’s disciplinary code on a poster.

How it helps: Displaying these posters ensures that employees are aware of their rights and obligations under the law. This can also reduce the likelihood of disputes, as employees are more likely to follow disciplinary procedures when they are clearly communicated.

Risk of non-compliance: Not displaying the required posters can result in penalties from labour authorities. Non-compliance may also attract negative attention from labour inspectors, who could impose fines or other sanctions.

Conclusion

Compliance with labour legislation is not optional. Using tools such as attendance registers, incident books, payslips, and required posters ensure that you stay on the right side of the law and avoid costly disputes and penalties. Failing to implement these tools puts your business at significant risk, both legally and financially.

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The disciplinary code is a guideline for employees to be informed of what is considered unacceptable behaviour in the workplace and to ensure that disciplinary actions are applied reasonably, consistently and fairly.

Main purpose of the disciplinary code

The main purpose of the disciplinary code is to maintain order and discipline within the work environment through fair and consistent procedures. This includes the following aspects:

• Maintaining discipline: The employer strives to maintain discipline in a fair manner with a focus on progressive discipline.
• Preventing unacceptable behaviour: The code aims to prevent unacceptable behaviour of employees.
• Changing behaviour: Through positive influence, employees must be encouraged to adjust their behaviour.
• Maximising productivity: The ultimate goal is to improve productivity in the workplace.

Principles

Good principles in the disciplinary code include:

• Responsibility: Discipline is the employer’s responsibility and must be carried out by supervisors and management.
• Reasonableness: Disciplinary action must be reasonably based on the seriousness of the offence and the employee must be aware of the employer’s expected standard.
• Opportunity to appeal: It is practical to make provision in the disciplinary code for employees to have the opportunity to appeal against any sanction.
• Representation: Employees have the right to request internal representation during disciplinary hearings.

Disciplinary sanctions

The disciplinary code provides guidelines for dealing with disciplinary action, with an emphasis on progressive discipline. This includes the following types of sanctions:

• Verbal warnings: This type of warning is usually valid for a shorter period, such as three months, and is issued for first offences or less serious misconduct.
• Written warnings: These warnings are issued when verbal warnings are insufficient, or for more serious offences. This is more serious than a verbal warning and is also usually valid for a longer period, such as six months.
• Serious written warnings: These warnings are given for repeated offences or for more serious misconduct. The warning is more serious than a written warning and is also usually valid for a longer period, usually around, for example, six months.
• Final written warnings: These warnings are given for repeated offences or for very serious misconduct and indicate that the next offence may lead to a disciplinary hearing. The warning is more serious than a serious written warning and is also usually valid for a longer period, usually about 12 months, for example.
• Dismissal: Dismissal should always be the last option, or for cases of extremely serious misconduct, which causes a breach in the relationship of trust between the employer and employee. Dismissal cannot be carried out without a disciplinary hearing, because the hearing ensures that a fair procedure is followed and confirms the substantive reason for dismissal. Dismissal is appropriate when a valid final written warning for similar misconduct was still insufficient to lead to behavioural improvement.

Categorisation of offences

Sometimes it is more user-friendly to divide the disciplinary code into several categories by grouping similar offences. Common categories include:

• Category 1: Absence – Offences that may lead to disciplinary action, where employees are not present according to their contracted and or scheduled working hours.
• Category 2: Control at work – Employees must recognise the employer’s right to exercise control. This includes obeying rules and the proper use of the employer’s property.
• Category 3: Industrial action – The right to strike is protected, but must be carried out within the legal framework. Unprotected strikes may have disciplinary consequences.
• Category 4: Disorderly conduct – Disorderly conduct can negatively affect the workplace’s productivity and safety. Employees must comply with reasonable instructions.
• Category 5: Theft or fraud – The employment relationship is based on trust. Serious offences, such as theft, may result in immediate dismissal.

The disciplinary code is an essential tool for managing behaviour in the workplace. It guarantees that all employees are treated fairly while there is a structure in place to deal with unacceptable behaviour. By taking a progressive approach, employers and employees can work together to create a productive and harmonious work environment.

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The employer’s property forms an integral part of the business infrastructure, and any loss, damage, misuse, willful misuse and waste thereof is serious misconduct that places unnecessary pressure on the employer to repair and/or replace the property.

The employer’s property is defined as both physical and intellectual assets. Physical assets include but are not limited to the workplace premises, buildings, equipment, machinery, fuel, products, stationary, business vehicles, cell phones, internet, working hours, etc. Intellectual property includes but is not limited to assets of the business:  secrets, trademarks, patents, confidential information, etc.

Labour law

In instances of loss and/or damage to the employer’s property, the employer should act in terms of the relevant labour law with respect to the employer-employee relationship. The employer can take disciplinary action against an employee for the damage and/or loss of the employer’s property.

Employers must always remember that an employee can never be dismissed, even with a valid reason, without first holding a disciplinary hearing to ensure that a fair procedure is followed and that there is substantive reason (proof) for the dismissal.  The substantive proof in this regard refers to the damage that the employer’s property suffered as a result of the employee’s misconduct among other things. 

Due care and attention

Each employee should take cognisance of the employer’s property and use it with due care and attention and without causing any damage thereto and/or loss thereof. Each case regarding damage and/or loss of the employer’s property will need to be evaluated by the employer to determine whether the employee was negligent or whether it was merely a bona fide mistake (mistake made in good faith) that caused the damage or loss. Based on this evaluation, the employer can determine what would be the next step in terms of disciplinary action, if any.

Evaluating the damage/loss

When the employer evaluates the damage/loss on a case-to-case basis the following process should be followed:

• Investigate the incident and gather all evidence;
• Consult with the employee(s) in question and witnesses to get a clear picture of the incident.
• Determine the necessary corrective action to be applied;
• Take disciplinary action if needed depending on the outcome of the investigation.

Proactive measures

It is recommended that employers implement proactive measures to limit the risk of misconduct referring to loss, damage, misuse and waste of the employer’s property. Employers should also take care to:

• Draft employment contracts which include proactive clauses that will reduce the employer’s risk in the workplace.
• Ensure that the disciplinary code is relevant and up to date regarding offences and appropriate sanctions.
• Also ensure that all employees are made aware of what the disciplinary code entails.
• Encourage employees to report dishonest conduct of co-workers. Every employee has the fiduciary duty to act in good faith and in the employer’s best interest, and report any misconduct by co-workers.
• Ensure that every employee has a detailed job description to clarify his/her duties and the employer’s expectations.
• Ensure that employees are well aware of the policies and procedures to be followed in the workplace relating to the employer’s property and the use thereof.

Limit your risk

It is vital for employers to limit risk in the workplace as far as possible. The employer must ensure that all rules and regulations, policies and procedures are brought under the employees’ attention and make sure that they are aware thereof. Hold regular meetings about the disciplinary code, rules and policies and procedures, and make sure that the meetings are well documented and that employees sign an attendance register.

These proactive steps will ensure that the necessary disciplinary action can be taken when needed.

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The Labour Relations Act, Act 66 of 1995 (LRA) sets strict conditions to comply with when dealing with a Section 197 transfer of business.  Its vitally important that both employers consult with each other about the transfer, as well as with the employees.

Section 197 of the LRA

Section 197 of the LRA’s default position and effect is that employees are automatically transferred from one employer to another when a business is transferred.  When a business is transferred as a going concern, employees of the old employer (transferor) are automatically transferred to the new employer (transferee) on the same terms and conditions of employment. This means that the employee’s contract with the old employer remains intact and their conditions of employment (including their wages, benefits and length of service) are preserved under the new employer. This provision ensures continuity and stability for employees, who are protected from sudden changes in their employment conditions due to the transfer.

At the end of the day, the new employer must ensure that the employees are employed on terms and conditions that are as a whole no less favourable than those under which the employees were employed with the previous employer.

Objecting to the transfer

Sometimes employees are unhappy with being transferred to a new employer and want to object to the transfer from the previous to the new employer. Whilst employees do not have a statutory right to object to an automatic transfer, some employers may permit employees to do so, allowing them to stay employed by the previous employer. This, however, would normally be to the detriment of the employee concerned as the previous employer’s operational requirements could very well justify the employee’s subsequent dismissal.

Case study

Such an objection was discussed in the Durban Labour Court case of Krishna v University of KwaZulu-Natal (2012) 33 ILJ 1688 (LC).  The Court held that an employee who was transferred to the National Health Laboratory Service (NHLS) from a laboratory service operated by her university on behalf of the national department, had not been dismissed (as she claimed) by reason of the university’s operational requirements.

The employee was an administrative assistant in the university’s microbiology department at the university’s medical school.  At the time the medical school operated laboratories for the Department of Health (DOH) which was also funded via a grant from the DOH. When the national department established the NHLS, that unit had to then be transferred to the department. The decision was that all the laboratory staff had to be transferred to the newly formed NHLS that was established in terms of an Act of Parliament.

In this case the employer had provided the employee with a choice to accept and consent to the automatic transfer to the new employer or to object and face a possible dismissal due to operational requirements.  After the employee consented and was transferred, she instituted action claiming that she was unfairly dismissed and that she was coerced into accepting the transfer.

After duly examining the choice given to the employee, the Court found that it was not a threat at all, and neither was she forced to accept the transfer.  It was merely a notification of the possible consequences should she refuse. The employer thus acted properly according to the Court when it informed the employee of a possible dismissal due to operational requirements should she object to the transfer.

Conditions of a Section 197 transfer

Employers should be aware of the conditions of a Section 197 transfer, because if these conditions are not met it could have dire financial implications for the employer/business.  When a dismissal arises from the transfer of a business, whether in whole or in part, it can lead to an automatically unfair dismissal claim in terms of Section 187(1)(g) of the LRA.  This could entitle the employee up to 24 months’ compensation.

Conclusion

Employers are encouraged to contact their labour law representatives to ensure that the correct procedure is followed if they are involved in a transfer, or partial transfer of business as a going concern.

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