SME Recruitment: A guide to employment contracts

© alexskopje – 123RF.com

We've seen countless instances of poorly-drafted contracts, and in some cases employers don’t even have contracts. The failure to make use of solid written contracts is particularly prevalent in many small businesses where there is a relaxed atmosphere and where entrepreneurs assume that their dealings with employees can be handled verbally and informally. We strongly recommend that all businesses use a proper contract that clearly defines the terms of employment and the expectations associated with the role, as failure to do so may cause significant risks for both employer and employee. Here we provide an essential guide to employment contracts in South Africa.

The Contract of Employment according to South African law

In South African law, the contract of employment commences when the two parties (employer and employee) have agreed to the essential terms of the relationship between them. Broadly speaking, a contract of employment is:

1. A voluntary agreement
   
2. Between two parties (employer and employee), according to which –

   • the employee agrees to perform certain specified duties for the other party, the employer;
     
   • the employer gains a right to instruct the employee as to the manner in which he or she carries out his or her duties

3. The contract lasts for an indefinite period unless otherwise specified
   
4. The duties are conducted in return for a specific salary
   

The Basic Conditions of Employment Act (BCEA) requires all employers who employ more than five employees to have contracts of employment which must contain certain clauses. Failure to comply with the provisions of the BCEA may result in a fine.

The BCEA requires following points to be included in an employment contract:

The essentials to an employment contract in South Africa

1. The full name and address of the employer;
   
2. The name and occupation of the employee, or a brief description of the work for which the employee is employed;
   
3. The place of work and where the employee is required or permitted to work
   
4. The date of when the employment starts;
   
5. The employee’s hours of work and days of work;
   
6. The employee’s wage or the rate and method of calculating wages;
   
7. The rate of pay for overtime work;
   
8. Any other cash payments that the employee is entitled to;
   
9. Any payment that employee is entitled to and the value of the payment;
   
10. How frequently salaries or wages will be paid;
    
11. Any deductions to be made from the employee’s salary;
    
12. The notice period required to terminate the employment, or if employment is for a specified period, the date when the employment is to end;
    
13. A description of any council which covers the employer’s business;
    
14. 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.
    

The items listed above form the bare essentials of the contract of employment. However, since the contract of employment forms the foundation of the relationship between the employer and the employee, it is particularly advisable that the you, as the employer, ensure that the contract is properly fleshed out to contain information that is specific to your business and the employee’s work.

This agreement exists to regulate the scope of the employee’s services to you. It is there to govern issues such as probationary periods. The employment contract should also define the protection of your confidential or proprietary information and whether the employee will be subject to a restraint of trade.

Without a contract of employment, your business is at risk because an employee could do something to harm your business (eg. share confidential information) and you would not be able to do anything about it.

So whilst it might seem a pain to have an employment contract, it’s very important for your business that you have one. Download your free employment contract template here.