Employing your first person is an exciting milestone for any small business, but it also means confronting employment law and compliance obligations that can feel daunting if you have never dealt with them before.
Growing your team is essential to growing a successful business, so here is the employment law grounding every small business owner needs.
1. Employment contracts
While a written contract is not strictly required to establish employment, having one in place is both good practice and a legal requirement. Section 29 of the Basic Conditions of Employment Act (BCEA) sets out what a written contract must include.
Outside a formal contract, or where employment status is disputed, Section 200A of the Labour Relations Act (LRA) sets out the conditions under which someone is presumed to be an employee rather than an independent contractor:
- How the person works is subject to the control or direction of another person.
- The person’s hours of work are subject to the control or direction of another person.
- The person forms part of the organisation they work for.
- The person has worked an average of at least 40 hours per month over the last three months.
- The person is economically dependent on the person they work for or render services to.
- The person is provided with tools of trade or work equipment by the other party.
- The person works for, or renders services to, only one person.
In practice, this means someone you have labelled an “independent contractor” may legally be an employee if enough of these conditions apply. This presumption does not automatically apply to people earning above the prescribed earnings threshold, worth checking the current threshold directly with the Department of Employment and Labour.
2. Rights and obligations for employers and employees
Section 23 of the Constitution of the Republic of South Africa sets out foundational labour rights and obligations:
Every employee and employer has the right to fair labour practice. Every employee also has the right to form and join a trade union, participate in its activities, and strike, alongside obligations to report for duty, render service in good faith, and follow lawful instructions respectfully.
Every employer has the right to form and join an employer’s organisation and participate in its activities, alongside obligations to remunerate employees properly (including keeping UIF and PAYE compliant), provide a safe working environment (mental health included), and treat employees with dignity and respect.
Beyond these constitutional rights sits a common-law principle every small business owner needs to understand: vicarious liability, where an employer is held responsible for the actions or omissions of an employee committed during the course and scope of their employment. A simple example: if an employee damages a client’s property while carrying out their duties, the employer can be held liable for the resulting loss, not just the employee personally.
Understanding this nuance matters directly for the insurance and risk cover you carry as a business, cover that adequately protects against vicarious liability is worth confirming you actually have.
Frequently asked questions
Do I need a written employment contract for every employee?
It is not strictly mandatory for employment to exist, but it is both good practice and, under Section 29 of the BCEA, a legal requirement to provide employees with the prescribed written particulars of employment.
Can I treat someone as an independent contractor to avoid employment obligations?
Not simply by labelling them one. Section 200A of the LRA sets out specific conditions under which someone is presumed to be an employee regardless of how their arrangement is described, so review these conditions carefully before classifying anyone as a contractor.
What is vicarious liability, in practical terms?
It means your business can be held legally responsible for an employee’s actions or mistakes made during their work, not just the employee themselves. This is exactly why adequate business liability cover matters once you start employing people.
What are an employee’s basic constitutional rights at work?
The right to fair labour practice, and the right to form or join a trade union, participate in its activities, and strike, set out under Section 23 of the Constitution.
What are an employer’s basic obligations under South African labour law?
Proper remuneration with UIF and PAYE compliance, a safe working environment including mental health considerations, and treating employees with dignity and respect.
Building your team responsibly
Growing your team is one of the most rewarding challenges a small business owner faces. Equipping yourself with the right knowledge, systems and practices from the start makes that challenge considerably less daunting, and considerably more likely to succeed.
About the author: Kulani Shiluvane is the founder of Shiluvah, a Human Resource and Labour Law Consultancy, and holds postgraduate qualifications in Management and Labour Law from the University of the Witwatersrand and the University of Johannesburg.
Originally published in October 2021. Updated September 2026 to reflect current employment law fundamentals for small business owners. Labour law changes over time, so confirm current requirements directly with the Department of Employment and Labour or a qualified labour law practitioner.
