Employment Laws in South Africa: A Guide for US Companies
With a thriving tech industry, South Africa is a popular place for US-based companies to hire remotely. Learn the key employment laws to keep in mind when hiring there.
Published on July 29, 2022
Employment laws in South Africa: An intro 🇿🇦As one of the largest IT markets in Africa, South Africa is a popular place for companies to set up a global team. The country is host to many corporate subsidiaries, including IBM, Microsoft, Intel, and Dell. More than that, it's a supply base for IT industries in neighboring countries. It's easy to see why so many international businesses are drawn to South Africa as a tech hub.As in every country, South Africa has its own set of employment laws that must be followed in order for your company to stay in compliance. South Africa's Constitution contains several laws related to employment and labor that secure citizens' rights to fair labor practices. The minimum conditions of employment are outlined in the Basic Conditions of Employment Act (BCEA), and legislation pertaining to unfair labor practices, collective bargaining, and trade union representation is detailed in the Labour Relations Act (LRA).In this article, we will provide some general information about these laws, in addition to others. But first, let's review what's required for employment contracts.
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Employment contracts 📑Under South African employment legislation, an employee is considered any worker who assists in or conducts the business of the employer. An independent contractor is not considered an employee under South African employment law.A person can be considered an employee under the law even if they are not formally employed by an employer. Most employees in South Africa are employed under employment contracts, however.The BCEA requires that an employer give their employee a written contract when the employee is hired. This contract must include:
- full details of the employer, such as company name and address
- details of the employee, such as their name and position at the company
- the employee's duties
- the employee's place of work
- the start date of employment
- the employee's ordinary work days and work hours
- the employee's wage rate and the method that will be used to calculate their wages
- the interval in which the employee will be paid
- overtime rate
- details about any deductions made from wages
- details regarding the bargaining council or sector that covers the employer’s business
- leave benefits
- notice requirements for termination of the contract
- other documents relevant to the contract
Fixed term workersWritten employment contracts may be fixed term contracts or contracts for an indefinite period, but the term must be stipulated in the contract. Below is a list of fixed term workers to consider when hiring in South Africa.
Temporary workersTemporary workers may work a maximum of three months, unless there is a justifiable reason for fixing the term of the contract beyond three months. After three months, temporary workers are entitled to the same conditions as permanent workers.
Agency workersAgency workers are considered to be permanently employed after working for a client for three consecutive months, unless there is a justifiable reason for different treatment.
Part-time workersPart-time workers may work for multiple employers simultaneously, especially when they are providing services to multiple groups within a larger company.
Probationary periods 🗓An employer may hire a probationary employee, or an employee who is hired with a probationary period in place. This allows the employer to assess the employee's suitability for permanent employment. After a probation period, the employer may confirm an employee's appointment. If the employer wishes to dismiss an employee after a probationary period, they must give the employee minimum notice.
Termination of employment contracts 🛑An employer must provide justifiable cause for dismissal of an employee, and follow a fair procedure for termination of the employment relationship. Grounds for employee dismissal include misconduct, inability to perform the work due to illness or poor performance, or operational requirements of the employer.
Notice periodWith the exception of gross misconduct, the employee must be given a minimum notice period. For employees with less than six months of continuous service, the BCEA requires at least one week of notice. For employees with six months to a year of continuous service, two weeks' notice is required at minimum. Employees who have worked for a year or more for the same employer must give four weeks' notice. South African law allows employers to pay their employees the equivalent to what they would have been paid if they worked during the notice period, in lieu of giving notice of dismissal.
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Severance payIf an employee is dismissed for gross misconduct or poor performance, they are not entitled to severance pay. An employee is entitled to severance pay if they were dismissed for operational reasons, however. In this case, an employer must provide an employee with severance pay equal to at least one week's remuneration for each completed year of service.An employee may be dismissed due to redundancy, in which case, the employer may offer the employee a suitable alternative job position at the company. If an employee "unreasonably refuses alternative employment," they may not be entitled to severance pay.
Minimum wage 💰The National Minimum Wage Act in South Africa was established in 2018 to protect low-earning workers in South Africa and reduce income disparities in the country. According to the law, an employer may not change an employee's working hours or other conditions of employment while fulfilling the national minimum wage requirements. Trying to reduce the company's costs this way is considered an unfair labor practice.Every year, the National Minimum Wage Commission may make adjustments to South Africa's minimum wage to adapt to inflation and cost of living. In their adjustment of the minimum wage, the Commission also considers:
- gross domestic product
- collective bargaining outcomes
- employers’ ability to carry on their businesses successfully
- the cost of operating micro-enterprises and new enterprises
- The likely impact of the wage adjustment on employment in South Africa
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Hours of work and leave ⏰In general, an employee is permitted to work no more than 45 hours a week. The maximum working day is nine hours in a five-day week, or eight hours a day if the employee works a six-day week.An employer must receive consent from their employee for night work, which is work performed anywhere between the hours of 6PM and 6AM. The employee must be compensated with a shift allowance. Alternatively, the employer may reduce the employee's normal working hours.
Overtime rate in South AfricaAn employee must agree to work overtime in their contract in order to receive overtime. They may not work more than 10 hours of overtime a week, or three hours of overtime in a nine-hour day.Overtime is calculated as at least 1.5 times the employee's usual wage. In lieu of payment, the employer may provide the employee with paid time off, which is calculated as 90 minutes for every 60 minutes of overtime.
Holiday entitlement 🏖Every 12 months, an employee is entitled to a minimum 21 consecutive days' annual leave with full pay. An employee's leave may instead be altered so that it accrues at a minimum of one hour per day for every 17 hours worked.
Sick leave 🤒An employee may accrue paid sick leave every 36 months since the start of their employment. In the first four months of employment, however, an employee is entitled to one day of sick leave per 26 days worked. Otherwise, sick leave is calculated as 30 days for every 36-month leave cycle.
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Occupational Health and Safety Act 👷♀️The Occupational Health and Safety Act regulates the working conditions required to ensure employees' wellbeing. To the best of their ability, employers are required to provide a workplace that is safe from hazards and protects the health of their workers. To do this, the employer is required to communicate risks and potential workplace hazards to their employees, as well as provide training that informs employees about safe conduct in the workplace.The details of the employer's responsibilities to their employees to ensure health and safety will vary by industry. For instance, the mining sector has very strictly regulated conditions that will obviously differ significantly from the IT sector.
Employment Equity Act ⚖️Under the Employment Equity Act, unfair discrimination includes any unfair treatment based on:
- marital status
- sexual orientation
- HIV status
- place of birth
- any arbitrary ground
Trade unions and collective bargainingThe South African Constitution protects employees' right to strike, form or join a trade union, engage in trade union activities, and engage in collective bargaining. Employees can organize a workplace forum through their trade unions to discuss numerous defined workplace issues, but rarely are these forums set up.A workplace with at least 10 union members may elect one to 12 trade union representatives, depending on how many members are employed at the company. If a workplace has 10 union members, one representative may represent those 10. If a company has more than 1,000 union members, 12 representatives may be elected for the first 1,000 members, with an added representative for every additional 500 members. The maximum number of representatives a company may have is 20.
Settlement of individual and statutory labor disputesAn employee who challenges unfair labor practices or unfair dismissal is protected by The Labour Relations Act (LRA). Private or non-statutory disputes may be resolved on forums such as the TOKISO panel.Statutory dispute forums include the dispute resolution branches of bargaining councils (BCs), but they are limited to certain industries such as the metal and engineering industry, public service, and chemical industries. If an industry does not have a BC, employees may use the CCMA for statutory disputes. The Labor Court and Labor Appeals Court are other options for resolving disputes.If an employee wishes to dispute unfair dismissal, they must complete a dispute referral form and file it with their industry's BC or with the CCMA within 30 days of the day they were dismissed. Next, the employee must participate in a conciliation meeting, where a Commissioner serves as a mediator and attempts to settle the dispute out of court. If the mediation is unsuccessful, the employee may pursue the matter in Labor Court. Many of the disputes that end up in Labor Court instead of arbitration relate to automatically unfair dismissals, multiple retrenchment, or strike dismissals.
Establishing a presence as a foreign employer 🌍Foreign employers based outside South Africa but who have a company branch within South Africa must pay tax on income derived from within South Africa only. The corporate tax rate in South Africa is a flat rate of 28% for all companies. The rate is reduced to 27% for years ending on or after 31 March 2023).
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