A Q&A guide to employment and employee benefits in South Africa.
The Q&A gives a high level overview of the key practical issues including: employment status; background checks; permissions to work; contractual and implied terms of employment; minimum wages; restrictions on working time; illness and injury; rights of parents and carers; flexible working; data protection; discrimination and harassment; dismissals; resolution of disputes between an employee and employer; redundancies; taxation; employer and parent company liability; employee representation and consultation; consequence of business transfers; intellectual property; restraint of trade agreements; relocation of employees and proposals for reform.
To compare answers across multiple jurisdictions, visit the employment and employee benefits Country Q&A Tool.
1. Do the main laws that regulate the employment relationship apply to:
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Laws applicable to foreign nationals
Section 23 of the Constitution of the Republic of South Africa, 1996 guarantees everyone the right to fair labour practices. The reference to "everyone" means every person in the Republic of South Africa. All legislation that regulates employment law in line with this right is therefore applicable to foreign nationals working in South Africa.
Laws applicable to nationals working abroad
The choice of law is determined by the jurisdiction in which the operation to which the South African national is providing services is situated.
2. Does the law distinguish between different categories of worker? If so, what are the requirements to fall into each category, the material differences in entitlement to statutory employment rights and are there any maximum time periods for which each category of worker can be engaged?
Categories of worker
Employee/worker. An employee is any person excluding an independent contractor who works for another person or for the state and who receives or is entitled to receive remuneration, and any other person who in any manner assists in carrying on or conducting the business of an employer (section 213, Labour Relations Act, 1995 (LRA)).
Independent contractor/self-employed. South African law distinguishes between employees and independent contractors. When considering whether an individual is an employee or an independent contractor, the courts consider the substance of the agreement over its form and make a determination based on the dominant impression test gained from considering a wide range of factors. Factors considered include the person's control over the other person's productive capacity and whether the:
Hours worked are subject to the control or direction of another person.
forms part of the organisation;
is economically dependent on the other person for whom he or she renders services;
is provided with tools of trade or work equipment by the other person.
Entitlement to statutory employment rights
Employees are entitled to the benefits and protections provided by South African labour legislation. Independent contractors are governed by the laws of contract and the specific contract under which they are working. As a result, they are not entitled to the benefits and protections afforded to employees by labour legislation.
There are no maximum time periods during which a person can be engaged as an employee or an independent contractor.
There is, however, a distinction between indefinite contracts of employment and fixed-term contracts of employment.
Employees on fixed-term contracts earning below the minimum threshold stipulated in the Basic Conditions of Employment Act 75 of 1997 (BCEA) (which is currently ZAR205,433.30) may have a claim for indefinite employment if their contracts are renewed for more than three months or terminated at the end of three months to avoid the deeming provisions of indefinite employment. This will not apply if there is a justifiable reason for extending the fixed term contract beyond three months, such as temporary replacement of an employee who is absent from work, employment on account of an increase in the volume of work not expected to endure beyond 12 months and employment for seasonal work.
Employees who earn above the threshold can be employed for longer than three months if the employment is for a specified duration or for a specific purpose. However, constant renewal of such contracts may give rise to a claim for a legitimate expectation of indefinite employment,
3. Are any grants or incentives available for employing people? Does any information/paperwork need to be filed with the authorities or given to new employees when employing people?
Grants or incentives
Employment Tax Incentive Act, 26 of 2013 potentially provides employers with a tax rebate for hiring workers between 18 and 29 years of age.
The Employment Services Act, 4 of 2014 (ESA) provides for regulations to be published establishing employment schemes aimed at promoting the employment of young people and other vulnerable categories of people. Draft regulations were published in December 2018 but they have not been made final.
UIF. Under the Unemployment Insurance Act, 63 of 2001 and the Unemployment Insurance Contributions Act, 4 of 2002 employers are required to register all employees with the Unemployment Insurance Fund (UIF). The following categories of employee are exempt from this requirement:
Those working less than 24 hours a month for an employer.
Learnerships (the equivalent to apprentices).
Foreign nationals working on a contract.
Workers who only earn commission.
Employers must make a monthly payment to the UIF on behalf of their employees, which consists of both:
An employee contribution of 1% of the employee's monthly remuneration.
A further 1% of the employee's monthly remuneration as an employer contribution.
COIDA. Under the Compensation for Occupational Injuries and Diseases Act, 130 of 1993 (COIDA), an employer must register themselves and all of their employees with the Compensation Commissioner. They must provide the Commissioner with an estimate of the number of employees they will employ in the upcoming financial year, and how much they will be paid. At the end of each financial year the employer must complete a return of earnings report, which must be submitted to the Commissioner.
SARS. Every employer must register with the South African Revenue Services (SARS) for the purposes of the taxation of employees. Employers must withhold a percentage of the employees' monthly salary, which must be paid to SARS within seven days after each month end. Employers must also complete an annual reconciliation and provide this to SARS.
ESA. The ESA makes provision that regulations can be published requiring employers to report on vacancies and the filling of positions. The regulations were published for public commentary in December 2018 but remain in draft format.
4. Are there any restrictions or prohibitions on carrying out background checks in relation to applicants?
Employers can access an employee's credit and criminal records with their consent. Under the Employment Equity Act, 55 of 1998 (EEA) employers (and prospective employers) are prohibited from discriminating against employees on unfair grounds. As a result, employers should be mindful about what information they seek out. For example, employees are not generally obliged to disclose HIV status or pregnancy.
Permission to work
5. What prior approvals do foreign nationals require to work in your country? What information/paperwork needs to be kept or filed with the authorities when they start work?
Procedure for obtaining approval. There are a number of work visas that a foreign national can potentially obtain in order to work lawfully in South Africa. An employee can apply for one of the following types of work visa:
General work visa.
Critical skills visa
Intra-company transfer visa.
Other required documents to support the visa application include:
Police clearance certificates.
Proof that the employee has sufficient funds to survive in the country until they are paid a salary.
In the case of an intra-company visa, the applicant is required to make a cash deposit equivalent to the value of a return ticket.
An employer can apply for a corporate visa, which allows them to hire a number of foreign national employees for a limited period of time. The employer will need to both:
Demonstrate why they need to appoint non-South African citizens.
Prove that 60% of their workforce comprises South African citizens or permanent residents of South Africa.
Expiry and renewal. ·General work visas remain valid for the duration of the contract of employment or for a period not exceeding five years. A general work permit will lapse if within six months of issuance and if every year thereafter the holder fails to submit satisfactory proof to the Director-General of Home Affairs that he/she is still employed, along with proof of the terms and conditions of the job and the job description.
Critical skills visas are issued for a period not exceeding five years and Intra-company transfer visas can only be issued for a period not exceeding four years and cannot be renewed or extended.
Cost. The cost of a work visa is currently ZAR1,520 (the cost is the same for all the types of work visa).
Time frame. The procedure to process a visa application usually takes a minimum of eight to ten weeks.
Sanctions. Section 49(3) of the Immigration Act, 13 of 2002 provides that anyone who knowingly employs an illegal foreign national will be guilty of an offence and liable, on conviction, to a fine or to imprisonment not exceeding one year. The Immigration Act does not expressly provide for maximum fines, but these are generally applied similarly to administrative fines, which provide for a maximum fine of ZAR8,000. An employee whose work permit has expired cannot carry on working for their employer. This does not, however, give employers an automatic right to immediately terminate the employment relationship without following due process provided for in terms of the South African labour legislation. Such employees enjoy the same protections under the legislation, regardless of their legal status.
An employee who works without the correct visa risks detention and deportation. Whether the employee did so knowingly or not does not materially have an impact on the outcome. It is always best practice to apply for an extension of a work permit at least 90 days before it expires to avoid instances where an employee is unable to render services to an employer by virtue of the expiry of the work permit.
Restrictions on managers and directors
6. Are there any restrictions on who can be a manager or company director?
Children under the age of 15 or under the minimum school-leaving age (which is 15 or the end of the ninth grade, whichever comes first) cannot be employed. There are no additional requirements for a manager or director.
There are no statutorily prescribed nationality restrictions.
The following persons are disqualified from being the directors of a company:
Persons removed from an office of trust for misconduct involving dishonesty.
Persons who have been convicted of an offence involving dishonesty.
Persons who have been convicted of an offence set out in the companies' legislation.
Regulation of the employment relationship
7. How is the employment relationship governed and regulated?
Written employment contract
All employers who employ more than five employees are required by law to set out in writing certain particulars in respect of employees who work 24 hours or more per month. These particulars include details on:
The employer's full details.
The occupation or job description.
The amount of the wage or salary and how it will be paid.
Notice period for termination of the contract.
The documents which form part of the employment contract.
There are additionally certain employment contracts which are required by various statutes to be in writing.
There are a number of terms, relating to basic conditions of employment, which are implied by law into the contract of any employee who earns below the statutory earnings threshold. Further, certain collective agreements or sectoral determinations can imply terms into employment contracts.
Collective agreements are automatically binding upon the parties to an employment contract.
8. What are the main points to consider if an employer wants to unilaterally change the terms and conditions of employment?
An employer cannot unilaterally change the terms and conditions of employment: the agreement of the employee is required. The employee's agreement should be recorded in writing.
9. Is there a national (or regional) minimum wage?
The National Minimum Wage Act, No 9 of 2018 (NMW) introduced a national minimum wage in South Africa. The effect of this is that every worker in respect of whom the NMW applies is entitled to be paid at least the national minimum wage by his or her employer. Employers can apply for an exemption from paying the national minimum wage in certain circumstances.
Non-compliance with the NMW can result in fines being imposed on the employer or referrals for claims for underpayment to the CCMA or appropriate court.
Section 32 of the BCEA requires payment to be made in South African rands, and must be in cash, by cheque or by direct deposit. Payment must be made seven days after the end of the period for which remuneration is payable.
Restrictions on working time
10. Are there restrictions on working hours? Can an employee opt out on either an individual or collective basis?
Working hours are regulated by Chapter 2 of the BCEA. The provisions of Chapter 2 only apply to employees earning less than the earnings threshold, currently ZAR205,433.30 per annum. Employees cannot opt out of these provisions.
Maximum ordinary working hours are:
45 hours per week and nine hours per day (for employees who work five days per week).
Eight hours per day (for employees who work more than five days per week).
Overtime can only be worked by agreement with the employee and is limited to ten hours per week.
Work on Sundays and Public Holidays can take place only with the employee's agreement.
Arrangements to limit overtime, such as compressed working hours and the averaging of working hours, are subject to the employee's agreement.
Employees are entitled to a full hour lunch break after working continuously for five hours, or a 30-minute lunch break by agreement. Employees are further entitled to a 12-hour daily break between shifts, and a 36-hour weekly break, which should fall over a Sunday unless otherwise agreed.
Shift workers are not generally treated differently from normal employees. Where night work is undertaken (between 6pm to 6am), employees must be compensated with a shift allowance or reduction of working hours, and transport must be available between the employee's home and the workplace.
11. Is there a minimum paid holiday entitlement?
Minimum paid holiday entitlement
In a cycle of 12 months, an employee is entitled to at least 21 consecutive days' annual leave on full remuneration. By agreement, annual leave can alternatively accrue at a minimum of one hour/day per 17 hours/days worked.
Public holidays are regulated by the Public Holidays Act, 36 of 1994. There are 12 public holidays in South Africa. If a public holiday falls on a Sunday, the following Monday is also a public holiday. Public holidays are not included in the leave entitlement: an employee must be paid for these days over and above their annual leave. An employee must be paid at least double their usual rate for working on a public holiday.
Illness and injury of employees
12. What rights do employees have to time off in the case of illness or injury? Are they entitled to sick pay during this time off? Who pays the sick pay and, if the employer, can it recover any of the cost from the government?
Section 22 of the Basic Conditions of Employment Act, 75 of 1997 (BCEA) regulates sick leave. A sick leave cycle is 36 months from the commencement of employment or the end of the previous cycle. Employees are not entitled to take unpaid sick leave (for the employees' entitlement to paid sick leave, see below, Entitlement to paid time off).
Entitlement to paid time off
During sick leave an employee is entitled to paid sick leave equal to the number of days that he would usually have worked for a duration of up to six weeks. However, during the first six months of employment, an employee is only entitled to one day per 26 days worked.
Recovery of sick pay from the state
Paid sick leave cannot be recovered from the state. However, time off resulting from injury on duty is not considered as sick leave and is dealt with under the Compensation for Occupational Injuries and Diseases Act, 130 of 1993 (COIDA). Employers may be compensated by the Compensation Commissioner for payments made to employees under this legislation.
Statutory rights of parents and carers
13. What are the statutory rights of employees who are:
Parents (including maternity, paternity, surrogacy, adoption and parental rights, where applicable)?
Carers (including those of disabled children and adult dependants)?
There is a right to four consecutive months' unpaid maternity leave. This can commence at any time from four weeks before the expected date of delivery or earlier if a certified medical practitioner deems it necessary for the employee's health to commence leave at an earlier date. Additionally, an employee cannot work for six weeks after the birth, regardless of whether the child is a stillborn or not. An employment contract can provide more favourable maternity leave than these provisions.
Parental Leave rights
An employee who is a parent but who is not the primary care giver (male or female) is entitled to at least ten consecutive days unpaid parental leave from the day that the child is born or in the case of an adoption, the date on which the adoption order is granted or on the day the child is placed in the care of a prospective adoptive parent, whichever occurs first. In the event that the employer does not provide for payment of salaries during this period, the parent would be entitled to some benefits which will be determined by the Minister of Labour under the Unemployment Insurance Act.
An employee who is a commissioning parent in a surrogate motherhood agreement is, subject to section 25C(6) of the BCEA, entitled to commissioning parental leave of at least ten weeks consecutively. Alternatively, he/she is entitled to the parental leave referred above, depending on whether or not he/she is the primary care giver. An employee can commence commissioning parental leave on the date a child is born as a result of a surrogate motherhood agreement.
An employee who is an adoptive parent of a child below the age of two is entitled to adoption leave of at least ten weeks consecutively, provided that his/her spouse/partner does not qualify for or has not been granted adoption leave and will be the primary carer of the child during the adopted leave period. An employee can commence adoption leave on the date that the adoption order is granted or that a child is placed in the care of a prospective adoptive parent by a competent court, pending the finalisation of an adoption order in respect of that child, whichever date occurs first.
Carers, including those of disabled children and adult dependants, are not provided for under South African labour legislation.
Continuous periods of employment
14. Does a period of continuous employment create any statutory rights for employees? If an employee is transferred to a new entity, does that employee retain their period of continuous employment? If so, on what type of transfer?
Statutory rights created
The period of employment has an effect on the statutorily prescribed minimum notice periods which are required for termination of an employment contract. The entitlement to family responsibility leave arises after the employee has been employed for a period of four months, as does the entitlement to be paid the value of accrued annual leave on termination of employment.
For the purposes of determining the length of employment for any provision of the BCEA, previous employment with the same employer must be taken into account if the break between the periods of employment is less than one year.
Consequences of a transfer of employee
Employees retain their length of service and conditions of employment on a transfer of a business, or part of it, as a going concern.
Fixed term, part-time and agency workers
15. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees? To what extent are part-time workers entitled to the same rights and benefits as full-time workers?
The expiry of a fixed-term contract does not constitute a dismissal. To avoid the abuse of fixed-term contracts, employees who had a reasonable expectation of renewing a fixed-term contract can claim that non-renewal constitutes dismissal. Restrictions are also in place for the use of temporary employees and agency workers that earn below the statutory earnings threshold, currently ZAR205,433.30 per annum. These restrictions are explained below.
Employees on fixed-term contracts are considered permanent after three months, unless there is a justifiable reason for fixing the term of the contract beyond three months in respect of employees earning below the threshold. A non-exhaustive list of justifications is provided in section 198B of the LRA. After three months, temporary workers are also entitled to be treated no less favourably than their permanent counterparts at the employer, unless there is a justifiable reason for different treatment.
Agency workers are considered to also be employed by the client they are rendering services to for purposes of the LRA once they have provided those services for three consecutive months. This generally provides protection against unfair dismissal. After three months, agency workers are also entitled to be treated no less favourably than their counterparts at the client, unless there is a justifiable reason for different treatment.
Part-time employees are entitled to be treated on the whole not less favourably than full-time employees, unless there is a justifiable reason for different treatment.
It is accepted that an employee may have multiple employers at the same time, particularly where an employee is providing services to other companies within a group.
16. Is there a statutory right for employees to request to work flexibly?
There are no statutory rights associated with the right for employees to request to work flexibly.
17. Are there any requirements protecting employee privacy or personal data? If so, what are an employer's obligations?
Employees' data protection rights
Employees have a right to privacy, which prohibits an employer from intercepting, monitoring or acquiring an employee's private communication without the employee's knowledge, unless the employer has the employee's consent to do so, or if the breach is justified by necessity. The Protection of Personal Information Act, 2013 (POPI) provides extensive protection in this regard, but its substantive provisions are not yet in force.
At the time of writing, the President of the Republic of South Africa was requested to sign the remaining provisions of POPI into full force by 1 April 2020 however this has as yet not been signed into law These provisions will establish minimum requirements for lawful processing of information with which all persons will be required to comply.
Any organisation which is either domiciled in or processes personal information in South Africa, must comply with POPI. Once it comes into effect, all persons will have one year to comply with the provisions and a failure to do so may result in substantive penalties such as:
Civil actions for damages by affected data subjects (or the information regulator on their behalf).
Criminal prosecution for offences committed, which give rise on conviction to fines, imprisonment of up to 12 months or ten years (depending on the severity of the offence), or both.
The information regulator can issue administrative fines of up to ZAR10 million depending on the extent and gravity of non-compliance which is based on a number of factors listed in section 109(3) of the POPI Act::
the nature of the personal information involved;
the duration and extent of the contravention;
the number of data subjects affected or potentially affected by the contravention;
whether or not the contravention raises an issue of public importance;
the likelihood of substantial damage or distress, including injury to feelings or anxiety suffered by data subjects;
whether the responsible party or a third party could have prevented the contravention from occurring;
any failure to carry out a risk assessment or a failure to operate good policies, procedures and practices to protect personal information; and
whether the responsible party has previously committed an offence in terms of this Act.
Employers' data protection obligations.
An employer is under an obligation not to access any personal data or information of its employees unless it is justified to do so by either:
A disciplinary or criminal investigation.
The employee's consent.
Discrimination and harassment
18. What protection do employees have from discrimination or harassment, and on what grounds?
Protection from discrimination
The Employment Equity Act, 55 of 1998 (EEA) protects employees from unfair discrimination on various grounds including, but not limited to:
Any arbitrary ground.
Disputes in terms of the EEA can be referred in writing to the CCMA within six months after the act or omission that allegedly constitutes unfair discrimination. Employees who prove unfair discrimination can receive compensation up to a maximum of 24 months' remuneration.
Protection from harassment
Harassment is viewed as unfair discrimination and as a result is protected against by the EEA.
19. Do whistleblowers have any protection?
The Protected Disclosures Act, 26 of 2000 was passed to protect whistle-blowers. Section 3 of the Act provides that any employee who makes a protected disclosure cannot then be subjected to an occupational detriment. A protected disclosure includes a disclosure made in good faith to a legal practitioner, employer or various bodies specified in the Act (for example, the Public Protector).
The LRA further specifies that any dismissal made as a result of making a protected disclosure will be automatically unfair. If the employer is found to be liable, an employee would be entitled to maximum compensation equivalent to 24 months' remuneration, alternatively reinstatement with back pay from the date of dismissal.
Termination of employment
20. What rights do employees have when their employment or employment contract is terminated?
There are minimum notice periods for termination of the employment contract either by the employer or employee. The duration of the notice period that each party must provide depends upon the employee's length of service:
One week's notice is required during the first six months of employment.
Two weeks' notice is required for employment of more than six months to up to one year.
Four weeks' notice is required for employment of more than one year.
An employer must pay severance pay of at least one week's remuneration for each completed year of service to the employee if the employee is dismissed for operational reasons, provided that the employee did not unreasonably refuse alternative employment. Severance pay is subject to a consultation process. No severance pay is payable for dismissal for other reasons.
Procedural requirements for dismissal
No filings are required, but the dismissal must be both procedurally and substantively fair (see Question 21, Protection against dismissal).
21. What protection do employees have against dismissal? Are there any specific categories of protected employees?
Protection against dismissal
An employee can be dismissed on the basis of misconduct, incapacity or for operational reasons, that is, retrenchment or redundancy.
The dismissal must be procedurally and substantively fair. This applies to all employees, regardless of the length of service or any other criteria. Procedural fairness requires that the employee must be:
Allowed to state a case, and be given reasonable time to prepare which, depending on the nature of the allegations and whether legal representation is permitted, can range between 48 hours and two weeks.
Allowed representation by a union representative/fellow employee.
If dismissed, be provided with the reason for dismissal and told of the right to challenge the dismissal.
Substantive fairness requires that there must be a good reason (cause) for the dismissal. Dismissal for misconduct is normally justified by the employee's serious misconduct (such as theft, gross negligence or assault). See Question 23 for the reasons for dismissals due to operational requirements (redundancy).
There are no categories of protected employees.
Resolution of disputes between an employee and employer
22. Is there a governmental or independent organisation to which employees can refer complaints in the event that there is a dispute between the employee and the employer?
The Labour Relations Act of 1995 (LRA) has made provision for employees to challenge unfair dismissals and other unfair practices at private or statutory dispute-resolution forums. Such disputes may, by agreement, be dealt with via private (non-statutory) dispute-resolution forums such as the TOKISO panel: www.tokiso.co.za.
There are also a number of statutory dispute-resolution forums established by the LRA. These include the:
Dispute resolution arms of bargaining councils (BCs) which exist in certain industries, including, for example, the metal and engineering, motor, public-service and chemical industries.
Commission for Conciliation, Mediation and Arbitration (CCMA) which is the forum ordinarily used by those industries that do not have their own bargaining councils, for example retail, IT, security, financial services and others.
Labour Appeal Court.
The process that must be followed when there is a claim of an unfair dismissal is that:
The aggrieved employee must complete a dispute referral form and lodge it with the relevant BC or with the CCMA within 30 calendar days from the date of dismissal.
A conciliation meeting is then set up where a Commissioner who acts as a mediator is appointed to attempt to facilitate an out-of-court settlement. This is a necessary first step and is aimed at bringing about expeditious resolutions in employer-employee disputes.
If conciliation fails, the aggrieved party may, depending on the nature of the dispute, refer the matter to the Labour Court.
Disputes that go to the Labour Court instead of arbitration usually relate to matters such as multiple retrenchment, strike dismissals or automatically unfair dismissals.
All CCMA and Labour Court services are free and funded by the state so there are no legal or administration fees and the costs that are incurred usually relate to each party paying for their own legal representation.
23. How are redundancies/layoffs defined, and what rules apply on redundancies/layoffs? Are there special rules relating to collective redundancies?
Definition of redundancy/layoff
When dismissing on the grounds of its operational requirements (redundancies), the employer must show that it terminated employment as a result of economic, technological, structural or similar needs, and that termination was the only reasonable option.
Section 189 of the LRA and the Code of Good Practice on Operational Requirements provide that, before effecting a dismissal for operational requirements, an employer must follow a consultation process which must include (among other things) attempts to avoid the dismissal, minimise the number of dismissals and mitigate the adverse effects of the dismissal. There must be an attempt from both parties to reach consensus. The persons or bodies that an employer is required to consult with, and the topics which must be consulted on, are specified by legislation.
In the case of large scale retrenchments (where dismissal of 10% or more are contemplated by employers who employ at least 200 employees), employers are required to have regard to section 189A of the LRA.
There are additional requirements which relate to large-scale dismissals (which are defined according to a staggered system measuring the proportion of dismissed employees to total workforce). Prior to giving notice of dismissal, there must be a referral, either to facilitation or conciliation, to the Commission for Conciliation, Mediation and Arbitration (CCMA). Facilitation is a process where a CCMA commissioner presides over the consultation meetings and endeavours to facilitate consensus between the parties. Conciliation is a process where the commissioner attempts to encourage the parties to a dispute to agree to a settlement. After the prescribed time periods, employees can refer a dispute regarding substantive fairness to the Labour Court, or strike. Procedural fairness is challenged only by separate motion proceedings.
Employee representation and consultation
24. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? What does consultation require? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?
Employees are not entitled to management representation.
Employees are entitled to elect representatives who are able to represent them in grievance and disciplinary hearings and monitor and report the employer's compliance with labour legislation.
Trade unions are entitled to certain organisational rights if they are sufficiently representative (generally, they comprise 30% of employees). Collective bargaining is voluntary, and unions sometimes have to strike to compel employers to bargain with them.
Employees retain a number of rights if an employer undergoes business rescue proceedings. Employees are additionally entitled to be consulted by an employer in the case of redundancies.
Employee consent or consultation is not required for mergers, acquisitions or any other similar transactions.
25. What remedies are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?
If the consultation process is not followed in the case of redundancies, the matter can be referred by a party for arbitration or to the Labour Court, depending upon the number of employees involved. It can also be an option for the employees to embark upon strike action, depending on the circumstances.
Unless the issue is one that can be referred to arbitration or adjudication, employees can strike to prevent proposals by management going ahead (for which consultation is not required).
Consequences of a business transfer
26. Is there any statutory protection of employees on a business transfer?
Automatic transfer of employees
Section 197(2) of the Labour Relations Act, 66 of 1995 (LRA) provides that in the case of a transfer of a business (or part of a business) as a going concern, the new employer is substituted in the place of the old employer. All rights and obligations of the employment contract are automatically transferred to the new employer and employees' length of service must be recognised.
Protection against dismissal
Section 187(1)(g) of the LRA provides that a dismissal related to a transfer of business is automatically unfair. However, the new employer can dismiss on the ground of its operational requirements after the transfer.
Harmonisation of employment terms
Under section 197(3) of the LRA a new employer can employ workers on terms and conditions that are different from the old employer, provided that these terms and conditions are, on the whole, not less favourable. The new employer can only amend conditions of employment by agreement with the employees.
Employer and parent company liability
27. Are there any circumstances in which:
An employer can be liable for the acts of its employees?
A parent company can be liable for the acts of a subsidiary company's employees?
It is a well-established principle in South African law that an employer is vicariously liable for the negligent act of his/her employee or agent, when the employee or agent acts negligently while in the course and scope of their employment.
Parent company liability
Under the common law employers may be held liable for conduct by their employees which falls within the course and scope of their employment. In addition, section 60 of the Employment Equity Act, 55 of 1998 makes an employer liable for a contravention of the Act by their employees if the breach was reported to the employer and they failed to take the necessary steps to eliminate the breach.
28. What rights do employees have on the insolvency of their employer? Is there a state fund which guarantees repayment of certain employment debts?
Employee rights on insolvency
Once a sequestration order has been granted, all employment contracts are suspended with the result that employees are under no duty to render services and have no entitlement to remuneration. Employees can make a claim for any unpaid monies due.
State guarantee fund
Employees can submit a limited claim to the Unemployment Insurance Fund.
Health and safety obligations
29. What are an employer's obligations regarding the health and safety of its employees?
The safety of the workplace is regulated by the Occupational Health and Safety Act, 85 of 1993. Employers have a general duty to provide a workplace that is safe and without risk to the health of its employees as far as is reasonably practicable. This includes the mitigation of risks and hazards that the employer has identified, as well as training and informing employees about safe conduct.
Detailed obligations on the employer also exist based on the industry the employer operates in (for example, the mining sector in particular is very strictly regulated).
Taxation of employment income
30. What is the basis of taxation of employment income for:
Foreign nationals working in your jurisdiction?
Nationals of your jurisdiction working abroad?
Individuals and companies that are not "tax residents" in South Africa (a term defined in section 1 of the South African Income Tax Act, 58 of 1962 (SAITA), see below) are taxed on a source basis, subject to any relief provided by an applicable double taxation agreement. In relation to services, the "source" is typically where the services are rendered, (and so an employee not tax resident in South Africa who provides services in South Africa will be subject to tax on a source basis).
For tax purposes, "tax resident" is defined in section 1 of SAITA as a natural person that is either:
Ordinarily resident in South Africa.
Not at any time during the relevant year of assessment ordinarily resident in South Africa, where that person was physically present in South Africa either:
for a period (or periods) exceeding 91 days in aggregate during the relevant year of assessment, as well as for a period (or periods) exceeding 91 days in aggregate during each of the five years of assessment preceding that year of assessment; or
for a period (or periods) exceeding 915 days in aggregate during those five preceding years of the year of assessment.
Nationals working abroad
Under recent amendments to the SAITA, some South African tax residents who render services outside of South Africa within an employment context (excluding independent contractors or self-employed persons) for more than 183 days may lose out on the benefit of previous tax exemptions (effective 1 March 2020).
The exemption will now only apply on the first ZAR1 million rand earned while working outside the country and only to the extent that it was not taxed by the other country's tax administration.
31. What is the rate of taxation on employment income? Are any social security contributions or similar taxes levied on employers and/or employees?
Rate of taxation on employment income
In South Africa income is taxed on a progressive scale. The minimum annual salary required for an employee to be liable for income tax is currently ZAR79,000.
The rates of income tax are charged as follows (for tax year 2020, from 1 March 2019 to 28 February 2020):
Taxable income of ZAR1 to ZAR195,850: 18%.
Taxable income of ZAR195,851 to ZAR305,850: ZAR35,253 plus 26% of taxable income above ZAR195,850.
Taxable income of ZAR305,851 to ZAR423,300: ZAR63,853 plus 31% of taxable income above ZAR305,850.
Taxable income of ZAR423,301 to ZAR555,600: ZAR100,263 plus 36% of taxable income above ZAR423,300.
Taxable income of ZAR555,601 to ZAR708,310: ZAR147,891 plus 39% of taxable income above ZAR555,600.
Taxable income of between ZAR708,311 to ZAR1,500,000: 207 448 plus 41% of taxable income above ZAR708,310.
Taxable income of ZAR1,500,001 and above: ZAR532,041 plus plus 45% of taxable income above ZAR1,500,000.
Rate of taxation on employers
Companies, small businesses generating taxable income above ZAR79,000 and personal service providers are all liable for tax.
Companies are liable for 28% of their income made in that financial year, personal service providers and foreign resident companies which earn their income from a source in South Africa are taxed at 33%.
Small businesses are taxed at the following rates:
0 to ZAR79,000 of income: 0% of taxable income.
ZAR79,001 to ZAR365,000 of income: 7% of taxable income above ZAR79,000.
ZAR365,001 to ZAR550,000 of income: ZAR20,020 plus 21% of taxable income above ZAR365,000
ZAR550,001 and above: ZAR58,870 plus 28% of the amount above ZAR550,000.
Social security contributions
Employees and employers must contribute towards the Unemployment Insurance Fund (see Question 3, Filings).
Under the Skills Development Levies Act, 9 of 1999, companies with a payroll of more than ZAR500,000 per annum must contribute 1% of their payroll per month to the South African Revenue Services as a contribution towards the sector education and training authority in their jurisdiction.
32. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded, whether generally or in particular sectors?
Both contractual and discretionary bonuses are a common feature of employment contracts in South Africa.
While an employer may exercise discretion when granting a bonus, that discretion must be exercised fairly.
Intellectual property (IP)
33. If employees create IP rights in the course of their employment, who owns the rights?
Unless there is an express agreement to the contrary, the employer owns the IP rights.
Restraint of trade
34. Is it possible to restrict an employee's activities during employment and after termination? If so, in what circumstances can this be done? Must an employer continue to pay the former employee while they are subject to post-employment restrictive covenants?
Restriction of activities
While an employee is employed, the employer can require an employee to disclose any interests or business activities that they undertake outside of their employment and prohibit such activities. Employers do not need to pay employees separately for these restrictions to be enforceable.
Post-employment restrictive covenants
A restraint of trade clause in an employment contract can be enforceable where the employer has a proprietary interest that requires protection, and that interest outweighs the right of the employee to work in his chosen profession. An employee who seeks to set a restraint of trade aside has the onus of proving that it is unreasonable and contrary to public policy. Ex-employees can be restrained for a limited time usually between six and 12 months, and in a specific area, from conducting activities such as soliciting clients, suppliers or employees, or engaging in activities in unlawful competition with the previous employer. Employers do not need to pay employees separately for these restrictions to be enforceable.
Relocation of employees
35. Can employers include mobility clauses in employment contracts, or take any other measures, to ensure that employees are obliged to relocate?
Relocation benefits are stipulated either in the employment contract or relocation policy and are at the discretion of the employer. An employee is bound by the terms stipulated in the contract of employment and would have difficulty arguing against its reasonableness once the contract is signed. In the absence of a contractual term or policy on relocation, employees can reasonably argue against mobility/relocation especially relocation to a different province or another country. Relocation costs/allowances are usually stipulated in the employer's policy. It is normal for employers to provide assistance for obtaining the necessary visa/work permits.
Proposals for reform
36. Are there any major proposals to reform employment law in your jurisdiction?
There are no current proposals to reform employment law in South Africa.
Professional qualifications. Attorney, South Africa, 2002
Areas of practice. Senior Director Employment and Labour Practice (Johannesburg), focussing on collective labour law, and individual and general employment law. Specialises in mergers and acquisitions, restructuring, business transfers, restraints of trade, executive dismissals, strikes and union disputes and forensic investigations.
Non-professional qualifications. Bachelor of Science and LLB degrees from the University of Western Cape and Witwatersrand (WITS) respectively
Assisted an international client with having a pension fund's dispute dismissed where the alleged quantum was in excess of ZAR100 million.
Assisted a large bank with a restructuring of its South African operations affecting over 800 employees without a single dispute being declared.
Assisted a State owned entity with the dismissal of high ranking union officials for bribery and corruption.
Assisted an international client with a forensic investigation which led to the termination of its Chief Executive Officer.
President of the South African Society for Labour Law (Gauteng chapter).
Served as an acting judge in the Labour Court.
Member of the Supervisory Board of Norton Rose Fulbright South Africa.
Professional qualifications. Attorney, South Africa, 2019
Areas of practice. Employment-related litigation, employment policy and agreement reviews, forensic investigations, due diligence exercises in mergers and acquisitions and executive dismissals.
Non-professional qualifications. Bachelor of Arts (International Relations and Law), 2013 and Bachelor of Laws degree, 2015 both from the University of Witwatersrand
Was the lead associate in advising one of South Africa's largest development banks in the review of their existing human capital policies and procedures in line with the recently amended labour law provisions in South Africa. The policies included but were not limited to their leave policy, remuneration policy and foreign national recruitment policy in order to ensure that it was line with the provisions of the country's immigration laws.
Advised a French multinational luxury goods conglomerate on the applicable legislation, regulations and laws pertaining to any employee liability and concerns relating to distributorship agreements it had in place with various entities across five African jurisdictions.
Conducted a forensic investigation into allegations of collusion and breach of company policies by a senior employee on behalf of a US-based correctional institutions management company.
Was the employment and labour lead associate in assisting an international client with a forensic investigation that led to the termination of its Chief Executive Officer.