Important documents you need when hiring a new employee

Three important legal documents your employees should sign

If you are thinking of starting a business, you will probably need to hire one or more employees. However, finding the right people to hire is one of the most difficult tasks any small business owner will face. Properly onboarding your new employee is therefore key to a productive relationship.

Having new employees review and sign certain documents will ensure parties are on the same page, while protecting your organisation.

The following are 3 (three) of the most important documents your new employee should sign:

• Employment Contract or Independent Contractor Agreement;
• Non-Disclosure Agreement; and
• Employee Handbook.

The difference between an Employment Contract and an Independent Contractor Agreement

Before deciding to hire, you must first consider your organisation’s operational requirements for the position you wish to hire an employee. You should consider whether your organisation’s operational requirements necessitate hiring an employee or independent contractor.

Despite the above, there are some legal and tax implications that naturally flow from the decision whether to hire an employee or an independent contractor. Therefore, incorrectly classifying an employee as an independent contractor may land you into legal difficulties. Choose wisely and seek legal advice if you’re not sure.

Independent contractors generally include consultants, freelancers, and others who work independently, relatively speaking. They may work out of their own home and often perform work for more than one client, setting their own hours. Unlike employees, they are paid for their services without any taxes withheld. They also pay for their own work-related expenses and are not protected by general employment laws.

If you’re hiring an independent contractor, it may be prudent to have them sign an Independent Contractor Agreement. This contract will specify the nature of work, the due date, rate of pay and other important terms.

In case of an employee, you will exercise much more control over their work product and hours. Employees will typically, but not necessarily, operate out of your company’s workplace. With the outbreak of Covid-19 most employers have however adopted remote working arrangements for their employees.

Nonetheless, as an employer, you’re responsible for any reasonable expenses associated with your employee’s day-to-day tasks and must abide by applicable employment laws. You also may provide certain benefits to employees that aren’t available to independent contractors.

Many employers require new employees to sign an Employment Contract. While not required by law, this gives you an opportunity to spell out the terms of the employment relationship, policies for termination, information about benefits, and other details.

A Non-Disclosure Agreement

Your employees probably have access to passwords, proprietary business processes, and other sensitive data. Whether you’re hiring an independent contractor or an employee, a Non-Disclosure Agreement (NDA) can help you safeguard these assets. NDAs are legally enforceable contracts establishing confidentiality between the two parties: the owner and recipient of certain information.

The NDA will outline the types of information considered confidential. This may vary from client lists, customer data, business insights, technical data, or sales strategies. Also included on the list above may be anything else that isn’t considered public knowledge or otherwise exempt. Keep in mind that the scope and enforceability of an NDA may vary on the merits of each case. It is highly unlikely that Courts will enforce NDAs that are overly broad or vague.

Employee Handbook

The Employee Handbook is a great way to provide detailed information about employee expectations, company culture and mission. It may also outline rules of conduct, administrative processes, and any other policies you want your new employees to understand. It’s meant to both welcome new employees and get them on the same page, essentially notifying them that they understand what’s expected of them.

Employee Handbooks may duplicate the terms outlined in Employment Contracts, but provide more detail and, examples of inappropriate behaviour. It is wise to get a new employee’s signature next to a statement that they have received the handbook and understand its contents. This gives you greater protection at the Commission for Conciliation, Mediation and Arbitration (“CCMA”) or Labour Court in the event where you have to discipline and/or terminate that employee. Whether you’re hiring independent contractors or employees, your staff will benefit from a clear understanding of your expectations and objectives. You can better protect your business by expressing these terms in legally enforceable documents that employees read and sign. If you have additional legal questions or concerns, you may seek legal advice.

Sudden Mutsengi – 28 September 2020

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