What are the basic requirements of an employment contract in South Africa?

Hiring your first employee is an exciting milestone for any South African business. But before you welcome someone onto your team, you need to get the employment contract right. A poorly drafted contract can lead to disputes, confusion, potential unfair dismissal claims, and unnecessary legal headaches.

The good news is that South African labour law provides clear guidelines on what must be included in an employment contract. Let’s walk through everything you need to know to create compliant and comprehensive employment agreements for your business.

Do You Actually Need a Written Employment Contract?

Here’s something many new employers don’t realise: whilst verbal employment contracts are technically valid in South Africa, written contracts are highly recommended to protect yourself, your employees and be compliant with the BCEA.

But honestly? You should always use written contracts regardless of salary levels. Here’s why:

• They prevent “he said, she said” disputes about terms and conditions;
• They provide clarity on the rights for both parties without having to consult confusing legislation for answers;
• They provide clarity on the obligations and expectations for both parties;
• They’re essential evidence if you ever face CCMA or Labour Court proceedings; and
• They demonstrate professionalism and protect your business interests.

Essential Elements Every Employment Contract Must Include

Section 29 of the BCEA requires employers to provide written particulars of employment within the first month of the employment relationship commencing. These particulars must consist of the following information:

1. Full Names and Addresses of Both Parties

Your employment contract should clearly identify:

• The employer’s full legal name (company name or individual if you’re a sole proprietor)
• The employer’s physical and postal address
• The employee’s full legal name and residential address
• The employee’s ID number

This seems basic, but you’d be surprised how many contracts have incomplete information that causes problems later.

2. Job Title and Description

Clearly specify the position or job title and provide a reasonable description of the work the employee will perform. This doesn’t need to be an exhaustive list of every possible task, but it should give a clear picture of:

• The employee’s main duties and responsibilities;
• Who they’ll report to; and
• Their place within the organisational structure.

A vague job description like “general duties” won’t cut it and may cause confusion and disputes down the line – especially if there is a change in the title and position. Be specific enough that both parties understand the role, but not too restrictive that reasonable flexibility becomes impossible and challenging.

3. Place of Work

State where the employee will be working. This could be:

• Your office address;
• Hybrid work locations and arrangements (remote and in office);
• Multiple sites (if applicable);
• The employee’s home (for remote work arrangements); or
• “Various locations” for field-based roles.

If the employee may be required to work at different locations or travel, make this clear upfront. With remote work becoming more common, be explicit about work-from-home arrangements and any requirements to attend the office.

4. Start Date and Contract Duration

Your contract must specify:

• The commencement date of employment; and
• Whether the contract is permanent, fixed-term, or for a specific project.

For fixed-term contracts, include the end date or the event that will trigger the end (like completion of a specific project). Remember that employees on consecutive fixed-term contracts may acquire rights as permanent employees under certain circumstances and create an expectation of renewal.

5. Probation Period

If you’re including a probationary period (highly recommended), state:

• The length of the probation (typically 3-6 months);
• The conditions that apply during probation;
• The notice period during probation (usually shorter than post-probation); and
• The criteria for successfully passing probation.

The BCEA allows for probation periods, but they must be reasonable and shouldn’t exceed six months for most employees (12 months for employees earning above the earnings threshold and for more senior positions in the business).

6. Remuneration and Payment Details

This is obviously crucial. Your contract must specify:

• The salary or wage amount (monthly salary, hourly rate, etc.);
• The payment frequency (monthly, weekly, fortnightly);
• The payment method (bank transfer, cash); and
• The payment date (e.g., last working day of the month).

Also include information about:

• Deductions (PAYE, UIF, any other deductions that the business requires, like pension fund or medical aid, etc.);
• Allowances (travel, phone, petrol allowances etc.);
• Commission structures or bonuses (if applicable); and
• Annual increases or review processes.

Be transparent about the total cost-to-company package and what’s included.

7. Working Hours and Overtime

South African labour law has strict rules about working hours. Your contract should state:

• Normal working hours for the week (maximum 45 hours per week for a five-day work week, or 9 hours per day);
• Start and finish times;
• Meal intervals (at least 60 minutes after 5 hours of work, or 30 minutes by agreement); and
• Rest periods (daily and weekly).

For overtime, specify:

• When overtime may be required;
• The overtime rate (at least 1.5 times the normal wage);
• Any time off in lieu arrangements; and
• Maximum overtime limits (10 hours per week under the BCEA).

If the employee earns above the earnings threshold, they may not be entitled to overtime pay, but this should still be clarified in the contract to avoid issues later on.

Additional Important Contract Terms

8. Leave Entitlements

Your contract must detail various types of leave:

Annual Leave: Employees are entitled to at least 21 consecutive days (or 15 working days) per annual cycle (spanning over 12 months only), or one day for every 17 days worked. Specify:

• How leave accrues;
• The process for requesting leave; and
• Leave payout policies on termination.

Sick Leave: Employees are entitled to paid sick leave (36 working days over a three-year cycle). Include requirements for medical certificates.

Family Responsibility Leave: Three days per year for certain family circumstances (only if an employee has worked for the business for 4 months onwards).

Maternity Leave: Four consecutive months of unpaid maternity leave (though UIF benefits may apply).

Parental Leave: Ten consecutive days of parental leave for the birth or adoption of a child.

Adoption Leave: Ten consecutive weeks of adoption leave for kids under the age of 2 years old.

Commissioning Parental Leave: ten consecutive weeks for the birth of a child in a surrogacy arrangement.

You can offer more generous leave policies, but you can’t offer less than the statutory minimums. It is important to note that major updates to maternity/parental law are on the horizon – parents (regardless of their gender and the manner in which they became a family) are entitled to share in the 4 months and 10 days offered in law. Parliament has 36 months in which to implement this new update, but all employers and employees should be aware of this change.

9. Notice Periods for Termination

Specify the notice period required from both parties to terminate the employment relationship:

• One week if employed for six months or less;
• Two weeks if employed for more than six months but less than one year; and
• Four weeks if employed for one year or more.

You can agree to longer notice periods (common for senior positions), but not shorter than the statutory minimums. Also clarify:

• Whether payment in lieu of notice is acceptable;
• The process for resignation or termination; and
• The handover process that the employee must follow after the employment has been terminated (or before their notice period is done).

10. Confidentiality and Restraint of Trade

If relevant to your business, include clauses covering:

Confidentiality: Protection of business information, supplier lists, data, client lists, trade secrets, and intellectual property. These clauses typically survive the employment relationship.

Restraint of Trade: If you want to prevent the employee from working for competitors or starting a competing business after leaving, you need a restraint clause. However, South African courts will only enforce restraints that are:

• Reasonable in scope (geographical area, duration, and activities restricted);
• Necessary to protect legitimate business interests; and
• Not overly harsh on the employee.

Don’t copy and paste generic restraint clauses. They need to be tailored to your specific business and the employee’s role to be enforceable.

11. Intellectual Property Rights

If employees will create content, software, designs, or other intellectual property, clarify who owns the work. Generally speaking, in terms of the Copyright Act, any work created during employment belongs to the employer, but it’s best to make this explicit and to avoid potential and unnecessary disputes.

12. Disciplinary Procedures

Reference your company’s disciplinary code and procedures. You don’t need to include the full policy in the contract, but the employee should acknowledge they’ve received and understood it.

Your disciplinary procedures must comply with Schedule 8 of the Labour Relations Act, ensuring:

• Fair procedures before disciplinary action;
• The right to representation;
• Progressive discipline for minor offences; and
• The right to appeal.

13. Benefits and Perks

Detail any additional benefits provided, as these are not a right or entitlement received in law:

• Pension or retirement fund contributions;
• Medical aid contributions and waiting periods;
• Group life or disability cover;
• Performance bonuses and how they’re calculated;
• Car allowances or company vehicles;
• Training and development opportunities; and
• Cellphone or data allowances.

Be specific about when benefits commence (some may only start after probation) and what happens to benefits on termination.

Common Mistakes to Avoid in Employment Contracts

Using Outdated Template Contracts

Labour law changes regularly. That contract you downloaded in 2015 is probably no longer compliant. Annual updates to earnings thresholds, minimum wages, and legislative amendments mean you need to keep your templates current.

Conflicting with Labour Legislation

You can’t contract out of an employee’s basic rights. Any clause that provides less than the statutory minimum is automatically void. Courts will replace the invalid clause with the legal minimum, which might not be what you intended.

Being Too Vague

Contracts that use phrases like “duties as assigned” or “salary as agreed” are recipes for disputes. Be specific about expectations, terms, and conditions.

Forgetting About Collective Agreements

If your business falls within a sector covered by a bargaining council, you must comply with sectoral determinations or collective agreements. These may prescribe minimum wages and conditions above the BCEA minimums.

Overly Restrictive Restraints

Including a five-year countrywide restraint for a junior employee will likely be declared unenforceable. Courts favour employees when restraints are unreasonable and inherently unfair.

Special Considerations for Different Employment Types

Fixed-Term Contracts

If you’re hiring someone on a fixed-term basis, remember:

• You must have a valid reason for using a fixed-term contract (specific project, temporary replacement, seasonal work).
• Employees on fixed-term contracts that last longer than three months have the same rights as permanent employees.
• Successive fixed-term contracts exceeding three months create an expectation of renewal over time and give the impression of permanence.

Part-Time Employees

Part-time employees are entitled to the same benefits as full-time staff on a pro-rata basis. Make sure your contract clearly states:

• Working days and hours;
• How leave and benefits are calculated proportionally; and
• Whether there’s flexibility to increase or decrease hours.

Independent Contractors vs Employees

This is a big one. Just because you call someone a contractor doesn’t make them one. South African labour law looks at the substance of the relationship, not just the label.

True independent contractors:

• Have control over how, when, and where they work;
• Can work for multiple clients;
• Provide their own tools and equipment;
• Bear the commercial risk of their work; and
• Invoice for services rendered.

If someone works like an employee (fixed hours, under supervision, using your equipment), they’re probably an employee regardless of what your contract says. Misclassifying employees as contractors can result in hefty penalties and back payment of benefits if brought before the relevant tribunal.

Getting Your Employment Contract Right

Creating compliant employment contracts doesn’t have to be complicated, but it does require attention to detail and an understanding of South African labour law. Here’s a practical approach:

1. Start with a solid template that’s been reviewed by a labour law attorney.
2. Customise it for the specific role and your business needs.
3. Review it regularly to ensure compliance with any legislative changes and updates.
4. Have new contracts reviewed by a professional before using them.
5. Keep records of signed contracts and any amendments.

What Happens After Signing?

Once both parties have signed the contract:

• Provide the employee with an original signed copy (keep one for your records).
• Issue a written appointment letter if not already included.
• Ensure the employee receives copies of your policies and procedures.
• Add the employee to your payroll and UIF registration.
• Complete tax registration (IRP5, EMP201 returns).

Remember that the employment contract is a living document. If terms change (salary increases, role changes, relocation), these should be documented through written amendments signed by both parties.

When to Seek Professional Help

Whilst standard employment contracts for straightforward positions can often be handled with good templates, consider getting professional assistance for:

• Senior executive contracts with complex packages and restraints;
• Highly technical roles with specific intellectual property concerns;
• Sales positions with commission structures;
• Situations involving bargaining councils or unions;
• Contracts for employees transferring from another company; and
• Any unusual or non-standard arrangements.

A labour law attorney’s fees are minimal compared to the cost of a CCMA case or unfair dismissal claim arising from a poorly drafted contract.

Final Thoughts

Getting your employment contracts right from the start sets the foundation for a positive, productive employment relationship. A comprehensive, compliant contract protects employers and your employees, providing clarity on rights, responsibilities, and expectations.

South African labour law strongly favours employees, which means employers need to be extra diligent about compliance. But don’t let that intimidate you. With the right approach and proper documentation, you can confidently build your team whilst protecting your business interests.

Remember: the best employment contract is one that’s clear, fair, compliant with legislation, and specific to your business needs. Take the time to get it right, and you’ll save yourself significant trouble down the line.

Need help drafting or reviewing employment contracts? Consult with a qualified labour law attorney to ensure full compliance with South African employment legislation.

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