Independent contractors are individuals, companies or businesses who perform work for or provide services to another entity under agreed terms. They are in fact service providers and are not considered to be employees. Independent contractors may for example decide on their own working hours, how they work and are not subject to the policies of the entity who they contract with. They are generally responsible to use their own tools, equipment and materials and must attend to their own tax compliance. They generally provide their services to different businesses or people at the same time.
Independent contractors are not covered by employment legislation such as the Basic Conditions of Employment Act (BCEA). Their working relationship is governed by contract law and the terms are agreed on in their service level agreements or contracts – and these can also be verbal agreements. Independent contractors invoice their clients for the work done and are not part of the payroll.
Independent contractors are not entitled to the same benefits as employees, such as paid annual leave, paid sick leave or paid family responsibility leave and are not entitled to be paid for overtime worked or be paid for public holidays or Sundays worked.
The contract terminates on completion of the relevant work or task as specified in the contract or upon delivery of the specified and required result. If the independent contractor is an individual person, the contract will terminate at the death of the contractor.
There may be situations in law where the independent contractor is considered to be an employee, for e.g. if the independent contractor only works for one client or if they obtain more than 80% of their income from a single client. Such situations may have both employment law- and tax implications.
It is advisable to seek Labour Law advice for contractual arrangements when determining employment classification.