Contracts of Employment

Understanding the Basics

Technically the Basic Conditions of Employment Act (BCEA) does not say you must have contracts of employment. That being said, the BCEA does say that an employer must provide specific information in writing (see Section 29), this however, is not applicable to all employers.

When?

One of the most frequently heard statements about contracts of employments is: They don’t have contracts because they are casual workers. This statement is unfortunately incorrect. The only time an employee does not have to receive information in writing (as per Section 29), is when the employee works less than 24 hours in a month. As soon as an employee works more than 24 hours in a month, they become entitled to most of the provisions of the BCEA and they need to be registered for UIF contributions.

What happens when there is no contract of employment?

Here are a few things that can happen:

1. If an employer has not provided an employee with any information in writing, the Department of Labour can compel an employer to do so (compliance order). Except if the employee works less than 24 hours in a month.
2. The provisions of the Basic Conditions of Employment Act and all other relevant legislation automatically become part of the terms and conditions of employment (referred to as implied terms). This will happen irrespective of whether you have a written contract of employment, but the difference with a contract is you can apply the legislation appropriately to suit your business context.
3. When there is a dispute about an agreement between the employer and the employee, the outcome can be negative for either party, or both. This is because the agreement will be determined based on the behaviours of the parties (referred to as tacit terms), which when assessed by a third party, may not accurately reflect the agreement.
4. Ambiguity. If the parties lack clarity, it could cause differing expectations which may result in unnecessary conflict between the parties.
5. There are specific provisions in the BCEA that require a written agreement between the parties. Without this agreement, the specific terms and conditions cannot be enforced and could be costly. E.g. Reducing an employee’s lunch time to 30 mins or not having lunch on days when an employee works less than 6 hours (see Section 14).
6. A fixed-term contract of employment must be in writing. This means that should the employer terminate the relationship with the employee, without a written fixed term contract that specifies the termination date and the reason for the fixed term contract (see LRA Section 198B for justifiable reasons for a fixed term contract), it will constitute as an unfair dismissal. This is not applicable to employees earning in excess of the earnings threshold (currently R205 433.30 per year CTC).

Common Pitfalls around Contracts of Employment:

1. Using generic templates: A contract of employment should always be tailored for your business. With generic templates you might bind yourself to terms and conditions that you were unaware of that do not further your business interests. Moreover, your integrity may be questioned if the actual procedures and policies of the organisation are not accurately reflected in the contracts.
2. Rushed contracts: Too often employers are faced with a situation where they want to enforce a term or condition of the contract only to discover the contract was drafted with common errors related to rushed work. E.g. “as per clause 17” where the contract does not have a clause 17.  
3. Not having sufficient information about the implementation of clauses: Here are some examples of this: Contracts include a termination clause that says you can terminate the employment relationship by giving notice (a specified period of time). However, this can only occur for a fair reason and after a fair procedure has been followed (see LRA for guidelines on the procedures). Moreover, contracts often create the misperception that you can simply not appoint an individual after a probation period. Both of the scenarios will constitute as unfair dismissals if implemented without following the correct procedures and without a fair reason for termination.
4. Clauses that are contradictory to the legislation: Two parties can never agree to something that is contrary to the legislation and any clause to that effect will be void. The most frequently seen example is a notice period of 24 hours. This is not compliant with the BCEA (see Section 37).
5. Overly complex fancy legal wording: The contract of employment is used to specify the terms and conditions of the relationship. It assists both parties to know what is expected of them. If a contract is overly complex and not understood by one or both parties, the contract will lose its meaning.

For company specific contracts of employment or to review your current contracts of employment contact us admin@employmentrelations.co.za