HRTorQue Outsourcing
HRTorQue Reporter
October 2018
 
HRTorQue Reporter Archive
Table of Contents
1. Legislative Updates - Recent Changes
2. HR Indaba October 2018 - Key Topics and Focus Areas in HR
3. Fixed Term Contractors - When can an employee reasonably be classified as an FTC?
4. Independent Contractors - Employers Beware
5. Contact HRTorQue

Should you require any further detail on any of these topics, please feel free to contact us.
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1. Legislative Updates - Recent Changes
Author: Jonathan Aitken
1.    Binding class ruling (BCR 065) that an intra-fund transfer of funds from an employer's surplus account to the credit of an individual member is a taxable fringe benefit. This relates to post-retirement medical aid lump sum benefits on retirement (including ill-health retirement) or death.
   
2. Issued in August - extension of bargaining council agreements to non-parties for the following bargaining councils:
a. Motor Industry Bargaining Council
b. Metal and Engineering Industries Bargaining Council
c. Furniture Manufacturing Industry KZN
d. National Bargaining Council for Electrical Industry of South Africa
e. South African Road Passenger Bargaining Council
   
3. Labour Relations Act - official list of accredited Bargaining Councils by the CCMA (GeN 508)
   
4. Occupational Health & Safety - Construction - application for construction work permit for grade 7, 8 or 9 (Construction Industry Development Board)for periods exceeding 365 days or 3,600 man-hours.
   
5. Compensation for Occupational Industry and Diseases Act - definition of active vs inactive employers.
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2. Trends in HR - HR Indaba October 2018
Author: Jonathan Aitken
At the recent HR Indaba in Johannesburg a number of key trends in HR were highlighted during the interactive sessions. For interest, some of the key trends and topics in HR that were discussed, included:

•  Employee and Team Performance
    -  Unlocking potential
    -  Employee engagement
    -  The value of international experience
    -  Improving talent management
    -  Culture - recipe for success
    -  Powering company success through employee insights
    -  Ergonomix - maximise productivity while reducing discomfort, fatigue and injury
    -  Understanding the impact of "personality"
    -  From potential to performance
    -  Reasonable accommodation for people living with disabilities
•  Leadership and Development
    -  How leaders cope with extreme pressure
    -  How to be more relevant
    -  Ultimate partnership - CEO and Head of HR
    -  Entrepreneurial spirit
    -  Working with customers to solve problems
•  HR Teams
    -  Building future proof HR teams
    -  The professionalisation of HR
•  HR and Finance Together
    -  Why HR and Finance are critical for one another
•  Strategy
    -  How to improve your diversity and inclusion strategy
    -  The rise of the social enterprise
    -  Being responsive to change
    -  People development linked to business performance initiatives
    -  HR for Africa
    -  Creating innovative organisations
    -  How to find scarce skills - accounting and finance
•  Process
    -  Digitally transform your HR document processes
    -  Leveraging HR processes in a complex legal ecosystem
    -  Get relief from your HR administrative burden
•  Personal Development
    -  Unlocking your true potential
    -  Work like you live - intuitively, collaboratively and in real-time
•  Technology and HR
    -  Digital disruption in recruiting
    -  Improved productivity with employee behavioural change through financial
       education
    -  Developments in portable sit/stand office layouts
    -  Social media and the workplace
    -  How HR can help with digital transformation
    -  Populating your organisation in the face of rapidly changing technology
    -  The impact of Artificial Intelligence
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3. Fixed Term Contractors
Author: Nosisa Sibanda

In what circumstances can an employee be classified as an FTC?


In the Labour Relations Act "a fixed term contract means a contract of employment which terminates on the occurrence of a specified event, the completion of a specified task or project, or on a fixed date other than an employee's normal or agreed-upon retirement age."

The entering into of a fixed-term contract usually occurs in the following circumstances, where the fixed term contractor:
•   Is replacing another employee who is temporarily absent from work.
• Is employed on account of a temporary increase in the volume of work which is not expected to endure beyond twelve months.
• Is a student or recent graduate employed for the purpose of being trained or gaining work experience to enter a job or profession.
• Is employed to work exclusively on a specific project which has a limited or defined duration.
• Is a non-citizen who has been granted a work permit for a defined period of time.
• Is employed to perform seasonal work.
• Is employed for the purposes of an official public works scheme or similar public job creation scheme.
• Is employed in a position funded by an external source for a limited period.
• Has reached the normal or agreed-upon retirement age applicable in the employer's business.

There is a relatively common practice in South Africa for employers to rollover fixed term contracts on a regular basis. Where this is done employers should consider whether this moves a fixed term contractor more into the definition of permanent employee and what this might mean to the benefits to be provided to the contractor.
 
As a reminder, section 200A of the Labour Relations Act sets out what constitutes an employee as opposed to a fixed term contractor:
 
Until the contrary is proved, a person, who works for or renders services to any other person, is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present:
•   The manner in which the person works is subject to the control or direction of another person;
• The person's hours of work are subject to the control or direction of another person;
• In the case of a person who works for an organisation, the person forms part of that organisation;
• The person has worked for that other person for an average of at least 40 hours per month over the last three months;
• The person is economically dependent on the other person for whom he or she works or renders services;
• The person is provided with tools of trade or work equipment by the other person; or
• The person only works for or renders services to one person.
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4. Independent Contractors - Employers Beware
Author: Dave Beattie
A common error made by HR departments is to assume that independent contractors are truly independent and that no PAYE needs to be deducted from payments made to these individuals. This often happens because the individuals in question previously worked for the organisation, have slipped into a consultants role (usually on retirement) and HR haven't the time to check whether they are truly independent both initially and on an ongoing basis. HR should however be aware that should they be audited by SARS any "independent contractors" will be reviewed and if they are not independent then SARS will require the employer to deduct PAYE (and penalties and interest for historic non-payment would apply).

Independent contractors earn income for the services that they render, and SARS made changes to the Fourth Schedule of the Income Tax Act in 2000 to bring these individuals into the PAYE net if certain criteria are satisfied (please see Interpretation Notes 17 and 35) to protect the fiscus as far as possible. Note, while labour law Independent contractors are not necessarily employees for UIF (as the definition is linked to labour law), they may very well be for PAYE purposes.

Simply, in terms of interpretation note 17 a statutory test is first carried out to see whether an independent contractor is actually independent and thereafter a common law test is applied.

Statutory Test:

This test has two parts and the second part takes preference:
 
1. If part one is positive then the person is deemed "not" to be carrying on an independent trade and therefore any earnings are remuneration and PAYE should be deducted. The first test has two sub-parts both of which need to apply for the person not to be independent:
   
1.    The first element is that the services or duties are required to be performed mainly (which is a quantitative measure of more than 50%) at the premises of the client; and
   
2. The second element of the test is whether the worker is subject to the -
 
(i)    control of any other person as to the manner that the worker's duties are or will be performed, or as to the hours of work; or
(ii) supervision of any other person as to the manner that the worker's duties are or will be performed, or as to the hours of work

2. Second Test
A person who employs three or more full-time employees, who are not connected persons in relation to him or her and are engaged in his or her business throughout the particular year of assessment, is deemed to be carrying on a trade independently.

So, if a person meets the second part then they will be an independent contractor even if they fail the first test.

Common Law Tests:
Assuming the statutory tests are not applicable then the common law test can be applied to see whether the person is independent. These tests are not a checklist and hence are not conclusive. They rely on the definition of an employee in section 200A of the Labour Relation Act. If the person is an employee per these definitions then payments made to them should be treated as remuneration and PAYE should be deducted. As a reminder, s200A of the Labour Relations Act defines an employee as:

Until the contrary is proved, a person, who works for or renders services to any other person, is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present:
•   The manner in which the person works is subject to the control or direction of another person;
• The person's hours of work are subject to the control or direction of another person;
• In the case of a person who works for an organisation, the person forms part of that organisation;
• The person has worked for that other person for an average of at least 40 hours per month over the last three months;
• The person is economically dependent on the other person for whom he or she works or renders services;
• The person is provided with tools of trade or work equipment by the other person; or
• The person only works for or renders services to one person.
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5. Contact HRTorQue
Durban
Phone: 031 564 1155  •  Email: [email protected]  •  Website: www.hrtorque.co.za
Address: 163 Umhlanga Rocks Drive, Durban North, KwaZulu-Natal
 
Johannesburg
Ground Floor, West Wing, 6 Kikuyu Road, Sunninghill, 2191
 
Cape Town Office
Ground Floor, Liesbeek House, River Park, Gloucester Road, Mowbray, Cape Town, 7700

Bloemfontein Office
62 Kellner Street, Westdene, Bloemfontein

East London
24 Pearce and Tecoma Street, Berea, East London

Port Elizabeth
280 Cape Road, Newton Park, Port Elizabeth

Polokwane
125 Marshall Street, Polokwane

Nelspruit
Promenade Centre, First Floor, Suite 11A, Nelspruit		 FB
 
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