Independent Contractors

Independent Contractors

Payroll / eTorQue, Tax

The Organisation, from time to time, has to make use of the services of an Independent Contractor for specific tasks / projects.

Provisions and Constraints

The following factors may not be present in terms of Section 200A of the Labour Relations Act, no 66 of 1995 (as amended) when determining whether a person is an Independent Contractor or an employee:

  1. The manner in which the person works is subject to the control or direction of another person;
  2. The person’s hours of work are subject to the control and direction of another person;
  3. In the case of a person who works for an organisation, the person forms part of that organisation;
  4. The person has worked for the organisation for an average of at least 40 hrs/month, for the last 3 months;
  5. The person is economically dependent on the other person for whom he/she works or renders services;
  6. The person is provided with tools of trade or work equipment by the organisation; and
  7. The person only works for or renders services to one person/organisation.

The above does not apply to any person who earns in excess of the amount determined by the Minister of Labour in terms of Section 6(3) of the Basic Conditions of Employment Act.

It is important to note that, when making a determination as to whether a person / company is an independent contractor or an employee, it is imperative to consider SARS Interpretation Notes 35 and 17. The application of the statutory and common law tests reflected in these Interpretation Notes will determine whether Employees Tax need be deducted and how payments should be coded for payroll reporting purposes.