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Key Risk Factors Several practical factors can blur the lines between an independent contractor and a permanent employee. The more integrated a contractor becomes in the day-to-day operations of a company, the more likely it is that they will be seen as an employee under the law. 1. Control & Supervision: If the company dictates the contractor’s working hours, monitors their performance like an employee, or requires adherence to internal HR policies, the relationship mimics employment. 2. Integration: If a contractor attends internal team meetings, uses company assets (like laptops and offices), or is featured in internal communications, they are functionally embedded in the organisation. 3. Ongoing Work: Contractors initially hired for a 3-month project but renewed indefinitely may become de facto permanent employees. 4. Economic Dependence: Contractors who derive 90% or more of their income from one client may be seen as economically dependent, undermining their claim to independence. Legal Consequences of Misclassification Employers who misclassify workers
risk more than administrative inconvenience - they face legal, financial, and reputational consequences. If a contractor is deemed an employee, they gain full rights under the LRA and the Basic Conditions of Employment Act (BCEA). This includes: The right not to be unfairly dismissed, including access to the CCMA for dispute resolution Statutory leave entitlements such as paid annual leave, sick leave, and family responsibility leave Job security protections, including severance pay if terminated for operational reasons Employer obligations to contribute to UIF and possibly the Skills Development Levy Additionally, SARS may impose penalties on employers who fail to withhold PAYE taxes from misclassified workers. In many cases, back-pay claims for benefits can be substantial, especially where a worker has been engaged as a contractor for several years. Proceed with Caution: Independent Contractor vs. Employee Checklist To protect your organisation from misclassification risks, ask the following: Is the work truly temporary or
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GLOBAL PAYROLL MAGAZINE ISSUE 11
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