The importance of employment contracts

An issue popping up on the radar of labour disputes at the CCMA is a lack of employment contracts. There appears to be an odd belief among employers that if a contract is not in writing, it does not exist and therefor they can basically do what works for them without repercussions or recourse for employees.

This scenario turns into a nightmare landscape all too often for the erstwhile employer. According to the Basic Conditions of Employment Act (BCEA) it is required by law that every employer provides a contract of employment to the employee on no later than the first day of work.

The contract of employment is an important document. It defines the terms of service of the employment relationship and regulates the terms and conditions of employment. It sets out the entitlements and benefits of the employee in terms of labour legislation and company policy.

The employment contract also regulates the behaviour of employees at work since all company policies and procedures – including the crucial disciplinary code – form part of the contract. Without a contract in place, it can be an extremely difficult task to act against employees as the employee can, likely successfully, claim that he was never informed of the policy s/he transgressed and has the right to conclude that it does not exist.

There are various types of employment contract such as permanent, fixed term, probation and project employment. At this point it is important to note that the current trend of engaging “independent contractors” to performing continuous tasks as part of an organization is not covered in these types as the law will apply its own standards to determine the relationship between an employer and an employee irrespective of the wording of the contract.

A key difference between an independent contractor and an employee, in law, is that the object of a contract with an employee is for the rendering of personal service by the employee. A contract with an independent contractor is to produce a specified result and may be delivered through others (contracted to him/her.)

In terms of both the permanent and fixed term contract, both start with a written offer of employment, which the employee then accepts in writing. The contract is then entered. The only difference here is that a permanent contract has no end date, but a fixed term contract will stipulate a date ending the contract and the employment relationship.

The project employment contract may be closest to that of engaging the services of an independent contractor. Basically, a project contract of employment is in fact a fixed term (or temporary) contract of employment. Here, the difference is that rather than stipulating a specific starting and end date (unless the project runs according to time) the project contract of employment engages an employee to complete a specific project where the end date is unknown, but does stipulate that the contract will end when the project is complete.

A probationary contract is offered where an employer wishes to test whether an employee will be suitable to task within a certain time frame – usually three months. If an employee is unable to meet the requirements stipulated, the employment relationship is ended. However, employers must affect this termination in compliance with the Labour Relations Act (LRA), schedule 8 of the Code of Good Practice.

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