The short answer
Engaging someone in South Africa as a contractor is quick, cheap and requires no local registration. It is also the route most likely to be re-characterised later, because South African law does not take the contract at face value.
Under section 200A of the Labour Relations Act (mirrored in section 83A of the BCEA), a person is presumed to be an employee if any one of seven factors is present. Not all seven. One.
Most UK businesses hiring a full-time remote worker in South Africa satisfy four or five of them on day one.
The seven factors
The presumption applies where any of the following is true:
- The manner in which the person works is subject to your control or direction
- Their hours of work are subject to your control or direction
- They form part of your organisation
- They have worked for you an average of at least 40 hours a month over the last three months
- They are economically dependent on you
- They are provided with their tools of trade or equipment by you
- They only work for, or render services to, one person
Run a typical arrangement against that list. You hired someone to work your hours, in your systems, on your laptop, as part of your team, full time, and they have no other clients. That is not one factor. That is six.
The earnings threshold, and why it is not the reassurance it looks like
The statutory presumption applies to people earning below the BCEA earnings threshold — reported at R254,371.67 per annum at the time of writing, and adjusted annually by the Minister of Employment and Labour. Many skilled roles a UK business hires sit above that line, so the automatic presumption does not bite.
That is where the reassurance ends. Where someone earns above the threshold, the same seven factors are still used as a guide to determine whether the relationship is in substance employment or genuine self-employment. You lose the automatic presumption; you do not lose the test.
The practical effect is that a higher salary changes who carries the burden of proof, not whether the arrangement is what you called it. South African tribunals look at the reality of the relationship, and the CCMA has a well-developed body of decisions on exactly this question.
What goes wrong, and who pays
Re-characterisation is not a paperwork correction. If a contractor is found to have been an employee:
- Unpaid PAYE, UIF and SDL become payable, with interest and penalties, for the whole period
- Statutory entitlements crystallise retrospectively — annual leave, sick leave, notice pay
- Unfair dismissal protection applies, so ending the arrangement becomes a dismissal that must be substantively and procedurally fair
- CCMA jurisdiction attaches, and the person can refer a dispute
The exposure sits with the engaging business. A clause in the contract stating that the person is an independent contractor carries almost no weight against the factual position — that is the entire design of section 200A.
The three routes, honestly compared
| Contractor | Own entity | Employer of Record | |
|---|---|---|---|
| Setup time | Days | Weeks to months | Days to weeks |
| Local registration | None | CIPC and SARS | None for you |
| Misclassification exposure | High | None | None |
| Who is the employer | Nobody, in theory | You | The EOR |
| Sensible for | Genuinely project-based work | Ten or more hires | First one to ten hires |
When a contractor arrangement is genuinely fine
This is not an argument that contractors are always wrong. The model holds up where the substance matches the label:
- A defined deliverable or project rather than ongoing capacity
- The person sets their own hours and method
- They use their own equipment
- They have other clients and are not economically dependent on you
- Work is genuinely time-limited
A specialist doing a fixed-scope piece of work over six weeks is a contractor. Someone doing your customer support every weekday is an employee, whatever the agreement says.
Where an EOR changes the analysis
An Employer of Record removes the question rather than answering it. The employee is genuinely employed — by the EOR — on a South African contract, with PAYE, UIF and SDL running under the EOR’s own SARS registration. There is no classification to challenge because nobody is claiming the person is self-employed.
It also resolves the awkward middle case: you want this person full time and integrated, which is exactly what makes a contractor arrangement fragile. See our guide to Employer of Record in South Africa for how the model works, and the cost and fee breakdown for what it runs to.
Frequently asked questions
We have used a contractor in South Africa for two years. What now?
Take advice before changing anything, because how you transition matters. Converting to employment via an EOR is common, but the historical period does not disappear, and how it is handled affects your exposure.
Does a South African contractor invoice us with VAT?
Only if they are VAT-registered, which depends on their turnover. Being VAT-registered is a point in favour of genuine self-employment but is not decisive on its own.
Does UK IR35 apply?
IR35 concerns UK tax on intermediaries and does not govern whether South African labour law treats someone as an employee. Both regimes can be relevant to the same arrangement, and they ask different questions. Our legal hiring guide covers the UK-side considerations.
Can we just put “independent contractor” in the agreement?
You can, and it will not decide the outcome. Section 200A exists precisely because labels were being used to avoid statutory protection.
Sources
- Labour Relations Act 66 of 1995, section 200A; Basic Conditions of Employment Act, section 83A
- Cliffe Dekker Hofmeyr — presumption of employment below threshold
- Labour Guide South Africa — employee status and the seven factors
- CCMA — Employee v Independent Contractor information sheet
This guide is general information, not legal advice. The BCEA earnings threshold is adjusted annually and the figure above reflects the most recent published amount at the time of writing. Classification is fact-specific — take advice from a South African labour law practitioner on your arrangement.