[Question] Employing Somebody - What to know?

[Mark Atkinson]

So the time has come for Red Giant to make its first hire. This is both an exciting and daunting time as the business starts to find its feet and expands.

I would basically like to know from those who already employ full time employees - what do I need to know?

Here are the facts:

1. The employee in question is working with us while he learns our trade and, as such, won't be earning that much.
2. He will be below the tax threshold - so I believe I don't need to pay PAYE on his behalf.
3. I want to employ him with as little admin involved as possible.
4. We will employ him on a 1 month renewable contract. Don't want to overcommit.

So, some questions:

1. Is there a standard employment contract that I should use? If not, are there any particular clauses that should be included that have helped you!
2. Is there any way I can avoid having to pay UIF on the employee's behalf?
3. Do I need to register the employee somewhere? (e.g. UIF) - if so, where and how?
4. What documentation should I keep on record for the employee?
5. Anything else I missed out? (Other compulsory deductions/contributions etc.)

Apologies, I am a complete newbie when it comes to employment. I think I know the answers to most of my questions but some confirmation would be great.

Thanks in advance.

[Justloadit]

Hi Mark,

My book keeper does all the necessary paper work on my behalf, so can not help you there.

One thing though, and I stand to be corrected here, you can only renew a contract with out a break for no more than 2 times, in which case the person automatically becomes a full time employee. So be extra careful when drawing up renewable contracts.

[Mark Atkinson]

Thanks Justloadit. I'm sure somebody else will help on the bookkeeping side of things.

That's a very interesting point regarding renewable contracts. Can anybody confirm or elaborate on that?

[wynn]

Keep him as a contractor, he just submits an invoice at the end of every month and you pay him.

[Mark Atkinson]

Keep him as a contractor, he just submits an invoice at the end of every month and you pay him.

I'm pretty sure that this will result in him being deemed to be a permanent employee - from a tax perspective at the very least. What are the implications of that?

[Blurock]

These are only my personal views and needs to be confirmed by our HR fundis.

If you intend employing the person with a renewable contract, one month will be too short as you can only renew twice. Six months may be better. If he does not perform in terms of the contract you can cancel the contract, which should also contain a service level agreement. (if you pay a contractor a fixed amount monthly, he is deemed an employee in terms of income tax and you will have to deduct PAYE)

However, if you intend training him for a period, you can put him on probation for 3 months before agreeing to a full time employment only once he has completed his training a t a certain standard.

Can the HR professionals help us out on this one?

[Mike C]

As I understand it, the definition of an Independent contractor is that he/she does not spend more than 50% at the Employer's premises, does not use the Employers tools and works without supervision (meaning leave, setting targets etc).

If they do not fit the definition then they become employees and you will have to pay all the legal requirements.

[Dave A]

Here's an idea I've toyed with at times -

Is it possible this "employment" could be construed as providing workplace experience? (at least initially).
Has the prospect done (or in the process of doing) a related training course?

[Mark Atkinson]

It could be construed as such, but he there is no real "training course" for what we do. It's basically a whole bunch of reading and online tutorials. If that counts, then yes, he is in the process of doing a related training course.

The best way to learn in our line of work is to actually work and learn from others around you.

[AmithS]

With regards to UIF as far as I understand from my accountant that handles my fast food store, all staff contract or permanent have to be registered for UIF. You as the business cc\pty will have to register for PAYE\UIF\SDL (even if you not paying PAYE & SDL it all goes on 1 form) and basically make a UIF submission every month (1% you pay, 1% employee pays deducted by you from employee salary).

The reason why most accountants do the UIF submissions is basically because it falls under SARS as far as I understand! (My accountant does not handle my employee contracts only the UIF\PAYE\SDL submissions)

Hope this helps with the UIF question!

[AmithS]

As far as documentation goes, keep everything,

examples,
1. employment contract
2. anything discussed by employee and yourself example training aspects
3. Leave forms (make a simple leave form for you and employee to sign)
4. Time sheets for hours worked on specific projects to keep track of project costs and possibly salary
5. IMPORTANT - problems you may experience with employee example rules\tasks\orders not followed and corrective action taken (important in the case of disputes)
Depending on the level of employee i.e. trainee vs. professional maybe even consider written warning documents to cover 5 (I would take it easy on a trainee thou )
6. Any company notices that the employee needs to sign
7. 1 thing that I find very useful and might be good with a trainee\1st time person is a code of conduct, which basically covers the way of working ethic the employee needs to follow (e.g. no chewing or eating in front of customers, ensuring leave is signed before going on leave, inform you when sick and bring a doctors note and other things that will be more specific to your industry which you pick up as time goes)

Hope this helps abit. Please feel free to ask if you need any more info!

[Mark Atkinson]

Thanks Amith. I guess I need to register as an employer with SARS then and start drawing up all those documents!

[Dave A]

It could be construed as such, but he there is no real "training course" for what we do.

There's a whole complex deal around skills training, and provision for employers giving workplace experience. You don't employ the "student", but you can pay them a living allowance which doesn't get hit by all the employment related taxes.

I'm not sure of the details though. There might be some fine print to qualify for this - and there'll also be a time limit I expect.

[Mark Atkinson]

There's a whole complex deal around skills training, and provision for employers giving workplace experience. You don't employ the "student", but you can pay them a living allowance which doesn't get hit by all the employment related taxes.

I'm not sure of the details though. There might be some fine print to qualify for this - and there'll also be a time limit I expect.

Sounds like it'll be less hassle to simply bite the bullet and register + pay the employment taxes over.

[Dave A]

And you are planning to grow, so registering for payroll taxes is coming sooner or later.

It was just a side thought, on the off chance that someone might be familiar with the details as much as anything else.