Employee vs Labour-Only Subcontractor

Last updated 21 Jun 2026Reviewed 21 Jun 2026

Calling a worker a subbie does not make them one. South African law tests the substance of the relationship, not the label on the invoice. For workers earning below the BCEA earnings threshold (R269,600.90 a year from 1 May 2026), section 200A of the Labour Relations Act and section 83A of the BCEA presume an employment relationship if any one of seven factors is present, and the burden is on you to prove otherwise. SARS runs its own separate test under the Fourth Schedule to the Income Tax Act.

So there are really two different things being compared: a genuine independent subcontractor with their own business, and an employee dressed up as a subbie. The table sets out the rights, the deductions, the legal presumption and the reclassification risk for each. Get it wrong and you face back-payment of PAYE, UIF, leave and overtime, plus a CCMA claim. Editorial guidance only, not legal advice. SiteKiln takes no referral fees.

At a glance

Option	BCEA rights	UIF and COIDA	Who deducts tax	LRA s200A presumption	CCMA risk	Reclassification risk
Employee	Full BCEA rights	You pay UIF and COIDA	You deduct PAYE	Presumed employee below threshold	Normal employment risk	Already correctly classified
Genuine subcontractor	No BCEA rights	Their own responsibility	They pay their own tax	No presumption if genuinely independent	Low if genuinely independent	Risk if relationship looks like employment

Compared in detail

Employee

Best for: Workers under your control and hours

Pros

Clear, lawful relationship with defined rights and obligations
Full BCEA protections: leave, notice, overtime and sick pay where applicable
You contribute UIF and register for COIDA, covering injury on duty

Cons

You must deduct and remit PAYE and UIF and keep payroll records
Dismissal must follow fair procedure or the CCMA can find against you
More fixed cost and admin than paying an invoice

Genuine subcontractor

Best for: Independent businesses with own clients

Pros

They invoice you and handle their own tax and registrations
No BCEA leave, notice or overtime obligation to them
No UIF or PAYE deduction by you; they carry their own risk and tools

Cons

Only genuine if they are truly independent (own business, own tools, multiple clients)
If they fail the SARS Fourth Schedule test you may have to withhold like an employer
Get it wrong and the cost lands on you, not them

Our pick

Our position is blunt: only treat someone as a subcontractor if they are genuinely running their own business. A genuine subcontractor has their own registrations, supplies their own tools and materials, controls how and when the work is done, carries their own risk, and works for more than one client. If that is true, they invoice you, they handle their own tax, and BCEA, UIF and COIDA do not apply to them.

It depends on the seven-factor test. Below the BCEA earnings threshold, the law presumes employment if even one factor is present: you control their hours or methods, they work only for you, they are part of your organisation, they get paid a regular wage, or they depend on you economically. Above the threshold the statutory presumption falls away, but the common-law dominant impression test still applies, and SARS applies its own Fourth Schedule test (mainly working at your premises under your control, unless they employ three or more unconnected full-time staff). Passing one test does not mean passing the others. If SARS or the CCMA reclassifies, you become the employer retrospectively, owing the back PAYE, UIF, leave and overtime and facing the CCMA. When the relationship looks like employment, treat the person as an employee from day one; the invoice book will not save you.

SiteKiln does not receive referral fees, affiliate commission or kickbacks from any provider listed. This is editorial content. If a better option exists, tell us at hello@kilnguides.co.uk.

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