Employee or Independent Contractor? The Tests That Decide

Calling a worker a subbie does not make them one. If they earn below the BCEA earnings threshold (R269,600.90 a year from 1 May 2026) and any one of seven listed factors is present, the law presumes they are your employee, and the burden is on you to prove otherwise. Get it wrong and you face back-payment of PAYE, UIF, leave and overtime, plus a CCMA claim, while the worker loses years of protections they were entitled to.‍‌​‌‌​‌​‌‌​‌‌​​​‌​‌‌​​​​‌‌​‌​​‌​‍

The statutory presumption (section 200A LRA / section 83A BCEA)

For workers below the earnings threshold, the law presumes an employment relationship if any one of these is true:

• The manner or hours of work are subject to another person's control or direction.
• The worker forms part of the organisation.
• The worker has averaged at least 40 hours a month for that person over the last 3 months.
• The worker is economically dependent on that person.
• The worker's tools or equipment are provided by the other person.
• The worker only works for that one person.

One factor triggers the presumption. The employer must then rebut it with clear evidence of genuine independence. Above the threshold the presumption falls away, but the common-law test below still applies.

The dominant impression test

Courts weigh all the factors together rather than ticking one box; the Labour Appeal Court's approach in SABC v McKenzie is the touchstone. Strong signs of an employee:

• The client controls how the work is done, not just the end result.
• The client sets the working hours.
• The worker is integrated into the client's organisation.
• The work must be done personally; no substitute can be sent.
• The client provides the tools and equipment.
• There is only one client, and the contract ends on the worker's death.

Strong signs of a genuine independent contractor:

• The contractor employs their own staff and can delegate the work.
• They carry the risk of profit and loss, and fix defects at their own cost.
• They work for several clients at the same time.
• They supply their own tools, bakkie and insurance.
• They are paid for a result (a project price), not for hours on the clock.

The SARS two-part test

SARS applies its own statutory test under the Fourth Schedule to the Income Tax Act before the dominant impression test (see www.sars.gov.za):

• Part 1 (deems the person an employee): the services are performed mainly (more than 50%) at the client's premises AND the worker is subject to supervision or control over how the work is done or over working hours.
• Part 2 (overrides Part 1): the worker employs 3 or more full-time, non-connected employees in the business throughout the year of assessment.

If Part 1 is met and Part 2 is not, PAYE must be withheld, whatever the contract calls the person. Related entity-level rules catch one-person companies: see Labour brokers and the deeming rule for the personal service provider trap.

Structuring a genuine subcontract

What a real subcontract arrangement has:

• A separate registered business on the subbie's side (Pty Ltd, CC or sole proprietor with their own SARS registrations).
• A written subcontract that specifies a deliverable and a price, not hours.
• Multiple clients, the subbie's own tools and transport, and their own public liability insurance.
• A genuine right to send another qualified person to do the work.

What it should not have:

• You setting their daily working hours.
• You providing all the tools.
• The subbie attending your staff meetings and wearing your branding as if on staff.
• Payment purely by the hour with no result-based element, terminable like a job.

A contract label cannot override reality. If the relationship works like employment on the ground, the CCMA, the Department of Employment and Labour and SARS will all treat it as employment.

Worked example: painter, subbie or employee?

Lebo works for one painting contractor, David. David tells Lebo to arrive at 07:00, provides all the brushes and paint, instructs Lebo exactly how to prepare surfaces, and Lebo has no other clients and no business registration. On the statutory presumption, several factors fire at once; on dominant impression, the picture is squarely employment. Lebo is legally an employee. David must register for PAYE and UIF, issue written particulars, pay at least the minimum wage and grant leave (see Employing your first worker). If David has run Lebo as a "subbie" for years, he is exposed to back-claims for PAYE, UIF, leave and overtime, and a CCMA dispute he will struggle to win.

Common mistakes

• Believing the invoice settles it. An invoice book and a "contractor agreement" mean nothing if you control the person's hours and methods.
• Confusing the three tests. The LRA presumption, the dominant impression test and the SARS test are separate; you need to pass the ones that apply, not just one.
• Economic dependence by drift. A genuine subbie who quietly ends up working only for you has probably become your employee.
• Fixing it by backdating paperwork. The tests look at the real relationship over time, not the documents signed last week.

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