The mindset shift: there is no at-will employment
If you are hiring from a US at-will background — or a UK background where unfair-dismissal rights need two years’ service — recalibrate first. Under the Labour Relations Act 66 of 1995 (LRA), every South African employee has the right not to be unfairly dismissed from the first day of employment, probation included. A dismissal must be substantively fair (a genuine reason: misconduct, incapacity or the employer’s operational requirements) and procedurally fair (the employee heard before the decision).
Every employee has the right not to be— (a) unfairly dismissed; and (b) subjected to unfair labour practice.
The CCMA: free arbitration any employee can use
Disputes go to the CCMA — the Commission for Conciliation, Mediation and Arbitration, a state tribunal that charges no filing fee and requires no lawyer. An employee has 30 days from dismissal to refer a dispute; conciliation is typically scheduled within about 30 days, with arbitration to follow if it fails. Because the barrier to a claim is effectively zero, the practical rule for a foreign employer is simple: assume every contested termination will be referred. If the dismissal is unfair, the primary remedy is reinstatement with back pay; compensation is capped at 12 months remuneration (LRA s 194(1)), rising to 24 months where the dismissal is automatically unfair — for example dismissal for pregnancy, discrimination, whistleblowing or a business transfer. Figures last reviewed 16 July 2026.
New for 2025/26: the Code of Good Practice: Dismissal
A new Code of Good Practice: Dismissal took effect on 4 September 2025 (General Notice 3470 in Government Gazette 53294), replacing the old Schedule 8 code and the 1999 retrenchment code. It pushes discipline towards corrective, dialogue-based processes rather than courtroom-style hearings, gives small businesses express procedural flexibility, and eases the justification needed for not confirming a probationer. What it does not do is create at-will employment: probation lowers the bar for non-confirmation on performance grounds, but the fairness requirement — and the CCMA — still apply.
BCEA floors: hours, overtime and leave
The Basic Conditions of Employment Act 75 of 1997 (BCEA) sets the minimum terms every employment contract must meet. Rows marked * fall away for employees earning above the earnings threshold (next section) — senior hires above it negotiate hours and overtime contractually.
| Entitlement | Statutory floor |
|---|---|
| Ordinary hours * | 45 hours a week (BCEA s 9) |
| Overtime * | Only by agreement, maximum 10 hours a week, paid at 1.5× (s 10) |
| Sunday work * | Double pay — 1.5× if the employee ordinarily works Sundays (s 16) |
| Public holidays * | Work only by agreement; roughly double pay if worked (s 18) |
| Annual leave | 21 consecutive days per 12-month cycle — about 15 working days (s 20) |
| Sick leave | Six weeks’ worth of working days per 36-month cycle — 30 days on a five-day week (s 22) |
| Family responsibility leave | 3 days a year for eligible employees (s 27) |
| Parental leave | The Van Wyk interim regime — shared parental leave, see below (s 25 as read in) |
| Notice | 1 week (6 months’ service or less), 2 weeks (6–12 months), 4 weeks (a year or more) (s 37) |
| Severance on retrenchment | one week per completed year of service (s 41(2)) |
| 13th cheque | No statutory entitlement — contract or bargaining council only |
Maternity and parental leave were rewritten by the Constitutional Court in October 2025. The old regime — four months’ maternity leave for mothers, ten days for fathers — is gone. Any policy that still reserves “maternity leave” for mothers now discriminates.
In plain terms: a single parent, or the only employed parent, gets at least four consecutive months’ parental leave; where both parents are employed, they share four months plus ten days between them, split by agreement — even concurrently. The regime is interim (the declaration of invalidity is suspended for 36 months while Parliament legislates), but it is the law now. The leave is unpaid at employer level; employees claim benefits from the Unemployment Insurance Fund (UIF), which pays maternity benefits at a 66% flat rate, capped — though how the UIF processes shared parental-leave claims is still settling administratively.
Two housekeeping duties round out the floor: written particulars of employment must be supplied on commencement (s 29), and a payslip on every pay day (s 33). Employee records, references and background checks also engage South Africa’s data-protection statute — POPIA (the Protection of Personal Information Act).
The two numbers every payroll needs
1. The national minimum wage: R30.23 per ordinary hour
The national minimum wage (NMW) is R30.23 per ordinary hour from 1 March 2026 (GN 7083 in Government Gazette 54075), with farm workers and domestic workers fully aligned at the same rate. Allowances (transport, tools, food, accommodation), tips, bonuses and payments in kind do not count towards it. It adjusts every 1 March, and it is not negotiable:
The payment of a national minimum wage cannot be waived and the national minimum wage takes precedence over any contrary provision in any contract, collective agreement, sectoral determination or law, except a law amending this Act.
Underpayment is expensive: the fine is the greater of twice the underpayment or twice the employee’s monthly wage — three times for a repeat offence (BCEA s 76A).
2. The BCEA earnings threshold: R269 600.90 per year
The second number gates who gets the statutory working-time protections and the contractor/labour-broker deeming rules. From 1 May 2026 — note: 1 May in 2026, not the 1 April cycle payroll systems often assume — the threshold is R269 600.90 per year:
I, Nomakhosazana Meth, Minister of Employment and Labour, hereby in terms of Section 6 (3) of the Basic Conditions of Employment Act, No. 75 of 1997, (the Act), determine that all employees earning in excess of R269 600.90 (Two hundred and sixty-nine thousand, and six hundred rand, ninety cents) per annum be excluded from sections 9, 10, 11, 12, 14, 15, 16, 17(2) and 18(3) of this Act with effect from 1 May 2026.
Earning below the threshold means the employee gets:
- the BCEA working-time protections — the 45-hour week, overtime at 1.5×, Sunday and public-holiday premiums;
- the LRA s 198A and s 198B deeming rules — labour-broker placements and fixed-term contracts convert after three months (next section); and
- the LRA s 200A presumption of employment — the anti-misclassification rule.
Above the threshold, those fall away — hours and overtime become contractual, and disputes about employment status are decided on substance without the statutory presumption.
Contractors, EORs and misclassification
South African law looks at the substance of a working relationship, not its label. For anyone earning at or below the earnings threshold, the LRA goes further and presumes employment:
Until the contrary is proved, for the purpose of this Act, any employment law and section 98A of the Insolvency Act, 1936 (Act 24 of 1936), a person who works for, or renders services to, any other person is presumed, regardless of the form of the contract, to be an employee, if any one or more of the following factors are present—
Note — The seven factors include working under another person’s control or direction, forming part of the organisation, average of at least 40 hours a month over three months, and economic dependence. Any one factor triggers the presumption; the employer must then disprove employment.
Re-labelling staff as “independent contractors” therefore fails unless they are genuinely independent — and misclassification exposes you retrospectively to PAYE, UIF, minimum-wage, leave, overtime and unfair-dismissal liability. Courts apply the same substance-over-form scrutiny above the threshold, just without the statutory presumption.
The EOR question, honestly
An employer of record (EOR) — in South African statutory language usually a temporary employment service (TES), or labour broker — employs your local team on paper and runs its payroll. It genuinely solves speed (people hired in days, not weeks), payroll compliance, and the practical difficulty of running SARS registrations without a local presence. What it does not do is put the employment relationship beyond South African law:
For the purposes of this Act, an employee—… (b) not performing such temporary service for the client is— (i) deemed to be the employee of that client and the client is deemed to be the employer; and (ii) subject to the provisions of section 198B, employed on an indefinite basis by the client.
Note — This deeming applies to workers earning at or below the earnings threshold whose placement is not a genuinely temporary service (three months or less, a genuine substitute, or a gazetted category). The TES and its client are also jointly and severally liable for basic-conditions and minimum-wage breaches (s 198(4)).
In short: place a below-threshold worker through an EOR for more than three months and you are deemed the employer, indefinitely, with pay parity against your own comparable staff. Above-threshold professional hires escape the deeming, but general employment law — unfair dismissal included — still applies to them, and you may still be found the employer in substance if you direct the work day to day. The same three-month logic catches fixed-term contracts: below the threshold, a fixed term beyond three months needs a written, justifiable reason, or it is deemed indefinite (s 198B(5)).
The honest decision rule: an EOR suits a short exploratory phase or a handful of senior, above-threshold hires. If you are building an operating team — or the numbers above make you the deemed employer anyway — a local entity is usually the cleaner answer. See company registration for foreigners and subsidiary vs branch for that route.
Ending employment: dismissal, retrenchment and business transfers
For misconduct and incapacity (poor performance, ill health — and, under the 2025 Code, incompatibility), the requirement is a fair reason plus a fair, dialogue-based procedure: investigate, put the case to the employee, hear them, then decide. Progressive discipline is expected for most misconduct short of the serious offences.
Retrenchment (redundancy) runs through LRA s 189: a written notice disclosing the reasons, alternatives considered, selection criteria and proposed severance, followed by genuine joint consensus-seeking before the decision is taken. Employers with more than 50 employees hitting the s 189A scale thresholds face CCMA facilitation and a 60-day minimum process. Statutory severance is one week per completed year of service (BCEA s 41(2)) — on top of notice and accrued-leave pay-outs. Skipping consultation makes even a genuine redundancy unfair.
Automatically unfair dismissals — for pregnancy, discrimination, protected strike participation, a protected disclosure (whistleblowing) or a business transfer — carry the doubled 24-month compensation cap and no scope for procedural rescue. Treat these categories as bright lines.
Buying a business? The staff come with it
LRA s 197 is South Africa’s equivalent of the UK’s TUPE rules: when a business is transferred as a going concern — including many asset deals — the new employer is automatically substituted into every employment contract, with full continuity and accrued rights, and dismissal because of the transfer is automatically unfair. Price the workforce liabilities (leave balances, severance exposure, bargaining-council funds) into any acquisition.
Restraints of trade are enforceable
Unlike the modern US or cautious UK position, South African restraints of trade are prima facie valid: since Magna Alloys v Ellis [1984] ZASCA 116, the party resisting enforcement bears the onus of proving the restraint unreasonable.
Employment equity: what changes at 50 employees
The Employment Equity Act 55 of 1998 (EEA) prohibits unfair discrimination — including unequal pay for work of equal value — for all employers from day one. Its affirmative-action chapter bites only once you become a designated employer: since 1 January 2025 that means 50 or more employees, full stop — the old annual-turnover test was deleted by the Employment Equity Amendment Act 4 of 2022.
A designated employer must consult a workforce forum, analyse its workforce, adopt an employment equity plan (the current cycle runs 1 September 2025 to 31 August 2030), report annually online, and assign a senior manager accountability. Since 15 April 2025, five-year sectoral numerical targets (GN 6124 in Government Gazette 52514) apply across 18 sectors. The targets have survived every court challenge to date — most recently the Constitutional Court’s dismissal of the NEASA/Sakeliga interim challenge with costs on 22 May 2026 (order, CCT 86/26). A substantive constitutional attack (Part B) is still pending in the High Court — but no interdict suspends the targets, so compliance is currently mandatory. Missing a target is not automatically a breach: the Act recognises justifiable reasons for falling short, assessed under s 42.
Two commercial notes. First, the Department of Employment and Labour now issues EE compliance certificates under s 53 of the Act, and a certificate is expected to be required before doing business with the state — if government work is in your plan, budget for this. Second, your EE data feeds the management-control element of the B-BBEE scorecard (Broad-Based Black Economic Empowerment) — plan the two together, alongside the wider South African compliance stack. Chapter III non-compliance fines start at the greater of R1.5 million or 2% of turnover, escalating to R2.7 million or 10% for repeat offenders.
Payroll registrations: PAYE, UIF, SDL and COIDA
Before the first pay run, register with SARS (the South African Revenue Service) as an employer — within 21 business days of becoming one — and with the Compensation Fund. The full stack, with deadlines, lives in tax and employer registrations; the payroll essentials are:
- PAYE (Pay-As-You-Earn) — withholding of employees’ income tax, paid over monthly by the 7th. A genuinely foreign employer has a nuance here: professional tax guidance consistently reports that, since 22 December 2023, a non-resident employer must register for and withhold PAYE only if it has a permanent establishment (or a representative employer) in South Africa — a question that connects directly to your corporate tax exposure. Take tax advice on your facts. UIF and SDL, by contrast, are not PE-dependent — UIF applies from the first employee, and SDL once annual leviable payroll exceeds R500 000 annual payroll.
- UIF (Unemployment Insurance Fund) — 1% employer + 1% employee of remuneration, capped at R17 712 per month, collected with PAYE; also file monthly employee declarations with the Fund so staff can actually claim benefits.
- SDL (Skills Development Levy) — 1% of payroll, exempt if annual payroll will not exceed R500 000 annual payroll.
- COIDA (Compensation for Occupational Injuries and Diseases Act — workers’ compensation) — register within 7 days of employing your first employee, file the annual Return of Earnings (the 2026 window ran 1 April to 30 June — check the dates each season), and pay an assessment at your industry’s tariff on earnings capped at R668 000 per year. Then download the letter of good standing — customers, sites and tenders will ask for it.
There is no statutory pension, provident or medical-scheme contribution — those arise only by contract or bargaining-council agreement — so statutory on-costs above gross salary are light by European standards. If salaries will be funded from abroad, read the exchange control guide before structuring the flows.
The bargaining-council trap
South Africa organises collective bargaining sectorally through bargaining councils — metals and engineering (MEIBC), road freight and logistics (NBCRFLI), the motor industry, building, contract cleaning and others. The trap for a foreign employer is that a council’s main agreement does not only bind its members. On request, the Minister extends it to every employer within the council’s registered scope:
Subject to subsection (2A), the Minister must extend the collective agreement, as requested, by publishing a notice in the Government Gazette, within 60 days of receiving the request declaring that, from a specified date and for a specified period, the collective agreement will be binding on the non-parties specified in the notice.
The result: an engineering or logistics employer can owe council wage rates (typically above the national minimum wage), pension or provident-fund contributions and council levies from day one — under an agreement it never negotiated, with back-pay claims and council enforcement if missed. Before hiring, match your activities against the registered scope of the councils in your sector and check the current extension notices with the Department of Employment and Labour; extensions come and go by gazette, so verify the position current at your start date.
Foreign nationals on your payroll
Two separate tracks apply to expat and foreign hires, and they do not cancel each other out. Track one: the Immigration Act 13 of 2002 prohibits employing a foreigner without valid work authorisation (s 38), with criminal sanctions for the employer (s 49(3)) — verify status before day one and keep copies. The visa routes are covered in work visas for founders and staff. Track two: employment-law protections apply to work performed in South Africa regardless of immigration status — and regardless of a foreign governing-law clause in the contract.
So an employee whose visa was invalid — or has lapsed — can still claim unfair dismissal against you. The visa check protects you; it does not strip the worker of rights. Run immigration compliance and employment compliance as two separate disciplines, and if questions remain, start with the hub FAQ or speak to us.
Frequently asked questions
Dismissal is lawful but process-driven. You need a fair reason (misconduct, incapacity or operational requirements) and a fair procedure — from day one, including probation. Any employee can refer a dismissal to the CCMA free of charge within 30 days. Arbitration can order reinstatement (the primary remedy, with back pay) or compensation of up to 12 months remuneration — 24 months if the dismissal is automatically unfair. Assume every contested dismissal will be referred, and paper each one properly.
Somewhat — but probation is not at-will employment. Under the 2025 Code of Good Practice: Dismissal, an employer needs a less onerous justification for not confirming a probationer than for dismissing a permanent employee. But you still need genuine performance grounds, evaluation and feedback, and an opportunity to respond — and the probationer can still refer an unfair-dismissal dispute to the CCMA. Probation modifies expectations, not the fairness requirement.
There is no separate employer payroll tax of the kind some countries levy. Employers withhold PAYE (the employee’s own income tax), and pay UIF contributions of 1% employer + 1% employee (on remuneration capped at R17 712 per month), the skills development levy of 1% of payroll (exempt below R500 000 annual payroll) and an annual COIDA assessment on earnings capped at R668 000 per year. There are no statutory pension or medical-scheme contributions. See tax and employer registrations for the full stack.
No. No statute requires a 13th cheque or annual bonus. It becomes binding only through the employment contract, a policy or practice applied so consistently that it hardens into a term, or a bargaining-council agreement that covers your sector. If you do not intend to pay one, say so expressly in the contract.
Legally, yes — a foreign entity can employ South African staff directly, or engage them through an employer of record (EOR). But the obligations follow the work, not the entity: UIF and SDL apply regardless of local presence, and professional tax guidance consistently reports that PAYE withholding is triggered once the foreign employer has a permanent establishment (or a representative employer) in South Africa (take tax advice on your facts). EOR placements of below-threshold workers beyond three months trigger deemed employment under section 198A. Most companies either register a subsidiary or use an EOR only for a small, above-threshold professional team.
The national minimum wage is R30.23 per ordinary hour from 1 March 2026 (GN 7083 in Government Gazette 54075). Farm workers and domestic workers are fully aligned at the same rate. Allowances, tips, bonuses and payments in kind do not count towards it, and it cannot be waived by agreement. Underpayment attracts a fine of at least twice the shortfall. Figures last reviewed 16 July 2026.