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Help: Employment Contract

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Annual Leave, Sick Leave, and Other Leave

This Contract offers you many options regarding leave that the employee is entitled to. Bear in mind that in South Africa much of the leave an employee may take is set out by the Basic Conditions of Employment Act (BCEA); an Employment Contract must provide the employee with leave at least equal to the BCEA.

With the Contract, you may choose between using the conditions of the BCEA or you may provide the employee with Leave that is more than what the BCEA requires.

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Benefits

This Contract offers a listing of several different optional benefits to be provided to the employee, including health insurance, disability insurance, life insurance, pension plan. In addition, the user is given the option of adding other benefits that are not listed. The Contract also contains language that indicates that the employee benefits may change from time to time. This allows the employer to preserve the option of changing the details of benefits from time to time without violating the Contract.

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Commissions

“Commission” is a form of variable-pay remuneration for services rendered or products sold. Commission is a common way to motivate and reward salespeople.  For example, a salesperson’s commission is often a percentage of the salesperson’s sales volume.  A commission plan should be in writing and should clearly describe any limitations on the amount of commission that can be earned, as well as the circumstances under which commissions will be paid.

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Compliance with Employer’s Rules

Some employers might have a set of Rules and Regulations that their employees need to follow. If an employer expects an employee to comply with the employer’s Rules and Regulations, the employer must communicate those Rules and Regulations to the employee. While this can be done orally, it is far more preferable for the employer to provide clear written Rules and Regulations to the employee in the form of a written document or booklet.

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Employee or Contractor?

A clear distinction is made between an Employee and a Contractor in South Africa Law. The Labour Relations Act and the Basic Conditions of Employment Act apply to Employees.

Essentially, a Contractor is doing the work as part of his or her or its own business and an Employee enters into a contract of employment, whether in writing or orally, with an Employer which creates an employment relationship and not a service provider relationship.

If you are signing this contract you are creating an Employer / Employee relationship.

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Employment Confidentiality

The Employment Contract offers a confidentiality paragraph that obligates the employee to protect and not disclose the employer’s proprietary or confidential information. “Confidential information” is information that is unique to a particular employer. Disclosure of confidential information could harm the employer’s business.

The confidentiality paragraph includes an option that describes the employer’s rights to take action against actual or potential disclosures. Another option allows for the continuation of the confidentiality provisions after the termination of employment.

Regarding the time employer’s information must be kept confidential, t is generally better t only make it as long as is necessary to protect the employer’s information. The confidentiality limitations must be “reasonable” in light of the needs and practices of the employer’s business and industry.

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Employment Contract

The Employment Contract is an agreement between an employer and an employee that specifies the rights and obligations of each party to the agreement. The employer and the employee are required to abide by the agreement.

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Expense Reimbursement

Many employers reimburse their employees for various “out-of-pocket” expenses. For example, if the employee is required to use his or her car to carry out his or her responsibilities on behalf of the employer, the employer may reimburse the employee by making a fixed “per kilometre” payment. Other reimbursed expenses might include phone calls, travel expenses, and education expenses.

Generally, it is preferable for an employer to retain maximum flexibility by making reimbursement “in accordance with Employer policies in effect from time to time.” This allows the employer to change the reimbursement policy. However, you may also select the option of specifying directly in the document which expenses will be reimbursed.

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No Contractual Rights

Generally, an employer will maintain very close control over who can sign contracts on behalf of the employer. Often this authority will be limited to key officers. In some cases, it may be convenient to allow other employees limited rights to sign contracts. For example, it may be appropriate to allow a purchasing agent to sign purchase orders. In all such cases, the employer should ensure that there are adequate internal controls to prevent misuse of that authority.

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Remuneration

Remuneration in the scope of this Employment Contract means payment of either salary or commission.

Employment in South Africa is subject to the Basic Conditions of Employment Act which set out the minimum requirements for employment and deal with various aspects of employment such as working hours, leave, etc.

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Restraint of Trade Geography

The “geographical area” in which competition is prohibited should be limited to the specific geographical area in which the employee actually operated. A determination of reasonableness will depend on the specific facts of each situation.

Restraint of Trade provisions that overreach their geographical boundaries or have restrictions beyond what the employer’s business actually does are typically not reasonable and therefore are not enforceable. For example, a business that strictly operates within a certain City or Province may have trouble imposing a Country-Wide Restraint of Trade. The legality of restrictions in the agreement will be determined on a case by case basis in court.

However, things get more complicated for internet-based businesses or businesses that sell globally because boundaries are not easily defined. Current technology has made the economy much more global, so a mileage limitation no longer applies to certain companies. Currently, courts have not had many opportunities to address how the internet affects the reasonableness of a geographic scope within a non-compete provision. Much of what can be enforced will depend on the businesses involved.

To help address this complication, an employee may agree to a Trade of Trade that lists specific businesses or companies that he or she cannot work for after the termination of employment.

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Restraint of Trade Provision

The Restraint of Trade provision is intended to provide additional protection against the possibility that the knowledge gained by the employee regarding the employer will be used in the future to compete against the employer.

However, the courts are often reluctant to enforce them as they may prevent someone from earning a living. Restraint of Trade provisions are permitted in South Africa but the provisions must be “reasonable” and where the restraint imposed is not greater than necessary to protect the company’s valid business interests.

Some guidelines as to what is “reasonable”, and therefore, enforceable are:

  • The “time period” should be limited to the useful life of the information possessed by the employee. In many cases, this will be two to five years but could be as short as one year or a few months, depending on how rapidly the information becomes obsolete.
  • The “geographical area” in which competition is prohibited should be limited to the specific geographical area in which the employee actually operated. A determination of reasonableness will depend on the specific facts of each situation.
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Return of Property

It is advisable to require an employee to return all employer property immediately upon termination of the employment. Any delay can lead to difficulties in recovering the property. Examples of an employer’s property could be cars, tools, keys and important records. Continued use of these items by the now “former” employee can cause significant damages for the employer.

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Signing Instructions

  • The Employment Contract should be signed and dated by both parties. It becomes effective as of the date inserted at the beginning of the Contract. It is not necessary that the signatures be witnessed or notarized.
  • It is advisable to sign two copies of the Contract so that each party will have a copy with original signatures. Original copies should be kept in a fire-proof and safe location.
  • This document should not be used if the employee is covered by a collective bargaining agreement, if the Employee is considered to be a consultant, or if the Employee is considered to be a contractor.
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Termination of Employment Contract

An Employment Contract can be terminated and that is why it is necessary to select notice periods that either the Employer and the Employee must give to end the Employment Contract.

The notice period should be reasonable for either party to adapt to the ending contract.

However, it is still essential that there is a property reason for terminating the contract as South Africa Labour Law requires that the parties strictly adhere to these Laws. All the correct procedures must be followed. If an Employment Contract is going to be terminated, it is often advisable to talk to an Attorney or Labout consultant.

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