Hiring Employees? Labour Law Basics Every Small Business Owner Should Know

Hiring your first employee is a major milestone for any small business in South Africa. It’s a sign of growth—but also a signal that your responsibilities are about to increase. As an employer, you need to ensure that you understand and comply with key South African labour laws to protect both your business and your employees.

In this comprehensive guide, we’ll walk you through the essentials of hiring and managing employees within the framework of South African labour law, and how MMT Financial Services can help ensure your processes are legally compliant and professionally managed.

1. Understanding the Basics of South African Labour Law

South Africa’s labour laws are primarily designed to protect employees from unfair treatment, while also giving employers a clear framework for managing staff. The two main legislative frameworks you need to be aware of are:

• The Labour Relations Act (LRA)

• The Basic Conditions of Employment Act (BCEA)

The Labour Relations Act (LRA)

The LRA governs all aspects of employee relations, including:

• Fair labour practices

• Collective bargaining

• Resolution of disputes (via the CCMA)

• Protection against unfair dismissal

The Basic Conditions of Employment Act (BCEA)

The BCEA outlines:           

• Minimum wages

• Working hours and overtime

• Leave entitlements (annual, sick, maternity, family responsibility)

• Employment contracts

• Termination of employment

2. Drafting a Legal Employment Contract

An employment contract is the cornerstone of the employer-employee relationship. It sets expectations and ensures both parties understand their rights and obligations.

A Legal Employment Contract Must Include:

• Job title and description

• Working hours and leave policies

• Salary and payment intervals

• Notice period and termination conditions

• Probation period (if applicable)

• Any benefits offered (UIF, bonuses, etc.)

Tip:

Avoid using generic templates you find online. Customise contracts to reflect your business’ needs and comply with South African labour law. MMT Financial Services can draft or review your contracts to ensure legal compliance and clarity.

3. Registering for UIF and PAYE

If you’re hiring an employee earning more than R1,000 per month, you’re legally required to register for:

• UIF (Unemployment Insurance Fund)

• PAYE (Pay As You Earn) with SARS

UIF (via the Department of Labour)

• Deduct 1% of the employee’s salary

• Contribute an additional 1% as the employer

• Submit declarations and payments monthly

PAYE (via SARS)

• Deduct income tax according to SARS tables

• Submit monthly EMP201 declarations and make payments

MMT Financial Services can register your business for UIF and PAYE, manage your monthly declarations, and help you stay compliant with SARS and the Department of Labour.

4. Workplace Policies and Disciplinary Procedures

It’s not enough to just hire and pay employees—you need systems in place for managing performance and handling issues.

You Should Have:

• A Code of Conduct

• Grievance and disciplinary procedures

• Leave policies

• A sexual harassment policy

• An absenteeism policy

Why It Matters:

Clear policies protect your business in case of disputes and help build a structured, professional work environment.

MMT Financial Services can assist in creating HR policies tailored to your business and provide templates that align with South African labour law.

5. Health and Safety Compliance

If your workplace poses any health or physical risk (retail, manufacturing, construction, etc.), you must comply with the Occupational Health and Safety Act (OHSA).

Requirements Include:

• A safe and hazard-free workplace

• Adequate training for employees

• Health and safety signage

• First-aid kits and emergency procedures

Failure to comply can result in fines or shutdowns.

6. Dealing with Employee Termination Legally

Dismissing an employee is a sensitive and highly regulated process. The Labour Relations Act outlines acceptable reasons and procedures for termination, including:

• Misconduct

• Incapacity

• Operational requirements (retrenchments)

Key Points:

• Always follow a procedurally fair process

• Allow the employee a chance to state their case

• Document everything

• Avoid “unfair dismissal” which can be reported to the CCMA

MMT Financial Services can guide you through dismissals and retrenchments, helping you avoid legal pitfalls and CCMA disputes.

7. Managing Employee Records and Payroll

You're legally required to keep certain employee records for at least three years, including:

• Full names and ID numbers

• Contact details

• Employment start and end dates

• Salary and wage records

• Leave taken

• Disciplinary actions

This also ties into payroll responsibilities:

• Payslips must be issued monthly

• Deductions must be clearly itemised

• Overtime, leave pay, and bonuses must be accurately calculated

Let MMT Financial Services manage your payroll so you can focus on growing your business without compliance worries.

8. Equity and Diversity Obligations

If your business grows to employ 50 or more staff, you are required to comply with the Employment Equity Act. This includes:

• Submitting an Employment Equity Report annually

• Developing an Employment Equity Plan

• Promoting diversity and non-discrimination in the workplace

Even smaller businesses should still foster inclusive practices and avoid any form of discrimination during hiring or employment.

9. Common Mistakes Small Business Owners Make

❌ Hiring Without Contracts

Verbal agreements offer no protection. Always formalise employment in writing.

❌ Delaying UIF/PAYE Registration

Late registration leads to backdated penalties and interest.

❌ Misclassifying Employees as Contractors

If you control hours, tools, and responsibilities, the person is likely an employee in the eyes of the law.

❌ Skipping Disciplinary Procedures

You must follow a fair process even if the employee is clearly at fault.

10. How MMT Financial Services Can Help

Hiring and managing employees legally in South Africa can be overwhelming, but you don’t have to navigate it alone.

Here’s how MMT Financial Services supports your business:

• Drafting legally compliant employment contracts

• Registering your business with UIF and PAYE

• Monthly payroll management and SARS declarations

• Developing workplace policies and HR systems

• Guidance on dismissals and employee disputes

• Ensuring your record-keeping is audit-ready

• Helping you navigate CCMA proceedings if needed

Let MMT take the administrative burden off your shoulders, so you can focus on building your team and growing your business with peace of mind.

Hiring employees brings both opportunity and responsibility. South African labour law is designed to protect employees, but it also provides a clear framework for employers. By understanding the basics, setting up compliant systems, and partnering with professionals like MMT Financial Services, you can create a workplace that thrives legally and financially.

Whether you're hiring your first staff member or growing your existing team, get in touch with MMT to ensure your employment practices are compliant, efficient, and scalable.