By Noelle Snyman (Associate at Themis Law Chambers)
Basics of Employment Agreements
One of the often-overlooked matters in any business, is employment agreements. No matter the nature of employment, agreeing to the terms ensures that the expectations of both the employer and the employee are clearly set out. Mismatched expectations can lead to a strained employment relationship.
When preparing employment agreements, the Basic Conditions of Employment Act 75 of 1997 (“BCEA”) is of utmost importance, as it sets minimum standards that the employer must adhere to.
When preparing an employment agreement, one must consider, inter alia, the following: the nature of the position, deductions to be made from the employee’s salary, bonuses and increases, working hours, overtime, employment policies, leave, benefits, intellectual property, media contact, enticement, restraints of trade, probation, suspension and termination.
Without attempting to exhaustively cover the issues, we have focus on some issues that frequently come up when preparing employment agreements.
In accordance with the BCEA, the deductions that must be made from an employee’s salary include, but are not limited to, pay-as-your-earn tax (PAYE), a contribution to the Unemployment Insurance Fund and any deductions in terms of a garnishee order.
Further deductions can be made, but only if the employee agrees thereto in writing. An employment agreement is the perfect way to record the agreed deductions. Such further deductions can include union subscriptions, medical aid and retirement fund contributions, repayment of a debt and/or any amounts paid to the employee in error.
Medical aid and pension fund deductions can be made, should the parties agree to do so, but such deductions are not compulsory.
Bonuses and Increases
Bonuses and increases are difficult to set out with certainty in an employment agreement. While bonuses can be a good incentive for employees, it is important to state that any such decisions remain in the sole and absolute discretion of the employer. It is also useful to include a provision regarding annual performance reviews, as it can help align the parties’ expectations.
Leave is regulated by the BCEA. The general principles relating to leave do not apply to employees working less than 24 hours in a month. An employer can offer more leave than the minimum standards set by the BCEA, but no less. Anything over and above the minimum requirements in the BCEA should be included in the employment agreement. Other forms of leave, including maternity leave, sick leave and family responsibility leave, should also be regulated.
Annual leave is a minimum of 15 working days per year or 1 day for every 17 days worked, or 1 hour for every 17 hours worked. It is a good retention mechanism to increase leave when an employee has worked for an employer for a certain amount of time. Annual leave does not carry over unless agreed between the parties, and this should be regulated in the employment agreement.
An employee is entitled to 3 days’ family responsibility leave during each annual leave cycle (being 12 months) after the first four months of employment and provided that the employee works at least 4 days per week. The BCEA sets out what qualifies as family responsibility leave.
During a sick leave cycle (being 3 years), an employee is entitled to the number of sick leave days that such employee would normally work in a 6-week period. Therefore, an employee who is employed on a full-time basis (Monday to Friday) would receive 30 days paid sick leave. However, during the first 6 months of employment, an employee is only entitled to one day of paid sick leave for every 26 days worked. An employer may require an employee to provide it with a valid medical certificate, should such employee take sick leave for more than 2 consecutive days, or more than 2 days in an 8-week period.
There are no obligations on an employer to make payment to an employee during maternity leave. Maternity leave payments are regulated under the Unemployment Insurance Act 63 of 2001. Paid maternity leave could a good retention method and should be regulated in an employment agreement, if it is viable for the employer to do so.
Working Hours and Overtime
An employment agreement must regulate the working hours of the employee, including set working hours, flexitime hours and overtime. It is important that the employee understands what is expected and how many hours he/she must work per day or per week. Regulating payment for working overtime is also important. It must be borne in mind that the BCEA also places limits on working hours and provides for minimum break-times.
Intellectual Property and Confidentiality
The duties of the employee during his/her employment may give rise to intellectual property being created. In order to protect the employer’s existing intellectual property and ensure that any intellectual property created during the tenure of the employment remains with the employer, it should be clearly set out in the employment agreement. Furthermore, obligations regarding confidentiality should be placed on employees, regardless of their line of work.
An employer may adopt policies, which are supplementary to employment agreements. Such policies and procedures can exclude, for example, a computer usage policy, a disciplinary and grievances policy, a performance management policy, a travel policy, a company vehicles policy, an overtime policy and a medical aid and pension fund policy, depending on the needs of the employer.
It is important to take note that the purpose of company policies is to regulate the internal operations of the company and as such, cannot be used to unilaterally change the terms of employment agreements.
Furthermore, the employer must ensure that its employees are aware of and can easily access the company policies and are made aware of any changes thereto.
Enticement and Restraints of Trade
Employees have access to confidential information, trade secrets and all the tools to become a competitor of the business of the employer. To limit the risk to the employer, the employment agreement should include protection against this. Such protection includes limitations on the use and dissemination of the employer’s confidential information, a clause preventing an employee from enticing other employees away from the employer and restraints of trade. Restraints of trade prevent an employee from competing with the employer, directly or indirectly, in a certain area and for a certain period of time. Such protections are necessary specifically for executive employees.
Be it fixed-term, part-time, full-time or executive employment, the employment relationship should be properly regulated. A well-drafted employment agreement will ensure that the employer’s expectations are aligned with the employee’s and that the employer’s business is sufficiently protected.