An independent contractor performs work for a business under a contract for services, not a contract of employment, and is generally responsible for their own tax affairs rather than having PAYE withheld.
What it means
The distinction matters because employees and independent contractors are governed by entirely different rules - employees get BCEA protections, UIF, leave and PAYE withholding; contractors invoice for services and handle their own provisional tax. Courts and SARS look past the label in the contract to the substance of the relationship - control, integration into the business, and economic dependence - when deciding which applies.
Where it fits in
If a "contractor" arrangement in substance looks like employment - fixed hours, the business controlling how and when the work is done, no real ability to subcontract or work for others - SARS or the CCMA can deem it an employment relationship, exposing the business to backdated PAYE, UIF and leave liability.
Key rules
- Classification depends on the substance of the working relationship, not just the label in the contract.
- A deemed employee relationship exposes the business to backdated PAYE, UIF and leave liability.
- Independent contractors are not subject to PAYE withholding - they account for their own tax.
- A personal service provider is a related but distinct SARS category with its own withholding rules, separate from an ordinary independent contractor.
