Employment Conditions in South Africa

Employment Conditions in South Africa

Public interest score

The PI (Public Interest) score is a measure used in South Africa to determine the level of financial reporting, audit, and review requirements for companies. This scoring system was introduced by the Companies Act, 2008, and its purpose is to assess the public interest impact of a company. The PI score is calculated annually and is based on various factors which reflect the company's size, complexity, and impact on the public. Here’s how it works:

Factors in PI score calculation

1. Number of employees: Score 1 point for every employee (or the average number of employees during the financial year).
2. Third-party liability: Score 1 point for every ZAR 1 million (or part thereof) of third-party liabilities (including long-term and short-term debts).
3. Turnover: Score 1 point for every ZAR 1 million (or part thereof) of turnover (revenue) during the financial year.
4. Beneficial interest: Score 1 point for each individual who, at the end of the financial year, is known to directly or indirectly have a beneficial interest in any of the company's issued securities.

Employees records

Employers are required to maintain accurate and up-to-date records of employees' personal information, employment history, and remuneration. They should keep the records for a minimum of three years after the end of employment.

Post-termination restrictions

Non-compete (restraints of trade) and non-solicitation clauses are common but should be reasonable in scope, territory and duration.  Other considerations that the court will take into account are the seniority of the employee, their ability to damage the employer’s competitive advantage and whether the employer has a protectable interest.  Employers should either add appropriate restraint of trade clauses in employment agreements or create separate agreements for that.

Business transfer

When a business (whole or in part) is transferred, employees either automatically transfer to the new employer with their existing terms and conditions, or on terms and conditions of employment that are at least any less favourable to their existing terms and conditions.

Intellectual property protection

Employment contracts typically include clauses on the ownership of intellectual property created during employment.  This is crucial in information and technology industries.

Probation period

While the LRA does not mandate a probation period, employers may include it in the employment contract. The probation period should be reasonable and related to the job's nature, allowing the employer to assess the employee's performance. The duration should be pre-determined and can be extended if necessary, based on performance evaluation. Employers must follow proper procedures if they decide to terminate employment during or after the probation period, which includes but is not limited to, following an incapacity procedure for poor work performance and monitoring the employee’s performance during the probation period.