What are my obligations when I hire my first employee?

When you hire your first employee, you take on six sets of obligations at once: a written statement of the terms of employment, registration for the Unemployment Insurance Fund, registration with the Compensation Fund, deduction and payment of PAYE to SARS where the employee earns above the tax threshold, payment of at least the national minimum wage, and compliance with the rules on hours, leave and notice in the Basic Conditions of Employment Act 75 of 1997. The Labour Relations Act 66 of 1995 then governs how the relationship ends, and a probation clause does not let you skip a fair process before dismissal.

Most of it is paperwork. The cost of ignoring it is real: back pay orders, penalties, and a CCMA award you did not see coming.

Step 1: Decide whether this person is really an employee

An employee is someone who works under your direction, forms part of your organisation, and is economically dependent on you. An independent contractor runs their own business and provides a service to yours. The label on the contract does not decide it. If the person works set hours, uses your equipment, is supervised by you, and works only for you, the law will treat them as an employee whatever the document says. The Labour Relations Act 66 of 1995 presumes a person to be an employee where certain of these factors are present, and it is then for you to show otherwise. If in doubt, treat them as an employee.

Step 2: Give a written statement of particulars

The Basic Conditions of Employment Act 75 of 1997 requires every employer to give an employee, when they start, a written document setting out the particulars of employment. These include your name and address, the employee's name and job, the start date, the place of work, hours of work, the wage and how it is calculated, the pay interval, any deductions, leave entitlements, the notice period, and any bargaining council or sectoral determination that applies.

A proper employment contract covers all of this and more. Keep a signed copy for the whole period of employment and for the period afterwards that the Act requires.

Step 3: Register for UIF

The Unemployment Insurance Contributions Act 4 of 2002 requires you to register as an employer with the Unemployment Insurance Fund and to pay monthly contributions for each employee. The contribution is a small percentage of the employee's earnings, half paid by you and half deducted from the employee, up to an earnings ceiling that changes from time to time. Registration is done through the Department of Employment and Labour's online portal or, if you are registered for PAYE, through SARS. Monthly declarations follow.

Step 4: Register with the Compensation Fund

The Compensation for Occupational Injuries and Diseases Act 130 of 1993 requires every employer with one or more employees to register with the Compensation Fund and to pay an annual assessment based on total earnings and the risk class of the business. In return, the Fund compensates an employee injured at work or who contracts an occupational disease, and you are protected from being sued by the employee for that injury. An unregistered employer loses that protection and can be pursued for the assessment plus penalties.

Register within the period the Act sets after employing your first person, and submit the annual return of earnings every year.

Step 5: Deal with SARS

If the employee earns more than the annual tax threshold, which SARS adjusts from time to time, you must register as an employer for PAYE, deduct employees' tax from each wage payment, and pay it to SARS monthly. If the employee earns below the threshold, you may not need to deduct PAYE, but you must still keep pay records. Check the current threshold on the SARS website rather than guessing.

Step 6: Pay at least the minimum wage and follow the BCEA

The national minimum wage sets an hourly floor that is adjusted each year. Some sectors have their own rates under sectoral determinations. Check the current figure with the Department of Employment and Labour before you set the wage.

The Basic Conditions of Employment Act 75 of 1997 then governs the working relationship. In broad terms, and subject to exceptions for certain sectors and for very small employers, it sets a maximum ordinary working week, requires overtime to be agreed and paid at a premium, provides for meal intervals and rest periods, gives annual leave, sick leave over a three year cycle, family responsibility leave, maternity leave and parental leave, requires a payslip with each payment, and sets minimum notice periods that grow with length of service. It also restricts the deductions you may make from wages. A deduction for damage or loss needs the employee's written agreement and a fair procedure.

Step 7: Understand how the relationship ends

The Labour Relations Act 66 of 1995 gives every employee the right not to be unfairly dismissed. A dismissal must be for a fair reason, which means misconduct, incapacity or the employer's operational requirements, and must follow a fair procedure. For misconduct, that means an investigation, notice of the allegations, a chance to respond, and a decision by someone who has considered the response.

Probation does not change this. You may agree a reasonable probation period, and during it you may assess and dismiss for poor performance more readily than you could with a long serving employee. But you must still evaluate, give feedback, offer guidance, and hold a fair process before dismissal. "You are on probation, so you can go" is an unfair dismissal.

The Employment Equity Act 55 of 1998 prohibits unfair discrimination against any employee, including your first.

A worked example: Rustenburg Auto Electrical

This example is illustrative only.

Sipho runs a one man auto electrical workshop as a sole proprietor. He takes on Lerato as a workshop assistant at R7 500 a month.

In the first month he gives Lerato a signed contract listing hours, wage, leave and a three month probation. He registers for UIF online and starts deducting Lerato's share and paying the total monthly. He registers with the Compensation Fund and pays the first assessment of roughly R1 100. Lerato's earnings are below the tax threshold, so Sipho does not deduct PAYE, but he keeps a wage register and issues payslips.

Eight months later Lerato slips on oil and breaks a wrist. Because Sipho is registered, the Compensation Fund pays for treatment and a portion of lost wages, and Lerato has no claim against Sipho personally.

Compare Sipho's neighbour, who employs a helper on a cash handshake. When the helper is injured there is no Fund cover, the Department finds no registrations, and the neighbour pays back contributions, penalties and a settlement. When he later lets the helper go, the CCMA hears an unfair dismissal claim against an employer with no contract and no record of any process.

What to do this week

1. Draft and sign the employment contract before the start date, using the Department of Employment and Labour's guidance on the required particulars.
2. Register for UIF on the Department's portal.
3. Register with the Compensation Fund and diarise the annual return of earnings.
4. Check the tax threshold on the SARS website and register for PAYE if needed.
5. Check the national minimum wage and any sectoral determination for your sector.
6. Set up a payslip template and a wage register.

Documents and records to set up

• Signed employment contract with the written particulars.
• Wage register recording hours, wages, overtime and deductions for each pay period.
• Payslips issued with every payment. An employer with fewer than five employees is technically exempt from the BCEA payslip and record duties (section 28(2)(a)), but domestic and farm workers must get pay statements under their sectoral determinations, and payslips are your best evidence in any later dispute.
• Leave register showing annual, sick and family responsibility leave taken.
• UIF registration and monthly declaration records.
• Compensation Fund registration and annual return of earnings.
• A disciplinary code or workplace rules, and a file for any warnings or hearings.

Employee records contain personal information. Read does POPIA apply to my small business on keeping them safely.

Realistic timeline

• Employment contract: a day or two with a template, a week with an attorney.
• UIF registration: the online portal usually confirms within days.
• Compensation Fund registration: weeks, sometimes longer, but you must apply promptly.
• First monthly UIF and PAYE payments: due within the first days of the following month, on the date SARS sets.

Common mistakes and what they cost

• Calling an employee a contractor to avoid the rules. The CCMA looks at the reality. You end up with an employee, back UIF, back PAYE and an unfair dismissal claim.
• No written contract. The Department can order compliance, and every dispute about hours, wage or leave is decided on the employee's word against yours.
• Not registering with the Compensation Fund. An injured employee still claims from the Fund rather than suing you, but the Fund can recover arrear assessments and, since 1 April 2026, a penalty of up to the full cost of the compensation.
• Paying below the minimum wage. The Department can order back pay and impose a fine.
• Dismissing on probation without a process. A CCMA award of compensation, plus your time at the hearing. See how long a CCMA case takes.
• Deducting for breakages without agreement. The deduction is unlawful and must be repaid.

If you cannot afford an attorney

You do not need an attorney to hire someone properly. The Department of Employment and Labour publishes the required particulars of employment, the current minimum wage and guidance on leave and hours, and its labour centres answer questions at no charge. The CCMA on 0861 16 16 16 offers free advice on dismissal procedures and runs training for small employers. The Small Enterprise Development Agency provides free guidance on registering as an employer. University law clinics assist small employers who meet their criteria.

If the relationship ends in a dispute, referral to the CCMA is free for both sides. A claim by an employee for unpaid wages can also go to the Department, and an individual owed money by an employer who is a natural person may use the Small Claims Court up to its limit, though a company cannot claim there. See the Small Claims Court calculator.

Frequently asked questions

Can I employ someone part time or casually without all this? Part time and casual employees are employees. UIF, the minimum wage and the Basic Conditions of Employment Act apply, with some adjustments for those who work very few hours a month.

What is the notice period for a new employee? The Basic Conditions of Employment Act sets minimum notice periods that increase with length of service, starting at one week for an employee in their first six months. Your contract may set longer periods but not shorter ones.

Can I put someone on a fixed term contract instead? Yes, but the Labour Relations Act limits the use of fixed term contracts for lower earners, and a fixed term employee who is retained beyond the term without a good reason may be treated as permanent.