KNOW THE DIFFERENCE AND AVOID THE PITFALLS
A Labour Broker is any person or business who, for a fee, recruits or provides workers to a client, where that person or business is reimbursed by the client and where that person or business pays the workers concerned.
The workers are under the direct control of the client and not the Labour Broker. The Labour Broker does not provide equipment, tools and safety equipment to the workers involved. This is the responsibility of the client.
An Independent Contractor is any person or business that is contracted by a client to perform a specific task, and where the contractor is only responsible for the delivery of a product or the end result of a service, and where the contractor is paid for such end result.
The contractor is not compensated for the number of workers he uses to achieve the end result, but for the end result as contractually agreed with the client.
The contractor’s employees are under the direct control and supervision of the contractor and not the client and are compensated by the contractor and provided with necessary tools and safety equipment. The contractor uses his own equipment and tools to complete the contractual task.
The biggest difference between a Labour Broker and an Independent Contractor is the nature of the service offered and the manner of invoicing.
What are the implications of this for the Client?
Should the Producer / Client use a Labour Broker, there are several implications:
- Where the Client does not have an Exemption Certificate for income tax to be delivered the relevant Labour Broker, SARS can hold the Producer / Client responsible for 30% of the income that the Labour Broker earned from that particular client.
- Claims / disputes in terms of the Employment Relations and Sectoral determination stipulate that the Labour Broker and his client are jointly and severally liable for any claims / disputes.
See table below for a summary of differences between Labour Broker and Independent Contractor.
| LABOUR BROKER | INDEPENDENT CONTRACTOR | |
| Nature of services rendered | Labour broker is contracted over a set period of time to deliver staff to the Client. | Independent contractor is contracted by Client to deliver a specific pre-agreed outcome to the Client. |
| Product delivered | Staff, whether unskilled labour or highly specialized labour. | Specific outcome-oriented product, e.g. pruning trees, harvesting, preparing soil, etc. |
| Nature of Billing | The Client reimburses Labour Broker based on the number of workers hired, e.g. 10 General Workers @ R100 per person / day. No mention is made of services rendered by worker, only job title / job level, rate and hours worked. | Customer reimburses contractor for product or outcome-oriented service, e.g. pruning of 100 fruit trees @ R10 p / tree. No mention is made of quantity of workers / hours used to deliver product, only description of outcome / product, quantity of units and tariff per unit. |
| Primary Employer | Labour Broker is the primary employer, the Labour Broker leases its staff to the Client. | Contractor is primary employer and uses its own staff to deliver product / outcome to Client. |
| Compensation | Labour Broker reimburses the worker according to number of hours worked for the Client. | Contractor compensates the worker according to the number of hours worked for the contractor. |
| Statutory Benefits(Leave, sick leave, UIF, pension etc.) | Labour Broker is responsible for meeting statutory benefits. | Contractor is responsible for complying with statutory benefits, when granting leave the Client does not need to be consulted. |
| Right to organization(Trade union membership, organizational rights, negotiations) | Labour Broker is the primary employer and wage negotiations take place through Labour Broker, access to work premises is granted in consultation with Client. | Contractor is primary employer and wage negotiations take place through contractor, access to work premises is arranged in consultation with contractor at contractor’s address. |
| Discipline & Grievances | Worker is subject to both the Client’s and Labour Broker’s disciplinary code, but is disciplined by Labour Broker. | Worker is subject to contractor’s disciplinary code and is disciplined by contractor. |
| Organizational Structure | Worker is subject to and reports to Client’s authority structure and forms part of Client’s organogram, but is disciplined by the Labour Broker. | Worker subject to and reports to contractor’s authority structure and forms part of contractor’s organogram. |
| Provision ofequipment andtools | Equipment or tools or safety equipment is provided by the Customer. | Contractor is responsible for providing all tools, safety equipment and accidental claims. |
© Andre Bloem