Page 260 - SAIT Compendium 2016 Volume2

IN 17 (3) Income Tax acT: InTeRPReTaTIon noTes IN 17 (3)
an employee relationship. Any restraint of trade payment made on or after 23 February 2000 to a natural person, or a ‘labour broker’ (other than a labour broker in possession of a current exemption certi cate), or a ‘personal service provider’ constitutes ‘remuneration’, which means that employees’ tax must be withheld from the payment.
9.2.2 Reports
A reporting regime indicates that a measure of supervision exists, albeit indirect and historic in nature. The existence of a reporting regime, depending on factors such as content, detail, regularity, and obligation, can be persuasive in favour of an employer- employee relationship. A reporting regime that amounts to control of the manner in which work is done, is suf cient to satisfy the ‘control’ requirement in exclusionary subparagraph (ii) of the de nition of the term ‘remuneration’.
9.2.3 Training
The typical independent contractor invests in his or her own training, and is free to choose his or her own production techniques. Typically, an employer might provide training to an employee but not to an independent contractor. Training can serve as a technique of supervision (ensuring co-ordination), or of control (ensuring that the employer’s techniques are followed to control the manner of working).
• Training relates to the degree or extent of control (for example supervision) where it is intended to improve productivity by increasing technical competence, productivity and goodwill by promoting uniformity of production techniques and procedures, knowledge of employer administrative and IT systems etc.
• Training relates to the quality of control (for example, control of manner) where its purpose is to promote an exclusive production technique or form of service provision (for example, client etiquette), in which case, it may amount to a near- conclusive indicator, and would be suf cient to satisfy the statutorily conclusive ‘control’ requirement in exclusionary subparagraph (ii) of ‘remuneration’.
• In some cases, training may not necessarily indicate an employee relationship, for example, ‘product training’ given to a broker-house or a commercial traveller, who may still be independent contractors.
9.2.4 Productive time (control of working hours, the working week)
Where the worker has contracted away his or her right to control his or her time, even for only a portion of his or her productive hours, there is at least a persuasive indicator in favour of an employee contract. It may also be suf cient to satisfy the statutory conclusive ‘control’ requirement in exclusionary subparagraph (ii) of the de nition ‘remuneration’, and actual exercise of this right is not necessary. An employer’s exclusive entitlement to all of a worker’s productive hours is a near- conclusive indicator of an employer-employee relationship. Examples of control over productive time are:
• Control of work periods
Ordinarily, an independent contractor can choose which client/employer he or she services on a particular day or in a particular period of a day. Therefore, clauses controlling ‘work periods’ (hours of work, working days, sick or annual leave) re ect the acquisition of control of the period in which work is done.
• Amount of time
An independent contractor can choose which client/employer he or she services at a particular time of the day. Therefore, a clause indicating that the worker works part time for a speci c daily time slot would be at least persuasive in favour of an employee relationship. While control of ‘work hours’ is normally associated with an employee relationship, this indicator is not decisive and may depend on the purpose of acquisition of control, namely:
• Control can be acquired for purposes of co-ordination of a mixed employee/independent contractor workforce,
and its existence is incidental to the independent contractor›s contract.
• Control can be acquired for the purpose of ensuring that the productive capacity of the true employee is
optimally used, and its existence is intrinsic to the employee›s contract. It may also indicate acquisition of exclusive use of productive capacity. Ordinarily, the greater the amount of time so controlled, the greater the impression of employee status should be.
9.3 Indicators resonant of (i.e. creating an immediate or super cial impression of an employee relationship or an independent contractor relationship
This category of indicator (when bona de) may give insight into how the parties viewed their relationship. The existence of a term containing this indicator or of an aspect of the employer/worker relationship embodying this indicator, would be regarded as relevant one way or the other, and must be considered in forming a dominant impression. However, it is likely that these indicators are either susceptible to deceptive contractual manipulation or relate tenuously to the essence of the distinction between the two contracts. Some examples are:
9.3.1 Tools, materials, stationery etc
An independent contractor characteristically possesses (that is, has invested in) his or her own tools or equipment, production or of ce materials, business stationery etc and provides other necessary raw materials. Therefore, provision by the employer of of ce equipment or tools, stationery etc tends to indicate a degree of dependence and lack of investment, hence the existence of an employer-employee relationship.
9.3.2 Of ce or workshop
An independent contractor characteristically operates from his or her premises (owned or leased), and is only temporarily and sporadically present at the client’s premises. Where the client provides an of ce/workshop or the work continually and invariably occurs at the usual place of business of the employer, there is an indication of dependence, control, lack of investment, and hence, an employer- employee relationship. The usual place of business of the employer may be understood to comprise all those places where the employer enterprise conducts any business-related activity.
9.3.3 Integration/employer’s usual work premises
Where the person (worker or business) is integrated into and operates in or from the employer’s usual place of business, (particularly if the person cannot sustain his or her activities other than at the employer’s usual work
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