Contract vs. Probation

05 Mar Contract vs. Probation

I often get asked to place a permanent employee with a company then receive a three-month contract as an offer of employment. I fully understand this, it minimises risk and makes it easier to get rid of the candidate after the would-be probation period. But, isn’t as risk free as people may think.  Today, we discuss contract vs. probation, and which is the better way to go dependent on your circumstances.

Here are the guidelines pertaining to the law:

Section 83 A of the BCEA goes further in the definition of “employee.” It states that –

A person who works for, or renders services to, another person, is presumed, until the contrary is proved, to be an employee, regardless of the form of the contract, if any one or more of the following factors is present:

1. The way the person works is subject to the control or direction of another person;
2. The person’s hours of work are subject to the control or direction of another person;
3. In the case of a person who works for an organisation, the person is a part of that organisation;
4. The person has worked for that other person for an average of at least 40 hours per month over the last three months;
5. The person is economically dependent on the other person for whom that person works or renders services;
6. The person is provided with tools of trade or work equipment by the other person;
7. Or the person only works for or renders services to one person.

There is not only the legal side to consider, but you also need to understand that the risk is high.  A candidate could except a permanent position for security reasons, even if only on contract. This is “OK” if they are not a good match, but what if they are the perfect match and you lose them?

While under contract candidates are also not entitled or eligible for membership of the company pension scheme or medical aid scheme, this also is risky for a contractor, and could sway them if offered a permanent job.

So, what is better – contract vs. probation?

My first question, when presented with a contract to test the candidate prior to permanent employment contract is, “Is this a contract because it is project or contract driven, or is it a contract because you are looking for a risk free option?”  If the answer is risk related, then I advise the client to go the probation option. Use a Limited Duration Contract for a contractor and a Permanent Employment Contract, with a probation clause, for a permanent employee.

When offering permanent employment with probation, please make sure there are performance appraisals recorded. Any issues that arise need to be recorded in these appraisals. The candidate needs to be informed of what they are doing wrong and guided on how to complete the task correctly. You can basically address all disciplinary issues in these appraisals. Should you not want to extend permanent employment after the trial period, you are within the rights of your administration.  If you are not sure, you could consider extending the trial period. You cannot use this as a roll over strategy, but you can do it to give a candidate the benefit of the doubt to prove themselves.

The main difference between employee and Independent Contractor is the nature of the contract itself. It must be determined what the intention was of the parties to the contract.  Was the intention that it was supposed to be a contract of employment, or was the intention that it be an Independent Contractor relationship?