Experts behind the Labour Law for Managers Loose Leaf Service say the only way to decide if the person working for you is an independent contractor or an employee is to ask yourself these two questions:
#1: Am I paying for working capacity?
If the person says, 'here's my working capacity, it's up to you to use my working capacity as you deem appropriate', this person is an employee.
#2: Am I paying for a product, service or result?
If, for example, you say to the person, 'I want a certain product, service or a result and you must deliver that product, service or result by whichever means you deem appropriate', this person is an independent contractor.
According to burmeisters.co.za, an employee is entitled to numerous benefits under the employment relationship. You can't unfairly dismiss him as his conditions of employment are set by the Basic Conditions of Employment Act (BCEA) and he has benefits of collective bargaining acts such as strikes.
An independent contractor, on the other hand, is an agent of the principal who hires him. He undertakes to do a specific piece of work or to produce a certain result and you remunerate him for fulfilling his contractual obligations. He is his own master. You can't dismiss him like how you would an employee.
'The relationship between the contractor and his principal usually terminates naturally when all parties have performed their obligations by agreement or where one of the parties unilaterally cancels the agreement. This unilateral cancellation has to be lawful in terms of the law of contract,' adds the site.
There you have it: You must clearly define someone as an employee or an independent contractor now that you know how. And be sure to put everything in writing by drafting an employment contract. If you don't, you'll face legal disputes as the person will claim he's entitled to certain things when that isn't the case.