Perceptions of employers and/ or entrepreneurs on the clarity of the definition(s) of independent contractor and employee in the greater Richards Bay area.

Abstract

The definitions of independent contractor and employee are problematic in the context of the South African Income Tax Act. This is evident from the number of cases in the South African Courts on this subject. Therefore, the main purpose of this study was to investigate the perceptions of the employers of the clarity of the definitions of independent contractor and employee in the greater Richards Bay area. The study used sociological institutionalism theory (SIT) as its model. This was a quantitative study conducted by means of 140 questionnaires were administered to employers in the greater Richards Bay area, of which 128 questionnaires were completed in full. The data collection was through questionnaires and interviews, characterised by a simple random sample that adequately represents the target population. The data was analysed with the assistance of the Statistical Package for Social Sciences (SPSS) version 24 (2015). The reviewed literature revealed that the employers have less knowledge in terms of the difference between an independent contractor and an employee, which causes difficulties as they prepare for the mandatory SARS submissions for tax compliance. Although most of the respondents had obtained tertiary qualifications and had been employed for a number of years, this problem of misunderstanding of the tax implications of independent contractors was noticed in the answers of respondents. This suggested that the respondents may not be clear about the understanding of the definitions of independent contractor and employee as per the SARS Fourth Schedule as some of them profess. The study provided strategic recommendations to advance employers’ knowledge on the difference between independent contractors and employees. This will also help employers’ understanding of tax implications imposed by the South African Revenue Services (SARS) over independent contractors versus employees. This study also aims to influence SARS to revisit the punitive manner in which SARS approaches the misunderstanding of these terms and begins to clarify the definitions of Independent Contractor and Employee. The study will also assist in improving the image of SARS in the eyes of employers and the general public, which could help in forging a good working relationship between SARS and employers, and ultimately increase tax compliance.