Navigating Independent Contractor Criteria: Insights from the Post-COVID-19 Era

The classification of workers as either independent contractors or employees has significant tax implications under South African income tax law. Employers are required to withhold employees’ tax from payments to employees but not from independent contractors. The Fourth Schedule to the Income Tax Act 58 of 1962 provides statutory tests, including the premises and control or supervision tests, to determine independent contractor status. However, the shift to remote work during and after the COVID-19 pandemic has challenged the applicability of these tests, leading to uncertainty for taxpayers and employers. This study evaluates whether these statutory tests, specifically the premises and supervision or control tests, remain relevant post-pandemic and compares South Africa’s approach with those of the United Kingdom, Australia, and Canada. The study uses a qualitative approach, an interpretative paradigm, and a doctrinal research method to address the research objective. The study finds that the current statutory tests may need revision to align with evolving work models. The study recommends policy adaptations to reflect post-pandemic work realities, ensuring tax legislation remains practical, including reclassifying the premises and control or supervision test from statutory test to elements of the dominant impression test. This suggested reclassification would allow for a better balancing of various factors in the dominant impression test rather than relying on conclusive tests that lack flexibility in responding to workplace changes.