Hiring Your First Employee: Complete South African Guide
Everything you need to know before making your first hire: legal requirements, UIF registration, employment contracts, and onboarding best practices.
When to Hire Your First Employee
Hiring your first employee is a major milestone for any business. It signals growth but also brings new responsibilities and legal obligations. In South Africa, employment law is comprehensive and favors employee protection - understanding it before you hire is essential.
This guide walks you through everything from deciding when to hire, to creating compliant employment contracts, registering for UIF and COIDA, and onboarding your new team member.
- You're turning down work because you can't handle the volume
- Growth is limited by your personal capacity
- You have consistent revenue to cover salary + costs for 3+ months
- There are tasks you shouldn't be doing (your time is more valuable elsewhere)
- You have systems and processes someone else can follow
The True Cost of Employment
Before you hire, understand the full cost. An employee costs more than just their salary:
| Cost Component | Percentage of Salary | Example (R15,000 salary) |
|---|---|---|
| Basic Salary | 100% | R15,000 |
| UIF (Employer Contribution) | 1% | R150 |
| SDL (Skills Development Levy) | 1% | R150 |
| COIDA (varies by industry) | 0.5% - 3% | R150 (est. 1%) |
| Leave Provision (annual + sick) | ~8% | R1,200 |
| Equipment/Tools (amortized) | Varies | R500 (est.) |
| Total Monthly Cost | ~112% | R17,150 |
A rough rule of thumb: budget 1.3x the gross salary for the true cost of employment. A R15,000 salary employee costs you closer to R19,500 when you account for all contributions, leave, and overhead.
Legal Requirements Before Hiring
Before your first employee starts, you must have these registrations in place:
SARS Registration for PAYERequired
Register as an employer with SARS to deduct Pay-As-You-Earn tax from employee salaries. Do this via eFiling.
UIF RegistrationRequired
Register with the Unemployment Insurance Fund. Both you and employee contribute 1% of salary each.
SDL Registration (if applicable)Required
Skills Development Levy (1% of payroll) required if your payroll exceeds R500,000/year. Register via SARS.
COIDA RegistrationRequired
Register with the Compensation Fund for workplace injury insurance. Required by law for all employers.
Written Employment ContractRequired
Must be provided within 2 months of start date. Must include all terms required by BCEA.
Failing to register or make contributions can result in:
- SARS: Penalties + interest on unpaid PAYE, SDL
- UIF: Penalties + employee can't claim benefits
- COIDA: Personal liability for workplace injuries (potentially millions)
- No contract: Employee deemed permanent with all rights
Minimum Wage Requirements
South Africa has a National Minimum Wage that you must comply with:
- General workers: R27.58 per hour
- Domestic workers: R27.58 per hour
- Farm workers: R27.58 per hour
- Expanded Public Works: R15.16 per hour
Monthly (45 hours/week): R27.58 × 195.67 hours = ~R5,395/month minimum
Note: Some sectors have higher minimum wages set by Bargaining Councils. Check if your industry has a sectoral determination.
Minimum wage is the legal floor, not a recommendation. To attract and retain good employees, you'll likely need to pay above minimum. Research market rates for your role and area.
The Hiring Process
Define the Role
Write a clear job description. What tasks will they do? What skills are required? What are the working hours? What's the salary range?
Advertise the Position
Use free platforms: Facebook Jobs, Gumtree, LinkedIn, community WhatsApp groups. Word of mouth is often most effective for first hires.
Screen Applications
Review CVs against your requirements. Don't just look for experience - attitude and reliability matter more for small businesses.
Interview Candidates
Prepare questions in advance. Focus on past behavior ('Tell me about a time when...'). Ask about their circumstances and availability.
Check References
Always verify previous employment. Ask about attendance, reliability, and why they left. One bad hire costs more than waiting for the right person.
Make an Offer
Verbal offer first, then written. Include salary, start date, working hours, leave, and any probation period.
Prepare Employment Contract
Use a proper contract template. Include all terms required by law. Have them sign before starting.
Complete Onboarding
Collect their ID, banking details, and tax number. Register them for UIF. Set up payroll. Train them properly.
The Employment Contract
South African law requires you to provide a written employment contract containing these details:
Full names of employer and employeeRequired
Legal names and ID numbers for both parties.
Job title and descriptionRequired
What role they'll perform and their main duties.
Place of workRequired
Where they'll work - address or 'various locations' if applicable.
Working hoursRequired
Start/end times, days of work, overtime arrangements. Maximum 45 hours/week ordinary time.
RemunerationRequired
Salary amount, payment frequency (weekly/monthly), payment method.
DeductionsRequired
PAYE, UIF, and any other agreed deductions.
Leave entitlementsRequired
Annual leave (minimum 21 consecutive days), sick leave, family responsibility leave.
Notice periodRequired
How much notice for termination. Minimum: 1 week (under 6 months), 2 weeks (6-12 months), 4 weeks (over 1 year).
Probation periodConditional
Optional but recommended. Maximum 6 months (3 months typical). Clear performance criteria.
If you don't provide a written contract, the employee is automatically considered permanently employed with all rights under the BCEA. You can't claim "they were just helping out" or "it was temporary."
Leave Entitlements
Employees have legal rights to various types of leave:
Annual Leave
21 consecutive days per year (15 working days). Accrues monthly (1.25 days). Can carry over but must be taken within 6 months of next cycle.
Sick Leave
Paid sick leave over 3-year cycle equals days normally worked in 6 weeks. Doctor's note required if absent more than 2 consecutive days.
Family Responsibility
3 days per year for birth of child, illness of child, or death of close family member. Proof may be required.
Maternity Leave
4 consecutive months unpaid (UIF may cover portion). Cannot work for 6 weeks after birth. Job must be held.
Keep accurate leave records. Use a simple spreadsheet or leave management app. When an employee takes leave, record:
- Type of leave taken
- Dates (from and to)
- Balance remaining
- Any supporting documents (sick notes, etc.)
Setting Up Payroll
Before your employee starts, set up a payroll system:
What to Collect from Employee
Copy of ID documentRequired
South African ID or valid work permit for foreign nationals.
Tax numberRequired
If they don't have one, they can register at SARS or via eFiling.
Banking detailsRequired
For salary payments. Bank confirmation letter if possible.
Contact detailsRequired
Phone number and physical address.
Proof of qualificationsRecommended
If relevant to the role (certificates, licenses, etc.).
Payroll Options
Manual Payroll
Spreadsheet-based. Free but time-consuming and error-prone. OK for 1-2 employees.
Payroll Software
SimplePay, PaySpace, Sage Payroll. R100-R500/month. Calculates tax, generates payslips, files submissions.
Payroll Bureau
Outsource to an accountant or payroll provider. R500-R1,500/month. They handle everything.
Every month, you must submit EMP201 to SARS showing:
- PAYE deducted from employees
- UIF contributions (employer + employee)
- SDL (if applicable)
Payment is due by the 7th of the following month. Late payment incurs penalties and interest.
Probation Periods
A probation period lets you assess a new employee before confirming permanent employment:
- Duration: Typically 3 months, maximum 6 months
- Purpose: Assess skills, performance, and fit
- Contract: Must be specified in employment contract
- Rights: Employee still has all BCEA rights during probation
- Notice: Shorter notice period is acceptable (e.g., 1 week)
During Probation
- Set clear performance expectations from day one
- Provide regular feedback (weekly is ideal)
- Document any performance issues
- Offer training and support to help them succeed
- Conduct a formal review before probation ends
You can't just dismiss someone at the end of probation without reason. If they're not performing:
- Give clear feedback on what's lacking
- Give them a chance to improve (with support)
- Document the process
- If no improvement, dismissal must still be fair
Common Hiring Mistakes
Hiring Friends/Family
Can work, but often doesn't. Harder to manage, harder to fire if needed. Keep it professional if you do.
No Written Contract
Verbal agreements mean nothing in court. Always have a signed contract before they start.
Skipping Reference Checks
Bad hires are expensive. One phone call to a previous employer can save you months of problems.
Ignoring Compliance
Not registering for UIF/COIDA feels like saving money until someone gets hurt or claims benefits.
Ready to Hire?
Your action checklist:
Calculate total employment costRequired
Salary + UIF + COIDA + leave provision + overhead. Can you afford this for 3+ months?
Register with SARS as employerRequired
Set up PAYE on eFiling. Get your SDL number if applicable.
Register with COIDARequired
Essential before anyone starts working. Protect yourself from liability.
Prepare employment contractRequired
Use a template that complies with BCEA requirements.
Set up payroll systemRecommended
SimplePay or similar. Worth the monthly cost for compliance and time savings.