Enterprise

Can my casual employees sue me for lack of contract

employees

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Dear Cathy,

Question: I am a make-up artist working in Nairobi. My business has grown to the extent that I have to train and hire assistants, especially during the weekends and holidays when demand for my services is very high. At the moment, I have retained five assistants who I have been training. We do not have a formal contract and we operate on trust. The nature of my business is such that when it is low, I do not need their services. What structure can I use to engage them without exposing myself to employment lawsuits? -Wanjiku

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Answer: Dear Wanjiku, thanks for your question.

Your issue is common to businesses whose volumes change depending on the season.

As we head into the festivities, you are quite busy with bookings and therefore need to hire extra hands. I also guess that when the festive season ends, you might not be so busy.

Therefore, will not need to retain assistants.

The traditional method of retaining the workforce has been through employment. This is where you would hire the assistants and pay them a periodical stipend that you both agree on.

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While traditional employment may be the most common method, did you know that it might not be the most suitable arrangement for retaining your assistants?

Here is why employment may not be the most suitable. Firstly, it is highly regulated under the Employment Act.

This Act places a large responsibility on employers when it comes to staff obligations. Furthermore, a structure like employment means that the employer is responsible for several statutory obligations such as income tax, social fund and health fund.

These statutory obligations drive the wage bill higher. Unless stated in the employment contract, you will have an obligation to pay salaries and wages whether or not your business performs well. Under employment laws, you cannot also discharge your staff unless due process is followed.

Structuring your relationship with assistants under employment laws may not be the most suitable for your seasonal business.

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There is another option that offers your business and your assistants a win-win solution. Taking up this option does not mean that you are oppressing your assistants or exploiting them.

It does not also mean you are participating in illegality because the other option I am about to offer is perfectly legal.

This option is called the independent contractor relationship.

The difference between this and employment is that the independent contractor model will assist your business to circumvent the labour laws while offering your assistants all benefits they would get if they were employed.

In this arrangement, you get to enjoy the services of your assistants and still pay them the agreed salary in a period you both agree to. It could even be monthly.

You will not have any statutory obligations like income tax or other deductions that drive up the wage bill. Furthermore, you will not be dragged to the labour court in the event of a dispute.

You still get to set the terms of engagement, for example, working hours, place of work, quality, and standard.

The assistants are also bound to confidentiality. In some cases, you can even put in restrictive covenants to prevent them from poaching your clientele.

A great strategy for business survival is taking advantage of loopholes in the law. Independent contractor arrangement is legal and is the best structure for your relationship with your makeup assistants.

Ms Mputhia is the founder of C Mputhia Advocates.