With the ravages of the Covid-19 pandemic still being felt, a growing number of South Africans in full-time employment are taking on a ‘side hustle’ to supplement their income.
Remote working has also provided employees with a great opportunity to engage in secondary jobs, especially where once being at the office may have been a hindrance.
Data from the Momentum/Unisa Household Index shows that an estimated 14% of households obtain an additional income from a side hustle. The majority (88%) of these households have one side hustle, while 12% have two or more.
However, striking a balance between the demands of a second line of employment, whilst maintaining deliverables in one’s primary 09h00-05h00 job, can result in blurred lines, said legal firm Cliffe Dekker Hofmeyr.
It noted that moonlighting is when employees, during their own time (or even during employer time), and outside working hours of their primary employment undertake to offer services to another employer for reward.
A side hustle is typically defined as additional work which a person is more passionate about than their full-time day job that supplements their income.
The second practice at play is contractual obligations between the employer and employee, Cliffe Dekker Hofmeyr said.
“South African law does not explicitly preclude an employee from earning an additional income, and the general principle is that an employee cannot be unreasonably kept from supplementing their income.
“However, there are circumstances in which this may not be allowed, such as being expressly prohibited in terms of the employment contract, a workplace policy, and when it actually or potentially harms the primary employer’s business, or when it negatively impacts the persons capacity to work.”
To prevent uncertainties in the workplace, employers typically regulate this practice by expressly prohibiting a secondary occupation in employment contracts, workplace policies and/or collective agreements, Cliffe Dekker Hofmeyr said.
“This is mostly considered as best practice, and employers who do not have these forms of restrictions, are advised to do so, especially in the existing economic climate.
“In addition, an employer may also limit the practice by providing that an employee must disclose the practice in advance and that it would be subject to the employer’s discretion for the employee to continue with their additional venture.”
What if there’s no clause?
If a prohibiting clause or workplace policy does not exist, an employee may have a secondary job provided that it does not contravene the standards of the primary employment relationship, Cliffe Dekker Hofmeyr said.
Additionally, it should be stipulated that there is no conflict of interest with the primary employer and the primary employer is not prejudiced for instance by the employee incapacitating himself in some form by reduced output or performance, the firm said.
“At the heart of the employment relationship are trust and confidence, and an employee is expected under the law to be honest, loyal and promote the business in the best interests of the employer.
“If the employee’s secondary job compromises the employment relationship it may result in possible disciplinary action and dismissal depending on the circumstances. The Labour Appeal Court has held that for moonlighting to be effectively prohibited there must be a specific rule stating that it is not permissible, and the rule should be known to employees.”
There have also been instances where an employee takes sick leave to attend to their secondary job, Cliffe Dekker Hofmeyr said.
“When an employer suspects this is occurring in the workplace, the employer should conduct a fair investigation. Where the conduct is established in addition to moonlighting the employee would be guilty of dishonesty or fraud which would be a basis for dismissal.
“In closing, employees who moonlight or ‘side hustle’ should do so with eyes wide open. Employers who do not regulate moonlighting or ‘side hustles’ should do so, as it is important to establish clear boundaries in the employment relationship.”
Types of companies
While CIPC registration is not a pre-requisite for a successful side hustle, it is a great opportunity to reserve the business name you want to use and trade under, said Lauren Deva, Pillar head for Commercial Transactional Pillar at FNB Business.
Before registering your side hustle, it is important to decide on a suitable business structure, she said.
There are several business structures that you can choose from depending on the type of side hustle you are operating.
- Pty Ltd, is a private company treated as a separate legal entity.
- Franchise, a form of a private company, which has a business model that can be licensed to third parties.
- Non-profit company (NPC), previously known as a section 21 company. It is set up to benefit the public.
- Public Company has shares that are traded publicly through a stock exchange.
- Sole Proprietor where there is no legal distinction between the owner and the business
- Commentary by Imraan Mahomed (director) and Storm Arends (candidate attorney) at Cliffe Dekker Hofmeyr.