If you run a small business in South Africa, this is the week your operating environment changed. The Labour Law Amendment Bill, published on 26 February 2026, proposes sweeping changes to the Labour Relations Act, Basic Conditions of Employment Act, and several other pieces of legislation. It landed one day after the budget delivered VAT threshold relief for SMEs.

Two reform packages in two days. Both address things we specifically called for in our letter to the president on small business reform. Here's what's in the Bill.

Under the proposed changes, employers would no longer need to give an employee a formal opportunity to respond before dismissal during the first three months of employment, or during a longer probation period if reasonably justifiable. Currently, even probation dismissals carry real procedural risk at the CCMA. This change makes the early hiring period significantly less dangerous for small teams still figuring out whether a new person is the right fit.

Newly established businesses with fewer than 50 employees would be exempt from bargaining council collective agreements on wages and conditions for their first two years. This gives startups breathing room to establish themselves before having to comply with sector-wide wage structures they may not be able to afford yet.

The updated Code of Good Practice on Dismissal, already in effect since September 2025, explicitly acknowledges that small businesses cannot be expected to run time-consuming investigations or formal pre-dismissal processes. A five-person startup is not a corporate HR department, and the law now says so.

This Bill is a negotiated deal. Over two years of NEDLAC talks produced concessions for both sides. Founders get flexibility, but they also get new obligations.

Statutory severance goes from one week to two weeks of pay per completed year of service. The increase applies only to years worked after the amendment takes effect, but for any startup that grows a team and later needs to restructure, the cost of letting people go just increased significantly.

Employers using zero-hour or on-call contracts must now specify maximum hours, availability periods, and cancellation notice. Cancel work without proper notice, and you still pay. The Bill also broadens who counts as an "employee," meaning some contractor and freelancer arrangements could now fall under employee protections. For early-stage companies that rely on flexible labour to stay lean, this changes the calculus.

All parents get four months of parental leave (shared between both parents where both are employed, totalling four months and ten days). Progressive and important, but for a team of six, someone being out for four months requires serious planning.

Employees earning above R1.8 million per year would generally not be entitled to reinstatement after unfair dismissal, with compensation capped instead. This mainly affects larger employers, but it's useful context for founders hiring senior talent.

We called for reform in three areas. Here's what shifted after one extraordinary week:

The honest question: if probation dismissals get easier but retrenchments get more expensive, has the overall risk of hiring actually decreased? A founder who hires someone and discovers after six months that they need to let them go now faces a steeper exit cost. The first three months are cheaper to navigate, but everything after that just got pricier.

There's also a tension between encouraging entrepreneurship and tightening contractor rules. Many early-stage companies use freelancers precisely because permanent employment carries too much risk. Broadening the definition of "employee" complicates that model at the same time the Bill is trying to encourage hiring.

This is still a proposed law. Public comments are open until 28 March 2026. Parliament must debate and pass it before anything takes effect. Founders should read the full Bill and consider submitting comments while the window is open.

The pattern is clear, though. Tax reform landed through the budget. Labour reform is now on the table. Capital access is still the missing piece, and until it's addressed, the other two reforms are doing half the job.

This news first appeared in our March ‘26 edition on We Need Milk grocery aggregator.

See our original call for reform in small business reform in South Africa. Read how the budget delivered in South Africa's business reform. And explore how WhatsApp time and attendance is changing SA workforce management.