Some companies in Zimbabwe have reduced the rate of employing people on a permanent basis opting to employ on contract basis. This is because of the nature of some businesses, the certainty of going concern and at times the availability of constant income. This means that a person works for a certain period of time for example one week or a year and their contract is renewed after that or terminated. This also applies to non- governmental organisations that do projects with a specific time period and after that embark on another. At times they employ the sufficient human resource for that period and after that start all over. Income for the services rendered is derived from the place services are performed regardless of where the contract is made, the place of payment or the residence of the payer. Where the services are rendered is the source which should be in Zimbabwe as the “source based system is used in this country”. The question that some employers ask is employee’s tax deducted on earnings of contract or casual workers.  The law addresses the issue otherwise.

Employee tax

Employees’ tax is computed on remuneration paid or payable in any year of assessment to an individual who is an employee in Zimbabwe. Whether it’s a written contract or a word of mouth what is important is there being an employer, employee and remuneration for tax to be charged. An employee is a person who performs services for an entity under the direction and control of that entity. The relationship of employee/employer exists when the person for whom services are performed controls remuneration and terms of employment. An employee may perform services on a temporary or less than full-time basis. The law does not exclude services from employment that are commonly referred to as day labour ,part-time help, short term fixed contract, casual labour ,temporary help or probationary. The Income Tax Act sets the environment for application of employees’ tax as that which contains or predicated by a relationship between an employer and employee.There is a stipulated threshold for taxable income in the Finance Act and this means that any person who does not earn that stipulated income is not an employee for the purpose of the Act. The type of contract is therefore irrelevant.

Services rendered at source

As long as a person renders a service that is part of gross income therefore will be subject to tax as long as it is within the stipulated threshold .Income from services rendered is derived from the place the services are performed regardless of where the contract is made or residence of the payer. The definition of gross income as stated in the Income Tax Act also includes: “any amount so received or accrued in respect of services rendered or to be rendered, whether due and payable under any contract of employment or service or not, and any amount so received or accrued by reason of the cessation of the employment or service of a person other than a benefit (not being a pension or gratuity) received or accrued by reason of contributions made to the Consolidated Revenue Fund, and any amount so received or accrued in commutation of amounts due under a contract of employment or service”. The service should be rendered in Zimbabwe for it to be taxed in Zimbabwe which is supported by a certain case whereby the taxpayer was employed to manage, on a salaried basis, a store in Bechuanaland. He sub-contracted, at own expense, a storekeeper to run the store on a day to day basis, while he lived in Bulawayo. He was personally to discharge the other duties as required by the contract. He spent the first four days of each month at the store and about ½ a day whilst in Bulawayo on store business. The Commissioner wanted to tax the ½ day’s remuneration but this was regarded as irrelevant as the taxpayer‘s source of income was mainly in Bechuanaland where he was employed and the greater part of his work was carried out there. An employee’s principal place of work is usually the place where he spends most of his/her working time.  


The employer is responsible for deducting and remitting PAYE to ZIMRA for all the employees who earn the minimum taxable income stipulated by law and above, every month regardless of the period worked. Failure to do so the employer will be guilty of an offence and  liable to a fine. It is also the duty of the employer to inform his/her workers about PAYE deduction so that those who do not have the adequate knowledge can be enlightened and understand why their remuneration will be lesser than the gross income. The employer should be able to differentiate between a contract worker and an independent contractor so as to deduct the correct amounts. In some instances a casual worker may supply their own tools but as long as the hirer provides the substantial investment in or assumes the substantial risk of undertaking he/she still remains an employee subject to payee. In the case that the employer fails to distinguish the employee relationship he/she can consult legal advisors .The source of the services rendered determines whether employee tax should be deducted or not. Hence if the source is in Zimbabwe i.e. where the services are carried out, PAYE should be deducted but if the service is rendered outside Zimbabwe that does not apply. This also applies to employees who work in Zimbabwe but are paid from abroad for example working for international firms or are donor funded; PAYE will be deducted from their incomes in Zimbabwe.