Checking a contractor letter of good standing

15 March 2025

Two colleagues reviewing a printed document together — Photo by Mikhail Nilov on Pexels · Illustrative stock photograph.

Verifying a contractor's Letter of Good Standing requires confirming active Compensation Fund registration, assessment compliance, and alignment with the contracting entity 1 2 3.

Under amended section 89(1), a subcontractor employing people on the contracted work must register and pay the necessary assessments. If it fails to register or pay an assessment, those employees are deemed to be the contractor’s employees and the contractor must pay assessments in respect of them. Section 89(2)–(3) provides recovery and set-off for qualifying amounts actually paid.

Apply the full section 89(5) accident-specific location and control test where relevant; a missing or expired LOGS alone does not establish liability for every injury claim. Amended COIDA section 89; commencement dates.

Authenticity validity and actual covered entity

This compliance process applies to small and medium enterprise (SME) owners, main contractors, finance managers, and compliance officers operating within the jurisdiction of South Africa 2 5 8. The relevant compliance period covers the statutory assessment year—running from 1 March of each year to the last day of February of the following year 9 10—as well as the specific validity timeframe stated on the individual Letter of Good Standing 1 3.

Completing this verification task means establishing independently that the contractor's LOGS is genuine, currently active, fully paid up, and issued to the precise legal entity performing work on site 1 2 11.

To interpret compliance requirements accurately, SMEs must distinguish between statutory legislation, regulator operational guidance, and professional recommendations:
— Practical point from this guide

Statutory Law: Under COIDA Act 130 of 1993 Section 89 5 6, and as substituted by the COIDA Amendment Act 10 of 2022 Section 56 7 12 13 14 15 16, a contractor who engages a sub-contractor must ensure the sub-contractor registers as an employer and pays all required assessments 5 13. If the sub-contractor defaults, the contractor becomes liable to pay those assessments and compensation payouts 6 7. Under Section 89(5), this statutory liability applies to work executed on or about premises under the contractor's control or management 16 17.
Regulator Guidance: The Department of Employment & Labour issues official user guides and web guidance instructing principal contractors to obtain a LOGS from contractors prior to site work 1 2 3. Guidance notes clarify that a LOGS cannot be generated online if an employer's account is flagged or blocked for an audit 18.
Evolv Recommendations: Evolv Accountants recommends embedding LOGS validation into contract execution protocols and monthly payroll processing, verifying document authenticity on the official online platform before approving progress invoices.

Prepare the information and authority: authenticity validity

Before initiating verification, the responsible officer must gather specific documentation, verify authorisation, and review statutory definitions:

Required Information and Inputs

Contractor's Claimed Letter of Good Standing: A copy of the certificate provided by the contractor, showing the company name, trade name, Compensation Fund (CF) registration number, certificate serial number, and validity period 1 11 19.
Legal Entity Identification: The contractor's CIPC registration document, certified identity copies of directors or owners, and proof of physical business residence 11.
Contract Account Number: The contractor's official CF registration number, which starts with the prefix 99 11 19.
Contractual Scope Agreement: The written sub-contract or service level agreement defining the precise nature of work, site location, and supervisory arrangements 5 13 16.

Systems, Permissions, and Authority

Online Portal Access: Access to the Department of Employment & Labour Return of Earnings (ROE) online system (cfonline.labour.gov.za) 3 11.
Delegated Authority: Confirm appropriate authority for the task. A Power of Attorney is included in the published audit/revision pack where a consultant represents the employer; do not treat it as an automatic requirement for an ordinary third-party certificate check 20 21.

Core Legal Definitions

Employer: Any person or legal person, including the State, who employs one or more employees 22 23 24.
Sub-Contractor: A person or entity entering an agreement with a primary contractor to execute the whole or any part of work undertaken by the contractor 13 14.
Letter of Good Standing: An official certificate issued by the Compensation Commissioner confirming that an employer is registered and up to date with all assessment payments and statutory fees 1 3.

Complete the task step by step: actual covered entity

Executing a thorough verification requires a structured, multi-stage process grounded in official Compensation Fund procedures 1 3 11:

Step 1: Examine Physical Document Details

Inspect the document furnished by the contractor. Verify that the registered company name, trading name, and CIPC registration number correspond exactly to the contractor's legal entity 11 19. Check that the CF Contract Account Number follows the valid format starting with 99 11 19.

Step 2: Validate Online Authenticity

Log into the official Department of Employment & Labour ROE portal (cfonline.labour.gov.za) 3 11. Use the current official Letter of Good Standing verification facility and the identifiers it requests 3. Confirm that the document status reflects an active, fully paid account 1 3.

Step 3: Verify Sector and Mutual Association Alignment

Determine whether the contractor operates within specific industry classes licensed to Mutual Associations 4:

Class IV (Mining) & Class XIII (Iron, Steel, Metal): Licensed under Rand Mutual Assurance (RMA) 4.
Class V (Building and Construction): Licensed under Federated Employers Mutual Assurance (FEM) 4.

Confirm the employer’s actual licensed-association or Fund registration. The published guidance describes optional CF-to-RMA transfer for mining and optional CF-to-FEM transfer for construction, so sector alone does not prove that a central Fund letter is invalid 4.

Step 4: Verify Nature of Business and Site Jurisdiction

Cross-reference the contractor's registered nature of business against the work being performed 4 9. Under Section 89(5), confirm that the work location is on or about premises controlled or managed by the contractor or principal contractor 16 17.

Step 5: Document and Store Verification Evidence

Download and print the online verification receipt. Save the validated certificate and system confirmation in the company compliance registry, retaining records for a minimum of five years 25 26. Amended COIDA section 81; 2026 commencement dates.

Reproducible Hypothetical Example

All figures and values below are illustrative for demonstrating calculation logic.

Scenario: Main Contractor "BuildCo South Africa (Pty) Ltd" awards a R500,000 electrical sub-contract to "Sparks Electrical (Pty) Ltd" for on-site installation work 5 13 16.
Sub-Contractor Earnings: Sparks Electrical employs 5 workers with total annual payroll earnings of R1,000,000 (illustrative value) 9 10.
Assessment Calculation: Assuming an illustrative industry assessment tariff rate of 1.5% 27, the annual base assessment payable by Sparks Electrical is:

Base Assessment = R1,000,000 × 1.5% = R15,000 (\textit{illustrative value})

Illustrative non-payment penalty assumption: Assume the Fund applies the annual-earnings basis under amended section 87(1): R1,000,000 ×10% =R100,000. That basis must come from the actual notice; other provisions or a penalty based on the outstanding assessment give different amounts. Amended section 87.

principal contractor/Contractor Liability Shift: Under Section 89(1), because Sparks Electrical failed to pay, its 5 employees are legally deemed to be employees of BuildCo 6 7. BuildCo becomes liable to pay the R15,000 assessment in respect of those employees under section 89; establish any further liability under the applicable provision 2 6 7.
Contractual Set-Off / Recovery: Under Section 89(2)–(3), BuildCo is legally entitled to deduct (set off) the R15,000 assessment and associated costs paid on behalf of Sparks Electrical from the R500,000 contract payment owed to Sparks Electrical 6 7 15.

Check the result against the evidence: authenticity validity

Do not assume that presenting a printed document equals full legal compliance 1 18. Independent completion evidence must be verified:

System-Generated Verification Confirmation: An official online validation summary downloaded directly from cfonline.labour.gov.za confirming active account status 3.
Zero Outstanding Balance: Confirmation that all assessment fees, interest, and penalties due to the Compensation Fund have been settled in full 1.
Absence of Audit Blocks: Verification that the employer is not flagged as "blocked for audit" 18. If an employer is blocked for audit, the system prohibits LOGS generation until supporting documents (EMP501, detailed payroll, reviewed annual financial statements, and affidavits) are submitted to 2019ROE.Audits@labour.gov.za and cleared 18 20 21.
Matched Entity Identifiers: Exact match between CIPC entity records, CF Contract Account Numbers (99...), and contract signatory details 11 19.

Handle exceptions and unresolved cases: actual covered entity

When verification encounters discrepancies or system exceptions, SMEs must follow specific escalation paths:

Exception 1: Employer Blocked for Audit

If a contractor cannot produce a current LOGS due to an audit block, the contractor must submit an audit clearance pack to 2019ROE.Audits@labour.gov.za 18 20. Required clearance documents include SARS EMP501 / Tax Clearance certificates, proof of UIF registration, a detailed payroll report, audited or independently reviewed annual financial statements, and a signed Power of Attorney if represented by an agent 20 21.

Exception 2: Outstanding Balances and Instalment Plans

If an employer owes outstanding assessment fees, a LOGS will not be issued automatically 1. The employer may apply to the Compensation Fund for an instalment payment plan and request an official account statement by emailing cfdebtors@labour.gov.za 1. Conditional clearance depends on maintaining agreed instalment payments 1 31.

Exception 3: Unregistered Sub-Contractors

If a sub-contractor is unregistered, as a recommended site-control measure, the principal contractor should pause access while the non-compliance is investigated, subject to the contract and applicable duties 2 5. The sub-contractor must submit an application for registration online or complete manual registration forms with attached CIPC certificates, UIF registration, director ID copies, and proof of address to obtain a Contract Account Number (99...) 11 19.

Exception 4: Change in Business Nature or Corporate Form

If a contractor changes its primary business nature or corporate structure, online submission is restricted 21. The employer must submit Form CF 1B (Application for change of nature of business) to update registered particulars 4 32.

Specialist Boundaries

Where formal legal disputes arise regarding inherited liabilities under Section 89, or where objections against assessment revisions are required under Section 91 17 25 33, SME management should escalate the matter to Evolv's compliance specialists or legal counsel.

Next steps for COIDA and compensation

Use the practical checklist below to manage contractor verification systematically across your organisation:

Recommended check	Input or evidence	Suggested owner	Completion check	Next action
Entity and period	Contractor’s LOGS, legal name and relevant registration/account details	Procurement officer	Certificate relates to the contracted entity and required period	Request missing information; do not assume director ID copies are required for an ordinary letter check
Authenticity	Certificate and issuer’s official verification facility or confirmation route	Compliance officer	Record the actual verification result and date	If unable to verify, seek clarification from the issuer or contractor; do not assume a specific serial-number database workflow
Issuer	Actual CF, FEM or RMA registration, as applicable	Compliance officer	Certificate issuer agrees with the contractor’s registration	Check the applicable arrangement rather than assigning every sector to a mutual association
Unavailable letter or audit query	Contractor’s explanation and issuer correspondence where authorised	Contractor or its appointed representative	Record the issuer’s actual decision or outstanding requirements	Contractor follows the issuer’s requested supporting-document and query route; an application does not guarantee clearance
Retain and review	Certificate, verification evidence, decision and expiry date	Procurement records owner	Keep a traceable record and diary a review before expiry	This procurement control is a recommendation; statutory section 81 earnings records must be retained for five years after the last entry

Authenticity validity and actual covered entity: Entity and period; Authenticity; Issuer. — Decision map derived from this guide’s table. Read the full table for conditions and exceptions.

Official guidance; Official guidance; Official COIDA provisions; Official guidance; Official COIDA provisions.

Frequently Asked Questions

What happens under COIDA if a principal contractor fails to verify a sub-contractor's Letter of Good Standing?

If a sub-contractor fails to register or pay statutory assessments, Section 89 of COIDA deems the sub-contractor's employees to be employees of the main contractor 6 7. The main contractor becomes legally liable to pay all outstanding assessments and injury compensation claims, but may recover those amounts from the sub-contractor or set them off against contract payments 2 6 7 15.

Can a sub-contractor generate a Letter of Good Standing if their account is flagged for an audit?

No. When an employer's account is blocked for an audit, the online system prevents LOGS generation 18. The employer must submit required audit documentation—including SARS EMP501 records, detailed payroll reports, and annual financial statements—to 2019ROE.Audits@labour.gov.za to clear the block 20 21.

How does the COIDA Amendment Act 10 of 2022 alter subcontractor liabilities compared to the 1993 Act?

The Amendment Act 10 of 2022 explicitly substitutes Section 89, replacing the previous terminology of "principal contractors and contractors" with "contractors and sub-contractors" 12 13 and deleting the standalone definition of "principal contractor" in Section 1 34. The statutory principle remains that main contractors inherit assessment liability if sub-contractors fail to register or pay 7 13.

What documents are needed to clear an audit block or apply for an assessment revision?

To clear an audit block or apply for a revision of assessment within 30 days of notice 25, an employer must provide a SARS EMP501 or Tax Clearance, proof of UIF registration, detailed payroll reports, audited or reviewed annual financial statements, a signed affidavit, and a Power of Attorney if represented by a consultant 20 21 25.

Which employers are legally exempt from paying assessments to the Compensation Fund?

Under Section 84(1) of COIDA, national and provincial government departments, as well as nine specific local authorities holding official exemption certificates, are exempt from paying assessments to the Compensation Fund 32 35 36. Describe your registration or earnings-record question and ask Evolv about the support required. Ask Evolv about authenticity validity and actual covered entity. Share the relevant records so the support required can be scoped.