Based on in-depth interviews, this study explores the reasons why many South African small businesses abide by some aspects of labour law, but not others: they generally comply with legislated labour regulations, but less so with regulations set by the statutory industry-level Bargaining Councils. Such selective engagement with the system is attributed to employer hostility to unions in the context of post-apartheid industrial relations. Since a larger workforce attracts closer scrutiny by the Councils, small firms are reluctant to expand, relying on outsourcing to increase production. The very size of the firm is thus a pliable concept, positioned between formal and informal norms.