• Share


By Venolan Naidoo (Senior Associate at Themis Law Chambers)

On 01 January 2015 significant legislative changes to South African labour law took place when provisions of the Labour Relations Amendment Act of 2014 (LRAA) were effected. The amendments drastically changed the regulation on inter alia employees working via temporary employment services i.e. labour brokers, part time employees, and employees working under fixed term contracts, the latter of which is the topic of discussion. The amendments were principally aimed at giving better protection to employees and, by giving effect to this, furthering the legislative obligations on employers.

The legislative changes are found under section 198B of the Labour Relations Act (LRA).

The purpose of the article is to understand what some of the changes entail and the impact thereof on employers when it relates to fixed term contracts or a series of fixed term contracts.

Before proceeding further, it is pointed out that the changes do not affect an employee’s right to challenge a fixed term contract based on a reasonable expectation of further renewal.

From the outset, the amendments do not apply to employers in the following circumstances:

  • If the employee earns above the required threshold set by the Minister, as gazetted, R 205 433.30 per annum;
  • Employers with fewer than 10 employees;
  • Start-up companies with fewer than 50 employees in operation for less than two years; and
  • Specific fixed term contracts permitted by statute, sectoral determination or collective agreement.

In addition, the provisions’ of the amendments apply to fixed term contracts in excess of a period of three months. Accordingly, fixed term contracts below a period of three months would not be regulated by the changes.

Section 198B of the LRA sets out the following requirements relating to fixed terms contracts:

  • The fixed term contract must be in writing. Therefore, employers are obliged to indeed conclude a written agreement setting out the structure and particulars of the fixed term contract;
  • The nature of the work must of course be for a limited duration. The LRA defines a fixed term contract that terminates on the occurrence of a specified event, the completion of a specified task or project, or a fixed date other than an employee’s normal or agreed retirement age; and
  • Importantly, the contract must specify or indicate a justifiable reason in respect of the fixed term period. The LRA itself sets out a list of items on what it considers reasonably justifiable but this is not an exhaustive list. Therefore, each fixed term contract must be assessed on its own basis whether it is reasonably justifiable for the fixed term period.

Importantly, and in addition to the other requirements, should an employer not have a reasonably justifiable basis for the fixed term period with the employee, the consequence is that the employment relationship would be deemed to be on a permanent basis. Should an employer terminate the services of an employee as if the contract was a “fixed term” but without having a reasonably justifiable basis for the fixed period to do so, this could be seen as an unfair dismissal juxtaposed to a permanent employee.

Furthermore, a fixed term contract, in excess of 3 months, requires that an employer must not treat such an employee less favourably than an employee employed on a permanent basis performing the same or similar work, unless there is a justifiable reason for the differing treatment. An employee who works on a fixed term contract in excess of 24 months is also entitled to severance pay at termination of the contract unless the employee is offered permanent employment, in which instance, he or she would not be entitled to any severance pay. Severance is calculated at one week’s compensation for every year worked.

In conclusion, the objective of the legislator in enacting such amendments was inter alia to regulate those employment contracts that were disguised as fixed term contracts but were in actual fact permanent contracts. Employers who have a reasonably justifiable basis to conclude fixed term contracts ought not to be affected by the adverse operation of the amendments but must of course comply with the requirements in terms of section 198B of the LRA.

Employers are accordingly cautioned to comply with their legislative obligations, or seek labour law advice, when it pertains to fixed term employment contracts.

Back to articles