Fixed-term contracts: Are my employees permanently appointed after 3 months?
One of the most frequently asked questions we receive revolves around the status of employees on fixed-term contracts. It is very important to start off with the proviso that it is important to obtain proper advice before deciding by yourself if an employee is permanent or not. The law is clear, but circumstances differ and it’s always important to err on the side of caution.
Fixed-term contracts are exactly what the name denotes: A contract with a fixed end date. These should be used where the task at hand exists for a fixed time period, and the employee will not be needed in the business after that. Unfortunately this has not been the case in the past. Many employers abused fixed-term contracts by appointing employees on 3, 6 month or even 1 year contracts, and renewing these contracts continuously. Oftentimes an employee on a fixed-term contract will not receive the same benefits such as medical aid and pension or provident fund contributions that a permanent employee would be entitled to. If such an employee spends years on end on short term contracts, unfairness creeps in.
The Labour Relations Act (LRA) was changed in 2014 with the addition of Section 198B(1), which defines a fixed-term contract as:
“…a contract of employment that terminates on —
(a) the occurrence of a specified event;
(b) the completion of a specified task or project; or
(c) a fixed date, other than an employee's normal or agreed retirement age, subject to subsection (3).”
It is very important to note that this section excludes employees who earn above the Earnings Threshold, currently set at R205 433.30 per year. That does not mean an employee who earns more can be taken advantage of and employed on roll-over contracts indefinitely, thereby losing out on specific benefits. Such a practice will most likely end in an unfair dismissal dispute, should the employer ever decide to terminate the contract.
It is important to be aware of the rules surrounding fixed-term contracts in order to avoid the nasty surprise of an unfair dismissal dispute. Contact email@example.com for sound advice.