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FIXED TERM CONTRACTS: Changes effective 1 Jan 2015

In Article Archive by Jan Truter56 Comments

One of the most important changes to the Labour Relations Act (the Act), which came into effect on 1 January 2015, is the added protection afforded to employees on fixed-term contracts. While some employers and employees are not directly affected, the impact will be far reaching and employers are encouraged to review their current contracts and practices to ensure compliance.

The relevant provisions, which are contained in a new Section 198B of the Act, are be summarised below.

What is a fixed-term contract?
A ‘fixed-term contract’ is defined in the Act 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.

Fixed-term employment beyond 3 months
The real impact of the amendments relates to fixed-term contracts that are for a period of longer than 3 months. For such contracts to be enforceable there are three main requirements that have to be met. Firstly, the nature of the work must be for a limited duration or there must be some other justifiable reason for fixing the term of the contract. Secondly, the fixed-term contract must be in writing. Thirdly, the contract must specify the ‘justifiable reason’.

A dispute would typically arise in the context of termination of employment. Should the employer fail to prove that the requirements mentioned above have been met, the employee will be regarded as having been employed on an indefinite (permanent) basis. In these circumstances there is a good chance that the employee’s services would not have been terminated for a fair reason and it is unlikely that the requirements of a fair procedure (for misconduct, incapacity or operational requirements) would have been met. The potential adverse implications for the employer should therefore be obvious.

What is a justifiable reason?
Section 198B of the Act lists examples of ‘justifiable reasons’ for employing someone for a fixed-term period of longer then 3 months. These are:
(a) Replacing another employee who is temporarily absent from work;
(b) A temporary increase in work volume which is not expected to endure beyond 12 months;
(c) A student or recent graduate who is employed to undergo training or gain work experience;
(d) Exclusive work on a specific project that has a limited or defined duration;
(e) A non-citizen who has been granted a temporary work permit;
(f) Seasonal work;
(g) An official public works scheme or similar public job creation scheme;
(h) The position is funded by an external source for a limited period;
(i) The employment of a person beyond the normal or agreed retirement age.

The above covers the obvious situations that come to mind, but there may be other justifiable reasons that have not been listed in the Act.

Additional protections
There are some additional provisions aimed at protecting employees on fixed-term contracts. Firstly, a person employed on a fixed-term contract for longer than 3 months, may not be treated less favourably than someone employed on a permanent basis performing the same or similar work, unless there is a justifiable reason for different treatment. (Part-time employees also enjoy protection against unfavourable treatment, but this, and the meaning of ‘justifiable reason’ in this context, will be discussed in a future contribution.) Secondly, employees on fixed-term contracts must also be given equal access to opportunities to apply for vacancies. Thirdly, where an employee is employed on a fixed-term contract exceeding 24 months, the employee would be entitled to severance pay upon termination. Fourthly, where the employer has failed to renew a fixed-term contract where there was a ‘reasonable expectation’ of such renewal (or where the employer offered to renew it on less favourable terms), the basis for an unfair dismissal claim has been extended to also include an expectation of indefinite employment – this is due to the amendment to the definition of dismissal in Section 186 of the Act. The onus to prove the expectation remains on the employee, though.

Fixed-term employment for 3 months or less
If someone is employed for 3 months or less, the provisions above do not apply. However, employees on shorter fixed-term contracts should continue to enjoy the protections that existed prior to the amendments. An employer may, for example, not abuse a fixed-term contract by using it as a substitute for probation. Another example is where an employee works beyond the expiry date of the contract without signing a new agreement - the employee could still successfully argue that employment has become indefinite. Furthermore, the provisions relating to a ‘reasonable expectation’ of renewal or permanent employment may also be relied upon by these employees.

Which employers are excluded?
Small businesses and their employees are generally not directly affected by section 198B of the Act. Employers that employ less than 10 employees, or employers that employ less than 50 employees and whose business has been in operation for less than two years, are excluded (but there are certain exceptions, e.g. an employer that conducts more than one business, or where an existing business dissolves and it results in the formation of more than one business). Some businesses may be specifically excluded from the effect of these amendments by the provisions of another statute, sectoral determination or collective agreement (for example, in a bargaining council).

Which employees are excluded?
The special protections afforded to employees on fixed-term contracts in terms of Section 198B do not apply to high earners. Employees who earn more than the relevant threshold determined by the Minister from time to time, are therefore excluded. However, high earners haven’t lost the protections that they previously enjoyed. For example, if there is no justifiable reason for appointing a high earning employee on a fixed-term contract, such employee is more likely to succeed with a claim based on a reasonable expectation of renewal or permanent employment. We therefore recommend that employers adopt a cautious approach by also applying the principles introduced by section 198B to high earners.

Implication of changes
There is likely to be a significant increase in disputes that are referred to the CCMA. These would include unfair dismissal disputes, as well as unfair labour disputes arising out of less favourable treatment of employees employed for a fixed-term or part-time.

Jan Truter of is an on-line labour relations service aimed at assisting employers with the implementation of effective labour relations. They can be contacted via the website or


  1. Good Labour Jan Truter

    I am currently in an internship for a period of 3years(year 2017 – current year) and I am still not entitled to any leaves(contract clearly outlined that clause),but only sick leaves.
    Please advise if this is a fair conduct as I am considered as an employee in this institution/workplace.

    If so please also advise on the necessary steps I should follow or consider.

    Your assistance will be much appreciated, thank you.


    1. Author

      One would have to look at all the circumstances surrounding the contract of employment, but it does not sound right. I suggest you approach your nearest branch of the Department of Labour for further assistance.

  2. Students have a bursary contract that say they can work 3 years plus 1 year back to the Department. The department however has no money to employ them for that number of years and offer them a fix term contract for 6 months which they signed but there after they were offered 3 months contracts that is now terminated permanently, which they did not sighn claiming that the bursery contract superseed the short term contracts. The employer on the other hand sais the short term contracts superseed the bursery contract. Which one is correct.

    1. Author

      It is possible that there is a fixed-term contract can be superseded by a subsequent contract that allows for earlier termination. It really depends on the circumstances and wording of the respective contracts.

  3. Hi

    I have beennona fixed term contract for 6 years how can I turn this into permanent position how do I hold the employer accountable since this seems to me it will continue for ever

    1. Author

      If you earn less than the threshold (currently R205433.30 per year) and there nothing in you contract that says why you are on a fixed-term contract, then you would be regarded as being permanently employed.

  4. I’ve been on a fixed term contract for more than 2 years with no specific date when it will end. After our last project I was just told there’s no work. No notice given.Im at home now for three weeks. What’s my case

    1. Author

      You will probably be regarded as having been indefinitely employed and should have a case based on unfair dismissal. You would have to refer the dispute to the CCMA or Bargaining Council within 30 days of dismissal.

  5. The earning threshold is currently R205433 per annum. A part time employee earns R13 000-00 per month but only works 4 hours a day. Can we say she is above the threshold as she earns aprox R150-00 per hour which equates to R26004-00 per month if she worked a full 8 hour a day. i.e. Earning Threshold = R204 533 annual / R17 044 monthly / R3 936 weekly / R786 daily / R98 hourly

    1. Author

      Reply to Lee: Interesting thought, but the Determnation merely refers to earnings per annum. Unlike the deeming provision in respect of an employee’s monthly, weekly and hourly ‘wages’ in terms of section 35 of the BCEA, the hours of work have no bearing on the matter.

  6. I am going to take over the reigns of a homework centre in 2018 and I would like to find out if I am allowed to put all staff on a 3 month renewable contacts. The staff work 4.5 hours a day. 5 days a week. I would keep all the existing staff but have to find a way to improve their work ethic.
    I have always encouraged the staff to aim higher and better themselves. They get paid above minimum wage.
    There are 8 staff members in total. The aftercare is not registered and the fees charged are the lowest in the area.

    1. Author

      Reply to Lana: Unfortunately a fixed term contract may not be used to improve the work ethic of employees. One has to manage work their performance according to the guidelines issued in terms of the LRA.

  7. hi l.i have been employed for a period of 3years on fixed 12 month contract.the employer had fecided not to renew for next year.he gave no reason for the non i have a case against him.thank u

    1. Author

      Reply to Buhle: We suggest you consult a specialist in labour law for advice and assistance.

  8. Hi I’m not sure whether mine falls under fixed but I have been employed on contract bases since September 2015, some were for 6 months others 3 months and another was for 9 months but just recently Manager created for us Memo for 3 years extention based on the new project that we are currently involved in that should take three years to finish,But the director turned it down and said manager should get advice from HR, longer periods should be advertised, HR came back with a 1 year renewable contract and the Director still said it should be done for 3 months with renewable options,The memo was signed by everyone who needed to sign but now all of sudden the contract states that its 3 months with no further extention. I feel that an expectation was created that we were going to be part of the project for the duration of its implementation stage to the end, and employed for a longer period now that the contract states that the should be no expectation of further extension. I would like to know how to I handle a situation like it feels like unfair dismissal.

    1. Author

      Reply to Ntsiki: I propose that you approach your employer to discuss your concerns. If the matter remains unresolved, you may consider seeking formal legal assistance.

  9. I have been on a fixed contract for 3 years, when i started the contract was for a project that has no duration period as even now it does not seem its yet to end, i have been also assisting in the finance department with some of the duties which are not stipulated in my contract. My contact has expired end of June and was set to be renewed however the company CEO had a meeting with the HR Manager in regards to the fixed term contracts and instructed her to draft permanent contracts this was before end of June but she refused and told the CEO to stop interfering in her department and she drafted the 6 months contracts and he refused to sign as that was not his intruction. This has been going on for the past month and i have not signed a contract till this day, my question is what stages should i take

    1. Author

      Reply to Nicole: Although we do not have all the facts, there seems to be a case for permanency. I suggest you leave it for now to allow senior management to resolve their differences. If you are again presented with a fixed term contract I suggest you seek legal advice.

  10. hi jan
    i would like ask does a fixed term employee not qualify for bonuses or salary increment i have been on fixed term for 4 years now


    1. Author

      Reply to Bennet: There is no automatic right to increases or bonuses (except if you are in an industry where these are prescribed). However, you may have a case if permanent employees that have the same job as you receive superior benefits.

  11. What is the current threahold as determine by minister for employees on fix term contact. previously it was R205433.00

  12. Hi I would like to ask. I was employed in a fixed term contract for a specific project which was going to take 3 years however other projects and funding started to come in and then my contract was extended to some more years now I have been in a contract for 10 years for the same employer which keeps being extended, however I have not been able to benefit like other employees who are permanent in getting a bursary to study because I am on contract and I have been in the same salary level for the past 10 years yet my duties have increased drastically and I have not been performing only project related work I have been also performing work which relates to work of a permanent employee. Please advise in the matter

    1. Author

      Reply to Lucia: There may be a basis for a claim for equal pay for work of equal value. Your temporary status also sounds questionable. I suggest you engage with your employer. If you don’t manage to find a satisfactory solution you can approach a labour lawyer for advice.

  13. I have a sister who was employed on a fixed term contract for 2 years and condition for renewal was perfomance based.Employer offered to pay one month for every year worked and one month notice.should she take compensation or does employer have a leg to stand on at the CCMA.

    1. Author

      Reply to Jessie: She may have a basis to challenge her dismissal, but the offer by the employer sounds like a good one.

  14. Good morning, I was contracted on a tempory contract to do relief work for 3years, the needs changed and I had to work on a permanent roster for more than 3 months, when asked that contract be changed as I worked 12hour shifts without night allowance, HR promised a new fix term contract for 4months but a week later I was dismissed without reason only on UI19 Form that contract expired. I would like to know what I can do please.

    1. Author

      Reply to Beth: If you feel that you have been unfairly dismissed (due to the lack of a justifiable reason indicated on your last contract, or because you had a reasonable expectation of renewal), I suggest you approach the CCMA asap.

  15. Employees who were on a 5 year contracts in local government and contract expired, then the employer gives another 3months it also expired and now currently we’re on a 5 months contracts which ending on 30 April 2017,

    1. Author

      Reply to Timothy: An employer my extend a fixed term contract for further limited periods, but everytime it must be linked to a ‘justifiable reason’.

  16. My fixed term contract was terminated more than a month before its end date.This is after we were told in meetings that we would be going on training because we are going to be moved to different departments.My contract was ended without any reason given and i was the only one out of 10 people who’s contract was ended.I was only told that i will be paid for the current month as well as the next month of my contract.I was asked to leave the premises imediately as if i was a criminal or did something wrong

    1. Author

      Reply to Brandon: Assuming the fixed term contract is valid in all respects and you have been paid out until the end of the fixed term contract, there is not really anything you can do you from a legal point of view.

  17. Our staff are employed on a permanent contract subject to funding being available. The understanding being that when funding ceases the contract will terminate with no retrenchment benefits. Staff will be given the required notice that employment will cease as funding has ceased.Does the employer face any challenges in this regard

    1. Author

      Reply to Verna: Availability of funding by an exteranl source for a limited period can be a justifiable reason for entering into a fixed term contract. In that case severance pay won’t be payble (unless the duration of the fixed term contract is for more than 24 months.) For the fixed term contract to hold the issue of external funding has to be referred to in the contract, though.

  18. Good morning, I was employed under a 0ne year fixed term contract in Oct 2012 at the age of 66 which is over the retirement age of 65. I am now on my 4th one year contract 6 months I worked without a contract. I am still fit for the job. Could they terminate at the end of this contract or am I considered permanently employed. Many thanks

    1. Author

      Reply to Sutherland: Employing a person on a fixed term contract after that person has reached the normal or agreed retirement age is recognised by law as a justifiable reason for such fixed term contract. However, if you feel that you are being unfairly discriminated against (e.g. in relation to others that are working beyond their retirement age), I suggest you seek advice from an attorney who specialises in labour and employment law.

  19. Do you need to give notice of termination/contract of service to a fixed term contract employee when it comes to an end

    1. Author

      Reply to Phasha: If the contract stipulates an end date, you are not legally required to give notice. It would be a good idea to notify the employee as a matter of courtesy, though.

  20. Greetings, I was employed to function as an Operations Manager in the food industry, but owing to the nett payment I required to survive at the time, was never placed on the company’s HR system. I was requested to submit a monthly invoice in the amount referred to above, and that amount was paid on the last day of each month. I have been in this position for a period of 3 years and 6 months now. I approached the owners of the company to determine the extent of my leave balance, and was informed that I did not qualify for leave. What recourse do I have in this matter. I am still in this employ.

    1. Author

      Reply to Butch: The main question is whether you ae an employee or independent contractor. It would seem that it is the former (employee), in which case you should be entitled to leave. Depending on your income (i.e. if it is more than R171120 per month), the burden will be on you to prove tha you are in reality an employee. I suggest you seek legal advice.

  21. Please reply to
    comment 11
    Bafana Albert
    Posted 25 May 2015 at 10:59 am | Permalink
    I want to know if you worked 1years and seven months you sitll fixed term Contract

    1. Author

      Reply to Evelyn: Provided there is a justifiable reason for a fixed term ocntract, there is not necessarily a limit on the duration. However, if the contract is for two years or longer the employee is entitled to severance pay upon termination.

  22. Good Morning

    I would like to know that(if the company is offering Voluntary Severance Package. Do I have a right to take it if I’m a fixed term contractor or is it only permanent employees that must get it.

    1. Author

      Reply to Thandikhaya: Theer is no reason why employees on fixed term contracts cannot be considered, but I suggest you take this up directly with the employer.

  23. I would like to ask, these:I have employed by a municipality on fixed term contract for about 2 years and the reason for me and others to be on ftc is because our positions are on the new structure which when we apply was told that, for us to be permanent, the structure must be approved, now structure has been approved,but the municipality never gave us
    new permenant contract and those contracts end in December and the city manager said if the positions are not filled before December, there won’t be any extension, so what I want to know how much chances do we have to be take municipality to court if is not giving us permanent jobs.

    1. Author

      Reply to Makgakga: The facts in your case seem rather complex and there is no straightorard answer. We suggest that you consult with a expert in labour and employment law.

  24. Good Day,

    Can you terminate a fixed term contract early on performance not met.

    1. Author

      Reply to Bronwyn: You may to terminate employment before the expiry date if the employee is consistently underperforming and you follow the right process.

  25. What would define the difference between a contract worker on a month to month contract or a consultant on a month to month contract and what are the laws around being a consultant for ongoing tasks

    1. Author

      Reply to Xondra: You are touching on the very fundamental distinction between an employee and an independent contractor – labour legislation does not apply to the latter. Whether it is the one or the other depends on a number of factors that have to be evaluated with reference to the facts of each case.

    1. Author

      Reply to Albert: A fixed term contract can be for an extended period, provided there is a ‘justifiable reason’ and such reason is written into the contract.

  26. Good day,

    I would like to find out if there is any other contract that I could use for the employment of permanent casuals. The casuals work 45 hours and earns a lesser salary than the permanents, there is no termination date on their contracts.Currently i am using the fixed term contracts and renewing on a continuous basis.

    1. Author

      Reply to Sharon: The ‘permanent casuals’ you are referring to are in fact ‘permanent part-time employees’. You can use a ‘permanent’ contract that reflects reduced working hours. Take note of the protections introduced for part-time employees by section 198C of the LRA, though.

  27. Hi. One of the most important things that you are not saying is that there is a window period of 3 months make the law applicable to fixed-term contracts only effective from1 April 2015.

    1. Author

      Reply to Jeff: There is indeed a ‘window period’ in the sense that only fixed term contracts that terminate after 31 March 2015 will be tested against the relevant requirements. However, any fixed contracts entered into after 1 January 2015 would have to meet those requirements

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