There are two types of contracts: indefinite (permanent) and fixed-term (temporary) contracts.

INDEFINITE CONTRACTS

FULL-TIME CONTRACT OF EMPLOYMENT

Most employment contracts are indefinite contracts. This means that when an employee starts working for the employer, no one knows when the contract will end but it is expected that the employment will continue until the employee reaches the retirement age of the company. An indefinite contract can only be ended in the following ways:

• By dismissal or termination of the contract of employment as a result of the misconduct of the employee, or the incapacity of the employee or on account of retrenchment
• When the employee reaches the normal retirement age laid down by the company or the industry
• By the death of the employee
• By the employee or employer giving notice to terminate their contract

PART-TIME CONTRACT OF EMPLOYMENT

This section only applies to ‘part-time’ employees where the employer employs less than ten employees and does not apply during the employee’s first three months of continuous employment. Part-time employees are permanent employees who work less than the ‘normal’ working hours (between 40 to 45 hours per week), depending on what the norm is for an industry in terms of a wage regulating measure, bargaining council agreement, collective agreement or according to the standard contract of employment of the employer’s other employees.

The threshold between full-time and part-time work is usually 30 to 35 hours per week. For example, a part-time contract could apply to a domestic employee who works one day per week for five different employers. So, a part-time employee can be permanent part-time or fixed-term part-time. For example, it could be an employee who works 20 hours a week on a fixed-term contract for 3 months; or it could be an employee who works 20 hours a week for an indefinite period which means they are permanent.

Section 198© of the LRA requires a part-time employee who earns under the Basic Conditions of Employment Act (BCEA) threshold of R21 198 per month and who works for a period of more than three months, to be treated equally (‘on the whole no less favourably’) as a full-time employee if they are doing the same or similar work in the same workplace unless different treatment is justified. A justifiable reason for different treatment may include:

• Seniority
• Experience or length of service
• Merit
• The quality and quantity of work performed

Equal treatment to a comparable full-time employee also means providing:

• The same or similar skills training and development
• Receiving a written contract of employment
• Protection under the LRA and BCEA as long as they work more than 24 hours a month
• Opportunities to apply for vacancies in the same company
• Entitlement to be paid severance payment if the contract is terminated after twenty-four months.

FIXED-TERM CONTRACTS

This does not apply to employers employing fewer than ten employees or where the employee earns above the BCEA threshold of R21 198 per month or where the employer employs less than 50 employees and has been in business for less than 2 years. I

If the employee and the employer both agree at the start of the contract that the contract is going to end within a fixed period or when certain work is completed, then it is a fixed-term contract.

A fixed-term contract means a contract of employment that terminates:

• When a specific event happens, for example, a person is employed to perform a specific job for a company event
• When a specified task or project is completed, for example, a person is employed for a 3-month fruit harvesting season
• On a fixed date, for example, if a person is employed for 3 months to stand in for someone who is on pregnancy leave

The law provides various conditions and limitations on fixed-term contracts. Section 198B of the LRA, aims to ensure fair and equal labour practices by employers and to avoid exploitation of temporary employment by employers using fixed-term contracts to get around having to provide benefits that only apply to permanent employees.

Contract employees and seasonal employees are two kinds of employees with fixed-term contracts.

It often happens, particularly on farms, that the employer goes to other areas to get people to work on the farm on a temporary basis. The employees then leave their homes and go to work on this farm. These employees may be referred to as contract employees. Usually the farmer and these employees have a fixed-term contract for a specified time. If an employee has a contract with the farmer, then the conditions of that contract are the conditions of employment.

If the contractor earns under the BCEA threshold of R21 198 per month, the contract is more than three months, and there is not a ‘justifiable reason’ for the temporary nature of the contract, then the conditions of the contract may not be less favourable than those of permanent employees who perform similar work. If employees work on a fixed-term contract, for three months or longer, they may not be treated on the whole less favourably than permanent employees.

Some farms have times when extra employees are needed. These times are called seasons. If an employee only works on the farm for a season, then they are called a seasonal employee. The seasonal employee knows when the contract starts and when the contract ends. This is a Fixed-term contract.

LENGTH OF A FIXED-TERM CONTRACT

A fixed-term contract of employment can be renewed at the end of the contract if there is a ‘justifiable reason’ for the renewal of the contract for a temporary period. For example, if workers are contracted for 3 months to complete the harvest on a farm and then the harvest continues beyond the 3-month contract, then the fixed-term contract of an employee can be renewed as this is a justifiable reason. Justifiable reasons include:

• Replacing another employee who is temporarily absent from work (parental leave)
• A temporary increase in work volume which is not expected to go beyond 12 months (seasonal increases in workload)
• A student or recent graduate who is employed to do training or get work experience
• Exclusive work on a specific project that has a limited or defined duration
• A non-citizen who has been granted a temporary work permit
• Seasonal work
• An official public works scheme or similar public job creation scheme
• The position is funded by an external source for a limited period
• The employment of a person beyond the normal or agreed retirement age

A fixed-term employee who is employed for more than 3 months (without a justifiable reason) and who earns below the earnings threshold of R21 198 per month in the BCEA, will be regarded as a permanent employee and termination of the fixed-term contract will constitute a dismissal. The employee may then apply to the CCMA or Bargaining Council (in terms of Section 186 of the LRA) alleging “reasonable expectation” for renewal of a fixed-term contract.

As a permanent employee, an employee may not be treated less favourably than any other permanent employee doing the same or similar work. They should be given the same work opportunities as permanent employees.

For fixed-term employees (including seasonal employees), the employer must pay employees according to the terms of the contract for the full contract time, even if there is no more work for the employees to do. If an employee’s contract is for one year, then the employer must pay the employee for the full year, unless the contract ends because of the employee’s fault or unless the contract includes a term that provides for ‘early termination’ of the fixed term contract. If the fixed term contract is to be terminated early before the end date of the contract, this still needs to be done using proper procedures, for example retrenchment consultations, if these apply. If the contract is for one season, then the employer must pay the employee for the whole season in terms of the provisions in the contract unless early termination takes place in terms of normal practices provided for in the Code of Good Practice: Dismissal as contained in the LRA.

The employer cannot stop the fixed-term contract earlier than the contracted period unless the contract makes provision for this and the employer follows a fair process in terms of the law.

RENEWING A FIXED-TERM CONTRACT

If an employer offers to renew an employee’s fixed-term contract, then it must be done in writing and reasons must be given for the renewal.

CREATING A ‘REASONABLE EXPECTATION’ OF PERMANENT EMPLOYMENT

If an employer creates a reasonable expectation of permanent employment to a fixed-term employee, and then terminates the contract without following the correct legal procedures, the employee can make a claim to the CCMA for unfair dismissal, alleging “reasonable expectation” for renewal of their fixed-term contract. The CCMA will decide if the employee had good reason to expect a renewal of a fixed-term contract based on all the surrounding circumstances.

Case law on fixed-term contracts and ‘reasonable expectations’

In Ntsoko v St John the Baptist Catholic School (2019) 28 CCMA, the employee was employed as an educator at the school in terms of four fixed-term contracts, the first of which was signed in February 2015 and the last on 31 October 2017. The contract was to run from 1 January to 31 December 2018. On 15 November 2018, the employee was advised that his fixed-term contract would not be renewed for 2019. The employee claimed he had formed a reasonable expectation that his contract would be renewed and wanted to challenge this decision. He referred a dispute to the CCMA relying on Section 186 of the LRA. The CCMA found that the nature of the employee’s work was not of a limited or definite duration. The employer had failed to provide any justifiable reason for employing the employee on a fixed-term contract. The employee was, therefore, a permanent employee of the employer.

FIXED-TERM CONTRACTS AND SEVERANCE PAY

An employee on a fixed-term contract who is employed for longer than 2 years is entitled to severance pay on termination of employment or alternative employment, if possible. Severance pay includes one week’s compensation for each completed year of the contract. Severance pay is made in cases where employers terminate an employee’s employment based on operational requirements such as retrenchment.

EXCLUSIONS FROM THE PROVISIONS OF FIXED-TERM CONTRACTS

The provisions on fixed-term contracts DO NOT apply to employers in the following cases:

• If an employee earns above the legal earnings threshold which is R254 372 per year (or R21 198 per month) before income tax, pension, medical aid, etc. This threshold changes from year to year so remember to check this.
• Employers with less than 10 employees
• Start-up companies with less than 50 employees if they have been in operation for less than two years
• Specific fixed-term contracts permitted by law, sectoral determination or collective agreement