Understanding Fixed-Term Contracts (FTCs) – What Every Employer Should Know
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1. What is a Fixed-Term Contract?
- A Fixed-Term Contract is one that terminates:
- • Upon the occurrence of a specific event;
- • On completion of a specific task or project; or
- • On a fixed date, other than the employer's standard or agreed retirement age.
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2. When Does Section 198B Apply?
- Section 198B applies unless:
- • The employee earns above the threshold set out in Section 6(3) of the BCEA;
- • The employer employs fewer than 10 employees;
- • The employer employs fewer than 50 employees and the business has been operational for less than 2 years (with specific exceptions for multiple businesses or divisions);
- • The contract is permitted by a statute, sectoral determination, or collective agreement.
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3. Legal Implications if Section 198B Applies
- 3.1 Duration and Status: A fixed-term contract may not exceed 3 months without a justifiable reason. If no valid reason is provided, the employment is deemed permanent and cannot be terminated by simple notice.
- 3.2 Benefits and Severance: A contract exceeding 2 years may trigger a payment equivalent to severance pay upon termination. Furthermore, employees must receive the same terms and conditions as permanent staff unless a justifiable distinction is proven.
- 3.3 Proactive Protection: Always include a retrenchment clause in your fixed-term contracts for added protection.
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4. Justifiable Reasons for Exceeding 3 Months
- The employer must be able to explain why the work is genuinely temporary. Acceptable grounds include:
- • Replacing a temporarily absent permanent employee;
- • Temporary increases in workload (not exceeding 12 months) or seasonal work;
- • Hiring students/graduates for training or specific projects with defined durations;
- • Positions tied to external funding, work permits, or job creation schemes.
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5. Essential Elements for Completion
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5.1 Required Documentation
- • State the legal/business reason for fixing the term clearly.
- • Explain why an indefinite appointment is not appropriate for the temporary need.
- • Attach supporting evidence (e.g., leave approval, project plans, or funding letters).
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5.2 The Termination Trigger
- The trigger must be clearly stated, such as the return of a replaced employee, the sign-off of a defined project, or a fixed date supported by the reason.
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6. Renewals and Expectations
- The mere renewal of a fixed-term contract does not automatically create an expectation of continued employment. Courts consider context and communication; for example, in Maiandoh v SABC (1997), even 8 renewals did not create a reasonable expectation because there was no implied right to further renewal.
- Avoid informal assurances that create expectations and communicate renewal intentions clearly.
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7. Conclusion
- This knowledge share notice promotes awareness and sound labour practices. Stay compliant and informed to ensure your fixed-term arrangements align with legal requirements.