The latest amendments to the Labour Relations Act (“the LRA”) in particular section 198B, clarifies the legal position regarding fixed term contracts of employment.


What is a fixed term contract?

A fixed term contract must be in writing and can be defined as a contract of employment that terminates on a fixed date or upon the occurrence of a specified event or completion of a specified project.


To whom does it apply?

The provisions dealing with fixed term contracts of employment only apply to employees who earn below the threshold prescribed by the Minister of Labour (R205 433.30 per annum).  Section 198B also excludes the following employers from the provisions of the LRA:

a) An employer who employs less than 10 employees;

b) An employer who employs less than 50 employees and whose business has been in operation for less than two years, unless, the employer conducts more than one business; or the business was formed by the division or dissolution for any reason of an existing business

In addition, the limitations in terms of section 198B do not apply to an employee on a fixed term contract that is permitted by any statute, sectoral determination or collective agreement.


Duration of a fixed term contract

The LRA has limited the duration of a fixed term contract to not more than three months; however there are certain circumstances that may arise where it might be necessary to conclude a contract for longer than the allotted three month period.


Extension of the three month period

Section 198B of the LRA provides that the three month period may be extended if the nature of the work for which the employee is employed is of a limited or definitive duration or the employer can demonstrate a justifiable reason for fixing the term of the contract.  Should the employment relationship in terms of a fixed term contract or more than one fixed term contract exceed the three month period, the employee will be considered a permanent employee, unless the employer can prove that there is a justifiable reason for the extension as provided for in the written, fixed term contract of employment.

The LRA specifically lists the instances which will be considered a justifiable reason.  These instances include, but are not limited to, where an employee replaces another employee who is temporarily absent from work or is employed on account of a temporary increase in the volume of work which is not expected to exceed twelve months.  An example would be where an employee temporarily replaces another employee who went on maternity leave.  In such a case, the employer would enter into a written, fixed term contract of employment for four months with the new employee.


The amendments were enacted to extend the protection afforded to fixed term employees and employers should take care to ensure their fixed term contracts of employment comply with the statutory requirements before they are concluded.


Article by: Chanel Snyman

CEO Dispute Resolution Official – Port Elizabeth