Fixed term employment contracts – new law!

The Labour Relations Act will soon be amended to change the law on fixed term employment (meaning for example employment “for one month”, “until X returns from maternity leave”, or “until we complete project Y”).

 1. The amended Act will impose new requirements when an employer employs a person on a fixed term contract, and will restrict their right to do so for
 longer than six months in total.
2. An employer must make an offer of fixed term work in writing, and must state in writing the reason for the offer being for a fixed term only.
3. Fixed term employment may only exceed six months in total if the work itself is of a limited or definite duration, or if the employer can show any other good reason (the amended Act gives a number of examples which will be accepted as good reasons). Failing this, the employment will be deemed to be indefinite, regardless of what the contract might say, and the employer will have to retain the employee in employment or follow fair procedures to dismiss the employee for a fair reason.
4. Where fixed term employment beyond a total of 24 months is justified (instead of indefinite employment), the employee will be entitled to severance pay from the employer, similar to a retrenched employee, when the work comes to an end – unless the employer offers the employee another job, or secures one for him or her.5. The amended provisions will not apply where the employee’s annual salary is over R172 000,00, or where the employer is a small one with fewer than 10 employees, or where the employer is a new, sole business of less than two years’ standing with fewer than 50 employees. (The last provision is intended to prevent employers from circumventing the law by artificially slicing up businesses or reintroducing old businesses in new forms.)

The new provisions will hopefully put an end to abusive practices whereby employers have denied staff job security for no good reason, and avoided meeting their legal obligations to dismiss employees fairly. The legislature has sought to strike a balance, however, by allowing short-term flexibility and by making exceptions for small and new businesses and high-earning employees.

This is not the only major development on the cards in employment law – more updates still to come with deal with other changes in the pipeline affecting both employees and employers.