One of the most important changes to the Labour Relations Act 66 of 1995 (LRA), which came into effect on 1 January 2015, is the added protection it affords employees who are employed on fixed term contracts. A fixed term contract means a contract of employment that terminates on the occurrence of a specific event, the completion of a specified task or project, or a fixed date other than an employee’s normal or agreed retirement age.
Fixed-term employment contracts with lower earning employees are now limited to a 3 month period. After 3 months, the employee will be deemed to be an indefinite employee of the employer and will therefore be protected against unfair dismissal.
This protection, however, only applies to lower earning employees, which are employees who earn less than the prescribed earnings threshold. This threshold is currently R205,433.30 per annum. This means that employees earning more than the threshold will not enjoy the protections afforded by the LRA relating to fixed term contracts.
Employers should further take note that these protections will not apply to a small employer that employs less than 10 employees or to an employer that employs less than 50 employees and whose business has been in operation for less than 2 years (start-up business).
An employer may engage an employee on a fixed term contract for a period of longer than 3 months only if:
It is now a requirement that a fixed term contract or the renewal or extension of a fixed term contract must be in writing and must state the reason for fixing the term. If a dispute should arise regarding the fixed term contract, the employer will have to prove that there was a justifiable reason for fixing the term of the contract and that the term was agreed upon by the employer and the employee.
Employees who are employed on a fixed term contract also enjoy the following additional protections -
SMES can therefore employ on a fixed-term contract for a maximum period of 3 months, which period can only be extended under the circumstance as set out above. Should the fixed-term contract, however, be extended beyond 3 months, the employer must take note of all the benefits that the employee will enjoy.
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