Learn
In a fix with Fixed Term contracts
There seems to be widespread confusion about fixed contracts – when to use them, why to use them and what benefits to afford employees on fixed-term contracts.
Let’s start with defining a fixed-term employee, as an employee who works for a company for a fixed- duration or fixed period such as a fixed project. A fixed-term contractor is not someone on probation, not someone who gets lost in the corner of the organisation and forgotten (more about that later) or someone hired against a permanent position but on a fixed-term contract to avoid paying company benefits.
Fixed-term employees are entitled to leave, maternity leave, sick leave and UIF benefits. Any employee that is employed more than 24 hours a month accumulates leave to contribute to UIF. A fixed-term contractor is entitled to one hour leave for every 17 hours worked or 1 day leave for every 17 days worked which equates to 1.25 days a month. And when the contract reaches its termination date the employer is to pay the leave out to the fixed-term employee as is the case with any other terminated employee.
Fixed-term employees are a group of employees that were previously “abused’ and legislation was “beefed -up” in 2015 to protect fixed-term employees from this abuse. There are certain cases where a fixed-term contract is valid and if you not using the contract for those purposes you will be in hot water at the CCMA.ssal at the CCMA.
Valid reasons for a fixed-term contract include:
- The fixed-term contract must be in writing (not having one in writing will imply it does not exist and therefore the employee has not to end date to contract therefore being in a permanent contract)
- The nature of the work must be for a limited duration this would mean that a company has excess work, volume and a temporary pair of hands is needed to assist, this should not extend for more than 12 months
- Employees are needed for a duration of a project and once the project has been complete the work no longer exists
- A temporary replacement for a permanent employee such as a maternity leave replacement or a replacement due to ill-health
- A fixed-term contract associated with a project or business where the activities of the business or project are dependant on external funding
- Seasonal work such as fruit pickers in the agricultural industry
- Training contracts such as article clerks where a fixed period of training is required for the completion of a qualification
- When an employee reaches the agreed retirement age and a company would like to retain their skills whilst finding a suitable replacement
The risk is that where a fixed-term employee is employed for longer than three months (the often forgotten ones where fixed-term contracts are not managed and the employee is still in employment way after the contract has expired), and there is no justifiable reason as per the valid reasons above where the nature of the work the employee is not of limited duration the employee’s employment will be deemed as indefinite the fixed term contractor will now become a permanent employee.
A few more cautions in regards to fixed-term contracts:
- Do not continually renew them, continuous renewal even with the wording: “the employee cannot have any expectation of permanent employment” will not hold water, ongoing renewal implies that the position is not temporary and therefore when you do end the contract it comes as a surprise to the employee and you will be liable for unfair dismissal at the CCMA.
- Do not use a fixed-term contract as a probationary mechanism, this is not one of the valid reasons for a fixed-term contract, automatically ending the contract because the person does not work out is unfair. In these cases you should appoint the employee on a permanent contract, manage the probationary process and follow the necessary steps in the process should the employee not work out.
After the amended legislation came into place in 2015, any employee who is on a fixed-term contract longer than 2 years is entitled to severance pay. This severance pay is one week salary for every week worked. This severance pay is only due if an employee earns below the threshold documented in the Basic Conditions of Employment Act currently pitched at R205 433.30 this severance pay is independent of the retrenchment process and is due on any termination of a fixed-term contract of this length for an employee earning below the earnings threshold.
Please also be aware that you cannot terminate a fixed-term contract by way of retrenchment if there is no clause allowing for such a retrenchment in the contract. Should an employer terminate the fixed-term employee’s contract in such circumstances the employer will be liable to pay the employee out their salary for the remainder of the contract.
Less staff issues
Less Stress
More Productivity
More Profit
Staff problems don’t fix themselves and more often than not, get worse and more costly the longer they are left unfixed.
Let us get you on the right track today and save you time money and heartache.
Give us a call
We would love to meet for an obligation-free chat, to find out more about your business and your unique HR needs.
Infinity HR Consulting operates in person in PMB, Midlands and remotely anywhere throughout SA. Our clients can appoint us on either a project (ad hoc), or retainer basis.
