What does the labour law say about rolling 3 month fixed contracts?

Understanding Extending Fixed-term Contracts and Labour Law Compliance in South Africa

As an employer, you might wonder whether rolling fixed-term contracts is permissible under labour law. Conversely, as an employee, you might ask, "Can my employer repeatedly extend my fixed-term contract?" This article provides a clear and precise explanation of what the Labour Law says, helping you navigate these questions and ensure compliance.

What is a Fixed-term Contract?

Section 198B(1) of the Labour Relations Act defines a fixed-term contract as a contract of employment that terminates under the following conditions:

• Upon the occurrence of a specific event;
• Upon the completion of a specified task or project;
• On a fixed date, excluding an employee’s normal or agreed retirement age;
• Where the nature of the work is of a limited or definite duration.

For example, this could apply to an employee hired to complete a building project expected to take longer than three months (Section 198B(3)(a)).

Protections on Fixed-term Contracts

The legal protections for employees on fixed-term contracts do not apply to:

• Employees who earn above the earnings threshold outlined in the Basic Conditions of Employment Act (BCEA).
• Employers with fewer than 10 employees.
• Employers with fewer than 50 employees who have been in business for less than two years, unless the employer owns more than one business or the business is a continuation of a previously established entity.

Duration of Fixed-term Contracts

For employees covered by the protections of the Labour Relations Act, the duration of a fixed-term contract is limited to three months, unless a justifiable reason exists to extend the duration to more than three months. 

Employers with fewer than 10 employees or Employers with fewer than 50 employees who have been in business for less than two years, unless the employer owns more than one business or the business is a continuation of a previously established entity, must adhere to this three-month limitation unless specific criteria for the extension are met.

When Can Fixed-term Contracts Be Extended or "Rolled"?

The duration of a fixed-term contract may be extended beyond three months only if a justifiable reason exists.

Examples of justifiable reasons include:

• Replacing an employee who is temporarily absent.
• Addressing a temporary increase in workload not expected to last beyond 12 months.
• Hiring a student or recent graduate for training or work experience.
• Employing someone for a specific project with a defined duration.
• Employing a non-citizen with a work permit valid for a limited period.
• Seasonal work.
• Employment under a public works scheme or similar job creation programme.
• Employment funded by an external source for a limited time.
• The employee has reached the normal or agreed retirement age within the organisation.

Where any of these conditions are present, a fixed-term contract may legally be extended beyond the three-month limit.

Compliance Checklist

Before rolling a fixed-term contract, employers should address the following questions:

1. Is the employee protected?

   • Does the employee earn less than the BCEA earnings threshold?

2. Is the employer exempt?

   • Does the employer have fewer than 10 employees?
   • Does the employer have fewer than 50 employees and has been in business for less than two years, unless the employer owns more than one business or the business is a continuation of a previously established entity?

If no:

• Limit the duration of fixed-term contracts to three months, or ensure there is a justifiable reason for extending the contract. 

If yes:

• Protections do apply, and fixed-term contracts may be extended without a justifiable reason.

By following these guidelines, employers and employees can navigate fixed-term contracts while compliant with South African labour law. If you need to hire excellent staff RecruitMyMom can assist with talented skills up to C-Suite level.