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Mistake? 4 common mistakes with fixed term contracts

Mistake? 4 common mistakes with fixed term contracts

Nov 24, 2022 | Articles, Business owners tips and advice

In general, it is a mistake not to be informed… The Basic Conditions of Employment Act (“BCEA”) dictates the minimum employment conditions that an employer and employee can agree upon. Take note that labour legislation applies to all employers and employees, irrespective of how the employment relationship is recorded, or the term thereof.
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Four common mistakes regarding fixed term contracts include:

Mistake 1: no written employment contract

One of the biggest mistakes employers make is not to implement written employment contracts, or to settle for a generic employment contract that offers minimal protection when there is a dispute in the workplace.  The employee is employed from the moment he/she accepts employment, irrespective of how the relationship is recorded – via an oral or written agreement.  A written agreement (employment contract), however, creates clarity by confirming the terms and conditions of employment agreed upon and protects the employer in terms of the employment relationship going forward. 

The employment contract can be of immense value to the employer if used effectively. Making a mind shift regarding employment contracts from an “administrative burden” to “risk mitigating tool” can save employers a lot of time and money in the long run.

Mistake 2: disguising permanent employment

Unfortunately, it does happen that employers attempt to evade the statutory obligations in terms of labour legislation altogether, or attempt to evade permanent employment by employing employees on a fixed term basis. This is however a grave mistake and employers must clearly understand that to disguise what is in fact permanent employment in the form of a fixed term contract is illegal.

It is crucial that an employer enters into the correct type of employment contract.  Ask yourself:  is the position of a permanent/indefinite nature; or is the position of a temporary nature, for a specific time period or for a specific project?  Employees employed on a fixed term basis for longer than three months, will be deemed to be permanent employees, unless the longer fixed term period is justifiable in terms of the Labour Relations Act (“LRA”). 

Mistake 3: creating an expectation

The employer must be careful not to create an expectation of permanent employment with the employee, which can easily happen when a fixed term employment contract is renewed for a second or third, similar period. The more frequently an employer rolls over a fixed term contract, the more reasonable becomes the employee’s expectation that it will continue to be rolled over in the future, hence creating an expectation of permanent employment. Failing to renew such a contract, can then be seen as an unfair dismissal.
If a fixed term employment contract comes to an end and the employee remains in this position, legislation states that that employee will be regarded as a permanent employee. This means that the contract will be deemed to have been tacitly renewed on the same terms, except that the relationship will now be of a permanent duration.

Mistake 4: different terms and rules

There is a myth that the same legislation, discipline, policies and procedures does not apply in the same way to fixed term employees, as it does to permanent employees.  The only difference between a fixed term and a permanent employee, is the term of employment. 

Fixed term employees must be treated the same as permanent employees with regards to wages, leave and other benefits.  Employees on fixed term contracts must also be given equal access to opportunities to apply for vacancies as well as be entitled to severance pay upon termination of employment where the employee is employed on a fixed term contract exceeding 24 months.

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