The effect of the newly amended Labour Relations Act on Fixed Term Agreements

31st July 2015

The effect of the newly amended Labour Relations Act on Fixed Term Agreements

The amendments to the Labour Relations Act 66 of 1995 (the “Act”) came into effect on 1 January 2015. Among some of the significant changes were the adjustments made to atypical employment and notably that of fixed-term agreements.1

A fixed-term agreement is defined in the Act as a contract of employment that terminates on the occurrence of a specific event or a fixed date (other than the employee’s retirement age), or the completion of a specific task or project.2

Significantly, the Act specifies that employees who are employed for a fixed term period longer than three months, in the absence justifiable reasons, will be deemed to be permanent employees and cannot be treated less favourably than other permanent employees performing similar work. In other words, they must be entitled to equal pay, equal benefits, equal leave entitlements and equal opportunities to apply for vacancies, unless justified by the employer.

In addition, the amendments have inserted the requirement that a fixed-term employee who is employed for exclusive work on a project that has a limited or defined duration for a period longer than 24 months will be entitled to severance pay amounting to one week's remuneration for each completed year of service.3

Furthermore, s198B(6) of the Act stipulates that an offer to employ an employee on a fixed-term contract or to renew or extend a fixed-term contract must be in writing; and must state the justifiable reason/s for fixing the term of the contract.

Justifiable reasons include one or more of the specified reasons listed in s198B of the Act or other justifiable grounds. The list of reasons as to what makes entering into a fixed term contract of more than three months justifiable4 include:

The Act specifies that fixed-term contracts entered into or renewed in contravention of these provisions result in the employment being deemed to be for an indefinite duration.

This particular provision came into effect on 1 April 2015 and has far reaching consequences for employers. Should you have any further enquires on compliance with the amendments, please do not hesitate to contact us on +27 11 788-0083 or email

Written and prepared by Joel Pandaro, BOUWER KOBELI MORABE Attorneys

1 These amendments are only applicable to employees earning below the earnings threshold, however, currently set at a gross annual income of R 205 433.30.
2 Section 198B(1) of the Act
3 Section 198B(10) of the Act
4 Section 198B(4) of the Act