April 2025 | Employment and Labour Law
It’s vital for both employers and employees to understand the practical and legal differences between permanent and fixed term employment arrangements.
What is a fixed term contract?
A fixed term contract is a temporary employment arrangement with a specified start date and an agreed end date. This could be a fixed end date or a reference to a specified task or project reaching completion, or to a specified event. Importantly, you must be able to prove that your employee agreed to the end date.
A standard contract of employment, by contrast, is for an unlimited period and ends only when your employee resigns, or reaches retirement age, or is lawfully dismissed or retrenched by you.
Any employer tempted to misuse a fixed term contract in order to dodge the many legal protections given to a full-time employee should think twice – our courts do not look kindly on attempts to prejudice employees by disguising the true nature of an employment relationship.
The basic requirements
The contract (and any renewal contracts) must be in writing and must state the reasons justifying the stated fixed term.
The protections
The Labour Relations Act (LRA) provides a range of protections to fixed term employees. Let’s address them under two main headings.
Firstly, the “reasonable expectation of renewal” protection that applies to everyone
Simply put, you could face an unfair dismissal claim (with all that that entails) if you give the employee reason to believe that the contract will be renewed or converted to full-time employment.
That’s because – and this applies to all fixed term contracts in that none of the exclusions listed below apply here – the LRA says the termination of a fixed term contract is seen as a “dismissal” if:
- The employee “reasonably expected” you to either renew the fixed term contract on the same or similar terms, or to convert the contract into indefinite employment (again, on the same or similar terms), and you didn’t do so.
Anything could land you in hot water here, with particular risk areas being things like continual renewal of fixed term contracts without justification, verbal or implied reassurances of renewal, a workplace culture of renewing contracts etc. To be on the safe side, consider giving your employee specific written notice of non-renewal in good time. Every scenario will be different here, so in some instances you may be advised that multiple contract renewals are justified, in others that they aren’t – specific legal advice is essential, and the bottom line is that professionally drawn contracts and clear communication are critical.
Secondly, other protections that apply only to certain employees
These additional protections do not apply in any of these exceptions:
- The employee earns more than the earnings threshold set by the Basic Conditions of Employment Act (currently R261,748.45 per year or R21,812.37 per month).
- You employ less than 10 employees.
- You employ less than 50 employees in a business that is less than two years old (and that hasn’t been formed by dividing or dissolving an existing business).
- The fixed term contract is permitted “by any statute, sectoral determination or collective agreement.”
The three-month limit, and the need for justification
You can only use a fixed term contract (or successive contracts) for over three months if:
- The work involved is of limited or definite duration, or
- You are able to prove a justifiable reason for fixing the contract’s term, with the LRA specifically mentioning situations such as:
- Covering another employee’s absence (on maternity leave perhaps)
- Addressing a temporary increase in work not expected to last over 12 months
- Providing work experience to students and new graduates
- Specific projects of limited or defined duration
- Seasonal work
- Positions funded externally for a limited period
- An employee who has reached retirement age
This is not an exhaustive list so you may well have other justifiable reasons, such as perhaps needing to establish the viability of a new venture, a new branch, or a new position before committing to long-term employment.
Watch out here! If you employ someone on a fixed term contract for more than three months without complying with the above, the contract is automatically deemed to be a full employment contract of unlimited duration.
Other things to watch
- Equal treatment after three months: Even if you have justification for exceeding the three-month limit, you must then treat the employee no less favourably than a permanent employee in the same position, unless again you have justification for different treatment.
- Right to apply for vacancies: Fixed term employees must have the same access to apply for vacancies as permanent employees.
- Retrenchment pay if a project exceeds 24 months: Any project-specific fixed term employee who is employed for over 24 months must, when the contract ends, be paid a week’s remuneration for every completed year of the contract or offered other employment (with you or another employer) on the same or similar terms.
A properly drawn employment agreement that both protects your interests and complies with the law is essential – and we’re standing by to help you.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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March 2025 | Employment and Labour Law
From 1 April 2025, the earnings threshold under the Basic Conditions of Employment Act (BCEA) will increase, impacting not only the BCEA but also employee protections under the Labour Relations Act (LRA) and Employment Equity Act (EEA).
Broadly speaking, employees earning less than the threshold amount are entitled to stronger labour protections.
The new threshold
The threshold rises by only 2.9% this year, increasing from R254,371.67 per year (R21,197.64 per month) to R261,748.45 per year (R21,812.37 per month).
What counts as “Earnings”?
“Earnings” (for this purpose only) means “the regular annual remuneration before deductions, i.e. income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee: Provided that subsistence and transport allowances received, achievement awards and payments for overtime worked shall not be regarded as remuneration”.
The impact on employee protections
- BCEA: Employees earning above the new threshold aren’t entitled to statutory protections for working hours, overtime pay, Sunday, public holiday and night work, daily and weekly rest periods and meal intervals.
- LRA: Those earning below the threshold gain stronger protections:
- If working for a client via a labour broker for more than three months, they are deemed employees of the client – unless they really are performing a temporary service.
- Fixed-term contracts exceeding three months are presumed indefinite unless the employer has a justifiable reason for fixing the term of the contract.
- EEA: Employees earning above the threshold can only take unfair discrimination disputes (except sexual harassment cases) to the Commission for Conciliation, Mediation and Arbitration (CCMA) if both parties agree. Otherwise, they must approach the Labour Court.
Exceptions to the BCEA protections
Some employees have limited BCEA protection regardless of their earnings, including:
- Senior managerial employees – defined as “an employee who has the authority to hire, discipline and dismiss employees and to represent the employer internally and externally”.
- Sales staff who travel to customers and set their own work hours.
- Employees working less than 24 hours a month.
Please ask us for specific advice if you need it. This article is merely an overview of a complex topic with many pitfalls for the unwary.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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February 2025 | Employment and Labour Law
The National Minimum Wage (NMW) for each “ordinary hour worked” has been increased from 1 March 2025 by 4.4% from R27,58 per hour to R28,79 per hour.
Domestic workers: Assuming a work month of 22 days x 8 hours per day, R28,79 per hour equates to R230,32 per day or R5067,04 per month. Of course, this is just a bare legal minimum: the Living Wage calculator will help you check whether you are actually paying your domestic worker enough to cover a household’s “minimal need” (adjust the “Assumptions” in the calculator to ensure that the figures used are up-to-date).
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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January 2025 | Employment and Labour Law, Uncategorized
“Only in our dreams are we free; the rest of the time we need wages.” (Terry Pratchett)
Retrenching employees can be an expensive business. You’ll have to pay each employee a minimum of one week’s pay for each completed year of ongoing service, and that total liability can add up alarmingly.
A recent Labour Court ruling has however set out clear guidelines for avoiding that cost by arranging alternative employment for your retrenched employees.
A lost cleaning contract and a raft of retrenchments
A contract cleaning services company, fearing it would lose a particular contract in an upcoming tender process, warned all staff employed at the factory in question that they could face retrenchment.
Sure enough, the tender went to a competitor. The company was able to absorb 130 employees into other positions and locations, but 41 had to be retrenched. Eleven of them were given severance pay, but the employer declined to pay anything to the 30 who accepted alternative employment.
The employees were having none of that, and approached the CCMA (Commission for Conciliation, Mediation and Arbitration). The CCMA awarded them both retrenchment pay and notice pay.
The employer then took the matter to the Labour Court, which set aside those awards. So, the employer is off the hook on both counts – and employers and employees should understand the Court’s reasoning for that decision.
Having your cake, and eating it
- The BCEA (Basic Conditions of Employment Act) provides that employees cannot demand severance pay if they are offered alternative employment and unreasonably reject it. As the Labour Court here put it, “the raison d’être of [severance pay] is to compensate an employee who has been dismissed for operational requirements, through no fault of her own, to be paid compensation for her loss of employment. However, the legislature considered that an employee who unreasonably refuses an offer of alternative employment is not without blame. She should therefore shoulder the loss of employment without any compensation.” (Emphasis added)
- Equally, “where an employee accepts alternative employment, arranged by the employer, she forfeits her right to receive severance pay.” Being paid both severance pay and a salary is a double benefit not intended by the BCEA.
Employers: Two practical steps to avoid liability
Employers should take two lessons from this ruling:
- Don’t just “sit on your hands watching the world go by”! As this Court put it, employers are incentivised to ensure that their employees get another job. Which is exactly what the cleaning company did here: it “did not just sit on [its] hands and impassively watch the world go by,” it managed to find alternative employment for 30 employees. It was extremely pro-active in this regard, meeting with the new employer, giving it all the information it needed, and allowing employees paid time off to attend interviews at a venue which it arranged.
- Act early and urgently. This employer avoided the claim for notice pay by giving over four weeks’ notice of termination. What’s more, it engaged in the consultation process and issued notice of retrenchment circulars at the earliest opportunity, then acted “as a matter of some urgency” to collaborate with the new employer in arranging new job offers.
Another point to consider
It’s worth noting perhaps that the Court also mentioned in passing (“obiter dicta”) that even if an employee were to find her own new employment “through her own efforts and without the aid of her retrenching employer” she “needs no soft cushion of severance pay to land on” and would have to justify any such claim.
Still, on the “better safe than sorry” principle, employers should not take chances here – rather be pro-active in arranging alternative employment as soon as you can.
A final thought for employees
Before you decide to reject any offer of alternate employment bear in mind that, as this court confirmed, it will be up to you to prove your entitlement to severance and/or notice pay – it’s not automatic!
Whether you’re an employer planning to retrench staff, or an employee facing an impending retrenchment, getting the best legal advice is key.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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November 2024 | Employment and Labour Law
“One of the hallmarks of an enlightened egalitarian society is the right to freedom of religion.” (Extract from judgment below)
Our courts do not tolerate unfair discrimination in the workplace, and employers need to tread particularly carefully when it comes to the concept of “automatically unfair discrimination”. Get that one wrong and you could be penalised with an order to pay your employee two years of earnings as compensation.
What is “automatically unfair discrimination”?
A dismissal is automatically unfair if based on any “arbitrary ground”, including, but not limited to, a person’s race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language or birth (aspects relevant to this case have been highlighted).
However, “a dismissal may be fair if the reason for dismissal is based on an inherent requirement of the particular job” (emphasis added).
Let’s discuss these concepts with reference to a recent Labour Appeal Court (LAC) case.
“Sorry, I can’t work on the Sabbath”
Employed as a regional marketing manager by an international hospitality company, an employee signed a standard employment contract which, after specifying “normal hours of work” as being 8.30 a.m. to 5 p.m., Mondays to Fridays, with an hour for lunch, also provided for circumstances in which he could be required to work outside those hours.
Two months after starting work, the employee dropped what presumably came as something of a bombshell to his bosses. He said that as a Seventh Day Adventist, his religious beliefs precluded him from travelling or attending events on the Sabbath (i.e. from sunset on Friday until sunset on Saturday). He hadn’t made any mention of this in his job interviews, nor had he challenged the wording of his contract as to the required work hours.
Initially his line manager was able to accommodate him by covering for him on the problem days (travelling, it seems, to Kenya, Mozambique and Zambia as well as locally), but after 16 months she could not continue. He was offered an alternative position which didn’t require him to work on the Sabbath, but that came with a 45% pay cut.
The manager declined this offer, and he was dismissed after a disability enquiry. He challenged his dismissal, and the Labour Court, after finding it to have been automatically unfair, ordered his reinstatement.
His employer appealed this judgment to the LAC, which overturned that ruling and held that the dismissal was in fact fair.
Lessons to learn, points to ponder
The reasoning and the legal principles that underpinned the employer’s success in this case provide a useful blueprint for both employers and employees who might find themselves in a similar situation. Let’s address them point by point:
- Job interviews: It no doubt counted against the employee that he hadn’t mentioned the limitations on his working hours in his interviews, nor had he queried the wording of his employment contract. As a job applicant, be clear about any constraints on your work availability outside of normal hours, and query anything in your contract that might conflict with them. As an employer, make it an integral part of your interview process to check that the applicant understands your requirements as to both normal and additional work hours, and agrees to them.
- Employment contracts: The employer’s success in the LAC would not have been quite as easily won if its contract hadn’t clearly stated that the manager “will be required to work longer hours from time to time without additional compensation” (emphasis added). A “job flexibility requirement clause” also helped it when it came to the offer of an alternative position.
- Automatically unfair discrimination: There are two questions here. Was there discrimination? And if so, was it based on an arbitrary ground such as the employee’s religious beliefs? The employer in this case conceded on both aspects.
- “An inherent requirement of the job”: It was then for the employer to convince the court that the discrimination was permissible because the job requirement in question is “inherent or inescapable in the performance of the job”. Such a requirement has to be “rationally connected to the performance of the job”, “adopted in a genuine and good faith belief that it was necessary to the fulfilment of a legitimate work-related purpose” and “reasonably necessary to the accomplishment of that purpose.” The employer had no problem in proving all that. But that wasn’t the end of it…
- Accommodating the employee: As an employer, you can’t simply say “tough luck, your religious beliefs mean you can’t do the job as per its inherent requirements so off you go.” You must prove “that it is impossible [for you] to accommodate the individual employee without imposing undue hardship or insurmountable operational difficulty.” It was on this leg that the employer nearly came unstuck – while two of the judges agreed that it had passed this test, the third judge disagreed. If the decision had gone against it, the employer would have been penalised with a compensatory order of 24 months’ earnings.
Bottom line here is that you must act reasonably and in context in trying to enable an employee to continue in employment.
Our employment laws are complex and the penalties for getting them wrong are severe – so don’t hesitate to ask us for help if you’re in any doubt.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
© LawDotNews
October 2024 | Employment and Labour Law
“The best investment you will ever make are your employees” (Peter Drucker)
As the end of the year approaches, many employees are eagerly awaiting their 13th cheque or year-end bonus. However, not every employer is in a position to pay bonuses, and this can lead to disappointment, disputes, or even legal action if expectations aren’t managed properly.
Read on to find out whether you’re legally required to pay a bonus, and how you can avoid potential conflict.
What does the law say?
There’s a common misconception that South African law obliges employers to pay annual bonuses. This is not true. There’s no automatic legal requirement to pay a 13th cheque or other bonus unless certain conditions apply:
- Employment contracts: If the employee’s contract states that an annual bonus or 13th cheque is part of their remuneration or guaranteed rather than discretionary, you are legally obliged to pay it.
- Company policies or agreements: Bonuses may also be provided for in company policies, collective agreements, or other documents. You need to follow these agreements unless circumstances make it impossible to do so.
- Custom and practice: If your business has consistently paid bonuses in the past, this may have created a “right of expectation.” In such cases, suddenly discontinuing the bonus without prior consultation may be viewed as unfair, and employees could take legal action for unfair labour practices.
How to avoid disputes: Prepare, plan and communicate
You can avoid the common disputes over bonuses by focusing on three essential actions: preparing, planning and communicating.
1. Prepare
- Review all employment contracts and company policies. Ensure these documents are up-to-date and clearly state whether bonuses are discretionary or dependent on conditions such as company performance or employee contributions.
- Be aware of any past practices. If bonuses have been paid regularly in the past, employees will almost certainly assume this will continue, even without it being part of their contract. They could also think that bonuses are an automatic right, and not based on performance. If you’ve paid bonuses in previous years, structure your policies carefully so that paying a bonus in good years doesn’t create enforceable rights (or even unrealistic expectations) in less profitable years. Specific legal advice on this point is crucial to avoid disputes.
2. Plan
- Use cash-flow planning to assess your ability to pay bonuses so you can make informed decisions about whether or not you can afford bonuses, and to give you early warning of any possible challenges.
- When you’ve made your decision, think about how and when to tell your staff about it.
3. Communicate
- Clear and early communication is key to managing employee expectations. If you won’t be paying bonuses this year, or will be reducing the amount, let your employees know well in advance to avoid last-minute disappointment.
- If you are able to pay bonuses, take the opportunity to reinforce the link between performance and reward. Thank everyone for their hard work and contributions to the success of the business.
- Remind staff about the taxman waiting in the wings for his cut. This could come as a nasty shock, particularly if the bonus pushes an employee into a higher tax bracket.
- Open communication and consultation build trust and help maintain morale and productivity, even if the news is disappointing. Employees will appreciate honesty and clarity, especially if you’re facing financial difficulties.
How we can help
If an employee believes they are contractually or customarily entitled to a bonus and you fail to pay it, they may cry “unfair labour practice” and take the matter to the CCMA (Commission for Conciliation, Mediation and Arbitration).
If you’re uncertain about your obligations or if you anticipate disputes, we’re here to help. We can review your employment contracts, assess past practices, and provide guidance on how to manage employee expectations legally and fairly.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.
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