Understanding Fixed-Term Contract Employment Rules in South Africa

Fixed-term employment contracts in South Africa are governed by section 198B of the Labour Relations Act 66 of 1995, which deems any fixed-term contract longer than three months with an employee earning below the prescribed earnings threshold to be a contract of indefinite employment unless the employer can show a justifiable reason for fixing the term. Employees earning at or above the threshold may lawfully be employed on fixed-term contracts for longer than three months without triggering the deeming rule, but the renewal and termination provisions of section 198B(4) and (8) still apply to limit repeated renewals. The current earnings threshold is updated by ministerial notice from time to time and is the single number that determines which statutory branch applies to a given contract. Both employers and employees should approach any fixed-term arrangement with the threshold and the justifiable-reasons list in hand, because a poorly drafted or repeatedly renewed contract can be converted into permanent employment by operation of law.

What a Fixed-Term Contract Is and Where the Law Lives

A fixed-term contract is an employment contract that terminates automatically on a specified date, on the completion of a specified task, or on the occurrence of a specified event — without the employer or employee needing to give notice. It is distinct from an indefinite (permanent) contract, which continues until either party lawfully terminates it under the ordinary LRA procedures.

The governing provision is section 198B of the Labour Relations Act 66 of 1995, inserted by the Labour Relations Amendment Act 6 of 2014 and in force since 1 January 2015. Section 198B applies to all employers and employees, regardless of sector, and sits alongside (not instead of) the Basic Conditions of Employment Act 75 of 1997, the Employment Equity Act 55 of 1998, and any applicable collective agreement or sectoral determination.

The framework is intended to prevent the abuse of fixed-term contracts as a way of denying permanent employees the protections and benefits attached to indefinite employment.

The Two-Branch Structure: Below-Threshold and Above-Threshold Employees

The first question under section 198B is whether the employee earns below or at or above the earnings threshold published by the Minister in terms of section 6(3) of the Basic Conditions of Employment Act. The threshold is updated periodically by notice in the Government Gazette and is the single number that determines which statutory branch applies to a given contract.

Branch	Who it applies to	Effect of a fixed-term contract longer than 3 months
Section 198B(3) — below-threshold employees	Employees earning below the prescribed earnings threshold	Deemed to be a contract of indefinite employment from the original start date, unless the employer can show a justifiable reason for fixing the term.
Section 198B(1) and (2) — above-threshold employees	Employees earning at or above the threshold	The contract may lawfully run for the agreed fixed term even if it exceeds three months. The renewal cap in section 198B(4) and the termination rules in section 198B(8) still apply.

Once deemed indefinite under section 198B(3), the employee is treated as a permanent employee for all purposes, including benefits, notice periods, and protection against unfair dismissal. The deeming takes effect from the date on which the employer first concluded the fixed-term contract with that employee, not from the date of the most recent renewal.

Burger Huyser Attorneys’ Labour Law practice works through this threshold question at the intake stage on every fixed-term matter — the answer dictates which branch of section 198B applies and which arguments are available to the client.

Justifiable Reasons for a Fixed-Term Contract (Section 198B(3)(a))

The employer bears the onus of showing that the fixed term is justified. If the employer cannot justify it, the deeming rule in section 198B(3) converts the contract into indefinite employment automatically.

Recognised justifiable reasons include:

• The nature of the work for which the employee was employed is of a temporary or limited duration.
• The agreement is to perform a specific task that is itself limited or finite.
• The employee is a student or recent graduate gaining work experience.
• The employee is engaged through a public employment service or similar work-placement programme.
• The agreement is for a non-citizen employee whose work permit is time-limited.

The list is non-exhaustive — the Labour Court and CCMA will look at the substance of the engagement, not just the label. A reason that is “operationally convenient” or “we prefer the flexibility” is unlikely to qualify; the test is whether the work itself is genuinely finite.

Practical drafting note: The justifiable reason should be written into the body of the contract. Silence on the reason makes the employer’s case much harder to prove later, and a court or commissioner will not infer a justification that was never recorded at the time the contract was concluded.

Repeated Renewals: The Section 198B(4) Cap

An employer may renew a fixed-term contract with the same employee (or re-employ them on a fresh fixed-term contract) only if the renewal is justified. In calculating whether a renewal is justified, account must be taken of the cumulative effect of successive fixed-term contracts and the total period of fixed-term employment of that employee.

A court or the CCMA may deem the employee to be indefinitely employed once the pattern of repeated renewals becomes inconsistent with a genuinely fixed-term engagement. The practical test is straightforward: if the work continues indefinitely, the contract should be indefinite; if the contract is repeatedly renewed to avoid that conclusion, the section 198B(4) deeming rule bites.

Scenario	Likely section 198B outcome
Series of 3-month or 6-month renewals for an ongoing operational role	Classic section 198B(3) trigger — likely deemed indefinite from the original start date
Project-based work with a genuine end date, not extended	Justified — fixed term should stand
Project continually extended or replaced with similar projects	Renewal cap under section 198B(4) likely bites
Genuinely seasonal roles (festive retail, harvest periods)	Usually justified if genuinely seasonal
Year-round recurring “seasonal” arrangements	Not justified — pattern indicates indefinite work
Substitution for absent employees (maternity leave cover, extended sick leave)	Justified, but the term should track the actual absence

Termination of Fixed-Term Contracts

A fixed-term contract terminates automatically on the agreed expiry date without any notice under section 198B(8). There is, however, a separate obligation that often catches employers out.

Situation	What the law requires
Contract expires naturally on the agreed date	Terminates automatically — no notice required (section 198B(8)).
Below-threshold employee approaching expiry	Employer must give not less than one week’s notice of the expiry date, or the contract is treated as renewed on the same terms (section 198B(5)).
Employer terminates before the expiry date without just cause	Unfair dismissal under section 186(1)(b) of the LRA — the employee may refer the matter to the CCMA for compensation or reinstatement.
Fixed-term contract is not renewed (rather than terminated early)	An employee may, in some circumstances, still claim unfair dismissal — particularly where non-renewal is linked to exercising a right (for example, taking parental leave) or where section 198B(4) deems the engagement indefinite.

Burger Huyser Attorneys’ Labour Law consultant Marius Ferreira regularly advises employers on the one-week notice obligation to below-threshold employees — failing to give it is one of the most common ways fixed-term contracts get unintentionally renewed.

Benefits, Status, and the “Equal Treatment” Floor

Employees on fixed-term contracts are entitled to the same benefits as comparable permanent employees, unless different treatment is justified. Section 198B(6) prevents employers from justifying less favourable treatment of fixed-term employees simply because of their contract status.

The deeming rules apply to benefits as well: once a contract is deemed indefinite, the employee is entitled to all permanent-employee benefits with effect from the deemed date. A common mistake is to assume that “fixed-term” means “no leave, no UIF, no provident fund” — the BCEA benefits apply regardless of contract duration.

Fixed-term employees are entitled to:

• Annual leave under section 20 of the BCEA.
• Sick leave under section 22 of the BCEA.
• Family responsibility leave under section 27 of the BCEA (where applicable).
• Unemployment Insurance Fund (UIF) contributions under the Unemployment Insurance Act 63 of 2001.
• Maternity, parental, and adoption leave protections under section 25 of the BCEA.
• Notice of termination on expiry where section 198B(5) applies.

Where the National Framework Lands in Gauteng

Fixed-term employment disputes under section 198B are typically resolved through the Commission for Conciliation, Mediation and Arbitration (CCMA), which has regional offices in Johannesburg, Pretoria, and Ekurhuleni. Where a dispute escalates to adjudication, the Labour Court sits at its Johannesburg seat for Gauteng matters, with a satellite court in Pretoria.

For employees and employers in the Pretoria / Centurion area, the practical CCMA office for conciliation is the Pretoria regional office, and arbitration hearings are typically scheduled within roughly 30 to 60 days of an unresolved conciliation. Where a fixed-term contract is alleged to have been unfairly terminated or to have triggered the section 198B deeming rule, the matter can be referred to the CCMA without an attorney for individual claims, but representation by an experienced labour law practitioner materially improves the prospect of a defensible outcome — particularly on the justifiable-reason and renewal-cap questions, which turn on document-led evidence.

What to Do If You’re on a Fixed-Term Contract That You Think Should Be Permanent

For an employee:

1. Gather your contract(s), any renewals, the total period of employment, and evidence that the work has continued past the original fixed-term end.
2. Identify whether you fall below or at or above the current earnings threshold — this determines which branch of section 198B applies.
3. A CCMA referral under section 191 of the LRA is the standard route for an unfair-dismissal claim; a section 198B dispute about the contract’s status can also be referred.
4. Time limits for CCMA referral are short — generally 30 days from the date of dismissal or the conduct complained of — and late referrals require a condonation application showing good cause.
5. An attorney experienced in labour law can assess whether the deeming rule applies, draft the referral, and represent the employee in conciliation and arbitration.

What to Do If You’re an Employer Drafting a Fixed-Term Contract

For an employer:

1. Confirm the employee falls on the correct side of the earnings threshold (use the current threshold, not a stale number).
2. Write the justifiable reason into the body of the contract — silence on the reason makes the employer’s case much harder to prove later.
3. State the termination date, the specific task, or the triggering event explicitly; vague “temporary” wording is the most common drafting weakness.
4. Build in a renewal review rather than auto-renewal: each renewal should be a conscious decision against a fresh section 198B assessment.
5. Remember the one-week notice obligation to below-threshold employees about expiry, or accept that the contract will be treated as renewed on the same terms.

These drafting steps are the same criteria a specialist labour law consultant will look for when asked to review or defend a fixed-term engagement. Burger Huyser Attorneys’ Labour Law practice, led by Marius Ferreira, assists both employees and small and medium employers with fixed-term contract drafting, review, and CCMA disputes arising under section 198B.

Frequently Asked Questions

How long can a fixed-term contract legally run in South Africa?

There is no absolute maximum period. For employees earning below the section 198B earnings threshold, any fixed-term contract longer than three months is deemed indefinite unless the employer can show a justifiable reason for fixing the term. For employees earning at or above the threshold, fixed-term contracts may run for the agreed fixed term without triggering the three-month deeming rule, but the renewal provisions in section 198B(4) still apply to limit repeated renewals.

What happens if my fixed-term contract is renewed several times?

Each renewal must itself be justified under section 198B(4). The CCMA and Labour Court look at the cumulative effect of the renewals and the total period of fixed-term employment. Where the pattern becomes inconsistent with a genuinely finite engagement, the employee may be deemed to be indefinitely employed with effect from the original start date, and any subsequent termination is treated as a dismissal from permanent employment.

Am I entitled to benefits on a fixed-term contract?

Yes. Section 198B(6) prevents employers from treating fixed-term employees less favourably than comparable permanent employees, unless the difference is justified. BCEA entitlements (annual leave, sick leave, UIF, family responsibility leave) apply regardless of contract duration, and once a contract is deemed indefinite, all permanent-employee benefits apply from the deemed date.

Can my employer end my fixed-term contract early?

Only on the same grounds that would justify dismissal of a permanent employee. Early termination of a fixed-term contract without a fair reason and a fair procedure is an unfair dismissal under section 186(1)(b) of the LRA, and the employee may refer the matter to the CCMA for compensation or reinstatement.

Do I need an attorney for a fixed-term contract dispute at the CCMA?

Representation at conciliation is optional and many employees represent themselves. At arbitration, while not strictly required, representation by an experienced labour law practitioner materially improves the prospect of a defensible outcome, particularly where the dispute turns on the section 198B justifiable-reason analysis or the renewal cap.

Need help with a fixed-term contract dispute or CCMA referral? Burger Huyser Attorneys’ Labour Law practice — led by specialist consultant Marius Ferreira — assists employees and small and medium employers with fixed-term contract drafting, review, and CCMA disputes arising under section 198B of the LRA. For a fixed-term contract question or a CCMA referral, contact the firm’s Centurion branch on 012 644 4990 (after-hours 061 516 7117) or the Linden head office on 011 888 0246.