Fixed-Term Contract of Employment Explained | Key Rules and Rights

Under section 198B of the Labour Relations Act 66 of 1995, an employee on a fixed-term contract that exceeds three months — or whose successive fixed-term contracts together exceed three months in any twelve-month window — is deemed to be employed on an indefinite contract unless the employer can show a justifiable reason. Section 198B(3) sets out a non-exhaustive list of justifiable grounds, and section 198B(4) expressly excludes substituting an employee on strike or lockout, performing seasonal work, and splitting genuinely permanent work into fixed-term contracts. The rules apply uniformly across all provinces and sectors.

What a Fixed-Term Contract Is (and How It Differs from a Permanent Contract)

A fixed-term contract ends on a defined trigger — a calendar date, completion of a defined deliverable, or the occurrence of a specific event (for example, the return of an employee on maternity leave). A permanent contract continues indefinitely until lawfully terminated. The expiry trigger should be specified in writing. Section 29 of the Basic Conditions of Employment Act 75 of 1997 (BCEA) requires written particulars of employment on engagement, including the expected period where the contract is finite.

The Section 198B Three-Month Deeming Rule

Section 198B was inserted into the LRA by the Labour Relations Amendment Act 6 of 2014 and is the central protection for fixed-term workers. An employee who has worked on a fixed-term contract for longer than three months is treated as having been employed on an indefinite contract from the date the threshold was crossed, unless the employer can justify the fixed term. The deeming rule also catches repeated short renewals: successive fixed-term contracts that together exceed three months in any twelve-month period trigger the same consequence. The clock runs continuously from the first day of the first contract; contracts cannot be split or staggered to evade the threshold.

What Counts as a “Justifiable Reason” for a Fixed Term

Section 198B(3) lists the most commonly relied-on grounds:

• The nature of the work is itself of limited or definite duration.
• A temporary increase in workload that is genuinely not expected to recur.
• Replacing an employee who is temporarily absent (maternity leave, sabbatical, secondment).
• A learner or student engaged for training or work experience within statutory limits.
• A registered unemployment work programme or government-sponsored public works scheme.

Section 198B(4) expressly excludes these as grounds for a fixed term:

• Substituting an employee on strike or locked out.
• Performing seasonal work — dealt with separately under section 198B(6) and the relevant Sectoral Determination.
• Work that is genuinely permanent but split into fixed-term contracts to avoid statutory obligations.
• Training or development outside an exemption under the Act.

The employer carries the onus of justification once the threshold is crossed. Recording the ground expressly in the contract reduces later dispute risk.

Equal Treatment and Benefits

An employee on a fixed-term contract for longer than three months must be treated no less favourably than a permanent employee performing the same or similar work, unless the difference is itself justified on objective grounds. Equal treatment extends across remuneration, pension and medical aid contributions, leave accrual, and training access. Section 198A — governing Temporary Employment Service (“labour broker”) placements — is a separate but parallel regime; for direct hires, section 198B is the governing provision.

What Happens When a Fixed-Term Contract Expires

A justified fixed-term contract expires by operation of law on the agreed date or event — no formal notice is required for the expiry itself. Most contracts include a notice clause for early termination during the term, calibrated to BCEA s37:

Completed service	Minimum notice (BCEA s37)
Up to 6 months	1 week
6 months to 1 year	2 weeks
More than 1 year	4 weeks

If the contract is not justified, the deeming rule applies and any subsequent dismissal is tested against the LRA’s unfair-dismissal provisions. Expiry without renewal can also give rise to an automatically unfair dismissal claim under section 198B(8) if the employee had a reasonable expectation of renewal — one of the most-litigated aspects of fixed-term contracts.

Severance Pay on Expiry

Section 198B(5) entitles an employee on a fixed-term contract longer than three months to severance pay of at least one week’s remuneration for each completed year of service (pro rata) if the employee is not offered continued employment on an indefinite basis on substantially similar terms. Severance is separate from notice pay and any accrued leave payout under the BCEA. An employee who unreasonably refuses such an offer forfeits severance.

Common Disputes and How They Are Resolved

Most fixed-term disputes are referred to the CCMA under section 191 of the LRA. The standard 30-day referral clock runs from the date of dismissal or the date the dispute arose; late referrals are ordinarily condoned only on narrow grounds.

Dispute type	Forum	Typical remedy
Unfair dismissal (ordinary)	CCMA arbitration	Compensation capped at 12 months’ remuneration (s194(1)) or reinstatement
Automatically unfair dismissal (incl. non-renewal under s198B(8))	Labour Court	Unlimited compensation (s187)
Equal-treatment / unfair-labour-practice under s198B(3)	CCMA conciliation; Labour Court on review	Compliance order or compensation
Severance dispute under s198B(5)	CCMA conciliation; arbitration if unresolved	Severance on the statutory formula

The CCMA is the Commission for Conciliation, Mediation and Arbitration, established under the LRA. Its Johannesburg and Pretoria regional offices cover the bulk of Gauteng-based matters. Automatically unfair dismissals linked to a fixed-term contract can attract unlimited compensation under section 187, and the 12-month minimum service threshold for unfair-dismissal claims does not apply.

Drafting and Review Checklist for Fixed-Term Contracts

1. Identify the trigger for expiry precisely — a specific date, a named event, or completion of a defined deliverable — and avoid open-ended language.
2. State the justification expressly with a reference to a section 198B(3) ground.
3. Include a notice clause for early termination during the term, calibrated to BCEA section 37.
4. Provide for severance if applicable, including the section 198B(5) formula.
5. Tie benefits and remuneration to the comparator permanent role to forestall equal-treatment challenges.
6. Avoid automatic-renewal clauses that create a reasonable expectation of continued employment without resolving the underlying justification.

An attorney who reviews a fixed-term contract before signature can flag each of these points against the specific role, sector, and duration. Burger Huyser Attorneys’ labour-law practice, run through specialist consultant Marius Ferreira, advises both employers and employees on contract wording, the deeming rule, and the merits of any subsequent CCMA or Labour Court referral.

Frequently Asked Questions

Can my employer keep renewing my fixed-term contract indefinitely?

No. Under section 198B of the LRA, an employee who has worked on a fixed-term contract for longer than three months — or whose successive fixed-term contracts exceed three months in any twelve-month period — is deemed to be employed indefinitely unless the employer can show a justifiable reason. Repeated renewals of short contracts do not defeat the deeming rule.

Is a fixed-term contract allowed in South Africa?

Yes, but only for work that is genuinely of limited or definite duration. Section 198B(3) lists the justifiable grounds, and section 198B(4) expressly excludes substituting an employee on strike or lockout, performing seasonal work, and splitting genuinely permanent work into fixed-term contracts as grounds for a fixed term.

How much notice must my employer give me when a fixed-term contract expires?

A justified fixed-term contract ends by operation of law on the agreed date or event, so notice of termination is not required for the expiry itself. Most fixed-term contracts include a notice clause governing early termination during the term, calibrated to BCEA section 37 (one week for under six months’ service, two weeks for under a year, four weeks for longer service). If the contract was not justified, expiry without renewal can amount to an unfair dismissal and trigger CCMA remedies.

Am I entitled to severance pay when my fixed-term contract ends?

Potentially yes. Section 198B(5) entitles an employee on a fixed-term contract longer than three months to severance pay (at least one week’s remuneration per completed year of service, pro rata) if the employee is not offered continued employment on an indefinite basis on substantially similar terms. An employee who unreasonably refuses such an offer forfeits severance.

Does a fixed-term employee get the same benefits as a permanent employee?

Generally yes. An employee on a fixed-term contract exceeding three months must be treated no less favourably than a permanent employee performing the same or similar work, including remuneration, pension, medical aid, leave accrual, and training access. Differences are only permissible where justified on objective grounds.

What is the difference between section 198A and section 198B of the LRA?

Section 198A regulates employees placed by a Temporary Employment Service (TES, often called a labour broker); section 198B regulates employees hired directly by the employer on a fixed-term contract. Both have a three-month threshold and an equal-treatment principle, but the deeming consequences differ. For most direct hires, section 198B is the relevant provision.

Can I challenge a fixed-term contract at the CCMA?

Yes. Most fixed-term disputes are referred to the CCMA under section 191 of the LRA within 30 days of the dismissal or the date the dispute arose; late referrals are condoned only on narrow grounds. Unfair-labour-practice claims about equal treatment under section 198B(3) are referred as unfair-labour-practice disputes; automatically unfair dismissal claims linked to non-renewal under section 198B(8) can attract unlimited compensation.

If you have been offered a fixed-term contract and want to understand whether it complies with section 198B of the LRA — or if your contract has ended and you believe the employer has misused the fixed-term route — Burger Huyser Attorneys’ labour-law team can review the contract, advise on whether the deeming rule applies, and represent you at the CCMA or in the Labour Court if a dispute arises. The firm is headquartered at 49 First Avenue, Linden, Randburg (011 888 0246), with branches across Gauteng, and labour-law work is run through specialist consultant Marius Ferreira. Initial consultations are available at any branch.