Fixed-Term Contract Example in South Africa: What the Clauses Mean and When the Contract Becomes Permanent

A fixed-term contract in South Africa is a written employment agreement that ends on a specified date, the completion of a specific task, or the occurrence of a specific event, and it is governed by section 198B of the Labour Relations Act 66 of 1995 (as amended by the Labour Relations Amendment Act 6 of 2014). The contract must, in writing, identify the justification for the fixed term, fix a determinable end date, and comply with the Basic Conditions of Employment Act 75 of 1997 on hours, leave, pay, and notice. After 24 months of successive fixed-term employment (or earlier if the justifiability test fails), the employee is deemed to be employed indefinitely unless the employer demonstrates a justifiable reason for the continuation. Fixed-term employees retain the same benefits as permanent staff and the right to claim unfair dismissal under the LRA (per NEHAWU v University of Cape Town 2003), so the contract is not the protection it once was.

What a Fixed-Term Contract Actually Is under the LRA

Section 198B of the Labour Relations Act 66 of 1995, introduced by the Labour Relations Amendment Act 6 of 2014 and in force from 1 January 2015, is the central provision that governs fixed-term contracts for employees earning below the earnings threshold. It sets the rules, the 24-month threshold, and the consequences of non-compliance. A fixed-term contract is one that terminates upon the expiry of an agreed period, the completion of a specified task or project, or the occurrence of a specified event, such as the return of an absent employee from maternity leave. The end point must be determinable; an “open-ended” contract that purports to be fixed-term is treated as indefinite from the start.

“Fixed-term” is legally distinct from several everyday labels that overlap in ordinary speech:

• Part-time refers to working fewer ordinary hours than a comparable full-time employee, regardless of the term.
• Temporary is a colloquial term with no fixed statutory meaning; it may describe a fixed-term contract but does not by itself qualify as one.
• Casual employment is a separate category under section 198A of the LRA, governed by its own rules.
• Probation is a trial period attached to an otherwise indefinite contract; it does not convert the underlying contract into a fixed-term one, and probation does not override a fixed-term end date when it is written into the same contract.

The Basic Conditions of Employment Act 75 of 1997 applies in full to fixed-term employees. The contract cannot undercut BCEA minima on ordinary hours, overtime pay, annual leave, sick leave, family responsibility leave, notice, severance pay, or written particulars of employment. Any clause that purports to do so is void to the extent of the inconsistency.

When a Fixed-Term Contract Is Justified

An employer may use a fixed-term contract only if there is a justifiable reason for doing so. Section 198B(2) requires that the justification be recorded in writing and signed by the employee. The Department of Labour’s published guidance and the line of cases built up under section 198B recognise a closed set of reasons that the courts and the CCMA have treated as legitimate. The commonly accepted categories are:

• The work is genuinely of limited or defined duration, for example a specific construction project, a finite consulting assignment, or a seasonal peak that recurs on a known cycle.
• Temporary replacement of an absent employee, including maternity, study, illness, or secondment leave.
• A student or graduate undergoing a structured work-integrated learning programme such as an internship, article of clerkship, or vocational placement.
• Limited funding for the position, for example a grant-funded or donor-funded post where the funding window defines the work.
• The employee is a non-citizen whose work permit is limited to a defined period and the permit’s expiry sets the term.

Personal preference, “we’ll see how it works out,” vague business reasons, or convenience are not justifiable. The closer the contract gets to a continuing operational role, the harder the justifiability argument becomes; that pressure intensifies once the 24-month mark is approaching, and the cases in this area (including Government of the Republic of South Africa v Trenlynow (2014) 35 ILJ 1125 (LAC) and South African Local Government Bargaining Council v Rand Water Board (2014) 35 ILJ 1133 (LAC)) have tightened the test considerably.

The 24-Month Rule and Deemed-Indefinite Conversion

An employee who works more than 24 months on a fixed-term contract, or on a series of successive fixed-term contracts, is deemed to be employed indefinitely unless the employer proves a justifiable reason for the continued fixed-term use. This is the section 198B deeming provision, and it is the part of the regime that most fixed-term contracts run into trouble on, not because the contract was badly drafted at the start, but because the employer forgot to revisit it at month 23.

Element of the 24-month rule	How it operates
Threshold	24 months of continuous or successive fixed-term employment with the same employer.
Breaking the clock	A genuine break in employment of more than three months resets the clock. Short renewals back-to-back do not.
“Successive” contracts	The pattern counts as successive even where the work or the post changes, if the renewal sequence is the employer’s device to avoid the section 198B consequences.
Effect of deemed status	The employee becomes indefinite on the same terms; any later retrenchment must follow the LRA’s operational-requirements process.
Burden of proof	The employer carries the onus of showing the continued fixed-term use was justified; the win rate on that argument at the CCMA or Labour Court is not high.

Once the employee is deemed indefinite, the contract continues on the same terms and any later attempt to retrench must comply with section 189 of the LRA, including consultation, selection criteria, severance pay, and the right to challenge the dismissal. The deemed conversion is automatic; it does not require the employee to apply for it and cannot be waived by agreement.

Rights and Benefits Fixed-Term Employees Cannot Be Denied

A fixed-term employee is an employee in the full sense, and section 198B(4) entitles them to be treated no less favourably than a permanent employee performing the same or similar work. The contract cannot pay less, exclude benefits, or limit access to internal processes that permanent staff enjoy. The minimum entitlements that travel with every fixed-term contract are:

• Equal pay for equal work (section 198B(4)).
• Full BCEA leave: 21 consecutive days of annual leave per leave cycle (BCEA section 20), 30 days of sick leave in a 36-month cycle (BCEA section 22), 5 days of family responsibility leave per 12-month period where applicable, and maternity or parental leave under the BCEA.
• UIF, SDL, and PAYE contributions flowing through the contract regardless of its term.
• Access to the CCMA and Labour Court on the same unfair-dismissal and unfair-labour-practice grounds available to permanent staff.
• Severance pay on retrenchment under BCEA section 41 if the employer terminates early for operational reasons, even where the contract still had months to run.

The Dismissal Question: Are Fixed-Term Employees Protected?

Yes. A fixed-term employee can claim unfair dismissal when the contract ends or is terminated before the agreed end date. The Constitutional Court’s decision in NEHAWU v University of Cape Town (2003) 24 ILJ 95 (CC) is the leading authority for the proposition that the expiry of a fixed-term contract engages the dismissal protection in section 186 of the LRA and that the employer must show a fair reason (operational, conduct, capacity, or incompatibility) and follow a fair procedure.

An employer who dismisses a fixed-term employee before the agreed end date without a fair reason and a fair procedure is exposed to:

• Reinstatement under LRA section 193, in the same position or an equivalent one on no less favourable terms.
• Compensation up to the statutory cap of 24 months’ remuneration.
• A constructive-dismissal claim where the employer makes the conditions intolerable to force the employee to resign before the end date.

Treating the expiry date as automatic dismissal is the most common error. Expiry is still a dismissal event, and the substantive and procedural fairness requirements apply. The CCMA referral must be made within 30 days of the dismissal event, although the CCMA may condone late referral on good cause shown.

Worked Example: An Annotated Fixed-Term Contract

The annotated clauses below show what a section 198B-compliant fixed-term contract looks like in practice. Each block is a drafting pattern, not a substitute for tailored advice on a specific role.

Parties and position

• Employer: [Full registered name of employer], [trading name if different], [registration number / VAT number].
• Employee: [Full name], [ID number], [residential address].
• Position: [Job title], reporting to [line manager / department].

Commencement and duration

• Start date: [Date].
• End date: [Date], or on completion of [specific task], or on occurrence of [specific event]. The end point must be determinable; “until cancelled” or “indefinite” defeats the fixed-term status.
• Justification: [e.g. “to cover the maternity leave of [name] from [date] to [date]”], with reference to section 198B(2) of the LRA.

Working hours and place of work

• Ordinary hours per BCEA section 9: maximum 45 ordinary hours per week; maximum 9 hours per day if the working week is five days or fewer; maximum 8 hours per day if the working week is more than five days.
• Overtime per BCEA section 10, paid at 1.5 times the normal hourly rate for the first few hours and double thereafter, subject to the BCEA overtime agreement framework.
• Place of work: [address].

Remuneration and benefits

• Basic salary: [R amount per month / hour], payable on the [date] of each month.
• Payment method: [bank transfer / cheque].
• Benefits: medical aid, pension or provident fund, and leave, on the same terms as permanent staff performing the same work, per section 198B(4) of the LRA.

Leave

• Annual leave: 21 consecutive days per annual leave cycle (BCEA section 20), pro-rated for contracts under 12 months.
• Sick leave: 30 days per 36-month cycle (BCEA section 22), with the BCEA sick-leave certificate requirements during the first six months of each cycle.
• Family responsibility leave: 5 days per 12-month period where applicable.
• Maternity or parental leave per the BCEA.

Probation, performance, and termination

• Probation period: [length, if any]. Probation does not override the fixed-term end date; the contract still ends on the agreed date even if probation is incomplete.
• Notice of termination under BCEA section 37: 1 week if employed less than 6 months; 2 weeks if employed 6 to 12 months; 4 weeks if employed more than 12 months.
• Early termination by employer: only on a fair reason under LRA section 188 and after a fair procedure.
• Early termination by employee: by giving the BCEA notice above.

Restraint of trade, confidentiality, and post-employment

• Restraint of trade clauses are enforceable only if reasonable in scope, duration, and geography, and protect a legitimate business interest. Restrictive covenants running longer than 12 months and South Africa-wide are routinely cut down by the courts.
• Confidentiality clauses survive termination.

Governing law and disputes

• The contract is governed by the laws of the Republic of South Africa.
• Disputes are referred to the CCMA for conciliation and, if unresolved, arbitration on unfair-dismissal, unfair-labour-practice, and contractual disputes. The Labour Court has jurisdiction over constitutional and competition issues.

Signatures

Signed by both parties, with the date of signature and a witness line where appropriate. Witnesses are not strictly required for the contract to be valid, but they provide evidence in any later dispute about what was signed and when.

Common Mistakes That Make a Fixed-Term Contract Unenforceable

The same drafting and operational errors come up in fixed-term disputes again and again. The list below captures the ones that defeat the contract or the defence:

• No written end date, defined task, or defined event; the contract is treated as indefinite from the start.
• No recorded justification; the employer loses the section 198B defence at month 25.
• Successive renewals without a genuine break; the 24-month clock runs across renewals.
• Lower pay or fewer benefits than permanent staff doing the same work; a section 198B(4) violation.
• Treating the expiry date as automatic dismissal; per NEHAWU v UCT, expiry is still a dismissal event and must be substantively and procedurally fair.
• Adding a waiver clause stating “the employee agrees the contract is not permanent”; such clauses cannot override the LRA.

Comparison: Fixed-Term vs Indefinite Employment

Aspect	Fixed-Term Contract	Indefinite Employment
End point	Specified date, task, or event	No end date; continues until lawfully terminated
Justification required	Yes, per section 198B(2)	No
Conversion to indefinite	Automatic after 24 months unless the employer justifies	N/A
BCEA leave, UIF, SDL	Full entitlements	Full entitlements
Equal benefits	Required under section 198B(4)	Standard
Dismissal protection	Yes, per NEHAWU v UCT 2003	Yes
Severance pay on retrenchment	Payable if retrenched before the end date	Payable
Notice period	BCEA section 37	BCEA section 37

Practical Steps for an Employer Drafting a Fixed-Term Contract

1. Confirm there is a real, justifiable reason for the fixed term, and write that reason into the contract under section 198B(2).
2. Set a determinable end date, task, or event; do not leave the contract open-ended.
3. Apply BCEA minima on hours, leave, pay, and notice; do not undercut the BCEA anywhere.
4. Match the benefits to those of permanent staff doing the same work, per section 198B(4).
5. Plan the 24-month timeline. If the work is genuinely going to exceed 24 months, consult a labour attorney before month 23 about whether indefinite conversion is the cleaner outcome.
6. Decide in advance how the contract will end (by expiry, by completion of the task, or by event) and run the procedure if the employer intends to terminate before the agreed end.

Burger Huyser Attorneys’ Labour Law practice is led by specialist consultant Marius Ferreira and operates out of the firm’s Linden head office in Randburg, with intake available at any of the firm’s Gauteng branches in Midrand, Sandton, Roodepoort, Bedfordview, Alberton, Pretoria (Menlyn), and Centurion. The firm acts for both employers and employees on fixed-term contracts, including drafting and reviewing contracts, advising on whether the 24-month threshold is approaching, and representing parties at the CCMA and Labour Court on conversion and unfair-dismissal disputes arising from contractual expiry. For employers, the practical work is usually a review of the existing contract well before the 24-month mark; for employees, it is usually a dispute about whether the contract was justified at all or whether the expiry counted as a dismissal.

Where the Section 198B Regime Leaves Employers in Practice

Section 198B is the part most fixed-term contracts run into trouble on, and the line of cases built around it has not been kind to employers who treat renewals as routine. The 24-month threshold is not a planning checkpoint; once an employee passes 24 months on successive contracts without a genuine break, the deeming provision kicks in and the employee is indefinite unless the employer can persuade the CCMA or Labour Court that the fixed-term use was justified all along. The Department of Employment and Labour (labour.gov.za) and the CCMA (ccma.org.za) remain the authoritative sources for current BCEA rates, sectoral determinations, and CCMA filing procedures, and both should be consulted before any contested dismissal or renewal decision is made.

A fixed-term contract is a written agreement that exposes the employer to a 24-month regulatory cliff and the employee to a real risk of unfair treatment if the contract ends badly. Burger Huyser Attorneys’ Labour Law team, working from the Linden head office in Randburg and across the firm’s Gauteng branches, drafts and reviews fixed-term contracts for employers, advises on whether the section 198B justification is holding up as the contract approaches renewal, and represents both employers and employees at the CCMA and Labour Court when disputes arise. For a first conversation, contact the Linden office on 011 888 0246 (after-hours 061 516 6878) or visit 49 First Avenue, Linden, Randburg, 2194. The firm carries a 4.8/5 average across 250+ Google reviews (Trustindex verified “Top Rated Law Firm in South Africa”) and handles labour-law matters across Gauteng.

Frequently Asked Questions

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

There is no fixed maximum, but section 198B of the Labour Relations Act 66 of 1995 deems an employee to be on an indefinite contract once the employee has worked more than 24 months on a fixed-term contract, or on successive fixed-term contracts, unless the employer can show a justifiable reason for the continued fixed-term use. The Department of Labour’s Code of Good Practice on the employment of fixed-term contracts provides interpretive guidance on what counts as a justifiable reason.

Does a fixed-term contract have to be in writing?

Section 198B(2) of the LRA requires that the contract’s justification be recorded in writing, either in the contract itself or in a separate document signed by the employee. Beyond that, the Basic Conditions of Employment Act 75 of 1997 requires written particulars of employment within the first 15 days of any employment relationship, regardless of whether it is fixed-term or indefinite.

Is a fixed-term employee entitled to the same benefits as a permanent employee?

Yes. Section 198B(4) of the LRA entitles a fixed-term employee to the same benefits as a permanent employee performing the same or similar work. The contract cannot pay a fixed-term employee less or deny them benefits that permanent staff receive.

Can an employee on a fixed-term contract claim unfair dismissal?

Yes. The Constitutional Court held in NEHAWU v University of Cape Town (2003) 24 ILJ 95 (CC) that a fixed-term employee can claim unfair dismissal when the contract ends or is terminated before the agreed end date. The employer must show a fair reason and a fair procedure.

What happens if the employer just lets the fixed-term contract expire without doing anything?

The expiry itself is a dismissal event under the LRA, per NEHAWU v UCT. If the employer has not followed a fair procedure or does not have a fair reason for non-renewal, the employee can refer the matter to the CCMA for unfair dismissal within 30 days of the expiry date. The CCMA can condone late referral on good cause shown.

Can a fixed-term contract be extended?

Yes, through a written extension agreement or a fresh contract. Successive fixed-term contracts count toward the 24-month threshold unless there is a genuine break of more than three months, and the employer must keep justifying the fixed-term use with each renewal.

Is a fixed-term employee entitled to severance pay if retrenched before the contract ends?

Yes. Section 41 of the Basic Conditions of Employment Act entitles an employee terminated for operational reasons before the contract’s end date to severance pay of at least one week’s remuneration for each completed year of continuous service.

Can a restraint of trade clause in a fixed-term contract be enforced?

Restraint of trade clauses are enforceable only to the extent that they are reasonable in scope, duration, and geography, and protect a legitimate business interest. South African courts routinely cut down restraints that are too wide or too long; a 12-month nationwide restraint is on the high side and may be reduced.