Fixed-Term Contract Template South Africa

The three-month rule, in one paragraph

A fixed-term contract in South Africa is governed by section 198B of the LRA, and the rule that matters is this: for an employee earning below the BCEA earnings threshold, a fixed term longer than three months is deemed to be employment of indefinite duration — unless the employer can show a justifiable reason for fixing the term.

The consequence is not academic. If the deeming applies, letting the contract “just end” on its end date is a dismissal, and it is referable to the CCMA within 30 days. The reason has to be genuine, it has to exist at the outset, and the employer carries the onus of proving it— which is why it belongs in the contract in writing, not in someone’s recollection a year later.

The eight reasons the Act actually accepts

Section 198B lists the grounds. If none of them genuinely describes your situation, the honest conclusion is that the role is permanent and should be advertised as such:

• Replacing a temporarily absent employee — maternity, extended illness, secondment. Name the person and the reason.
• A temporary increase in work not expected to last beyond 12 months. Describe what is driving it.
• A student or recent graduate gaining experience or working toward a qualification.
• Work on a specific project of limited or defined duration. Name the project and the event that ends it.
• A non-citizen on a time-limited work permit. Record the permit expiry.
• Seasonal work. Say which season.
• An official public job-creation or training scheme.
• A position funded externally for a limited period — donor or grant funded. Record the funder and the end date.

Who section 198B does not apply to

Employees earning above the threshold; employers with fewer than 10 employees; and employers with fewer than 50 employees who have been in business for under two years. Those exclusions are real, but they are narrower than most owners assume — a business that grows past ten people loses the exemption without anyone sending a notice.

Section 198D: the other deeming clause

Past three months, a fixed-term employee earning below the threshold must be treated on the whole not less favourablythan a permanent employee doing the same or similar work, unless there is a justifiable reason for the difference. That covers pay, benefits and access to opportunities. A team where the “contractors” do identical work for less money and no benefits is the shape section 198D was written to catch — and “they are on contract” is not, by itself, a justifiable reason.

Why the no-expectation clause does not save you

Every fixed-term template carries a line saying the contract creates no expectation of renewal. Keep it — it helps. But section 186(1)(b) of the LRA treats a failure to renew as a dismissal where the employee reasonably expected renewal, and expectation is built by conduct as much as by words:

• Renewing the same contract three times and then not renewing the fourth.
• A manager saying “don’t worry, we’ll sort out the paperwork.”
• Advertising the same role before the end date arrives.
• Letting the employee keep working past the end date with no new contract — at which point the term has simply lapsed and the employment continues indefinitely.

The practical defence is a diarised renewal decision taken and communicated before the end date, in writing, with a reason.

Ending it — on time, or early

A fixed-term contract ends automatically on its end date, without notice, when it is a genuine fixed term. Ending it earlyrequires a fair reason and a fair procedure, exactly as for a permanent employee — the fixed term lowers nothing. Where early termination is by notice, the BCEA section 37 minimums apply: one week under four weeks’ service, two weeks under a year, four weeks after a year.

When the contract does end, the exit paperwork is identical to any other termination: a certificate of service, an itemised final payslip, a completed UI-19 (code 3, contract expired — not code 1), and the accrued leave paid out. Run it against the final pay checklist and estimate the UIF claim with the UIF calculator.

Five mistakes that turn a fixed term into permanent employment

• Using a foreign template. Nothing on page one of a generic search knows that section 198B exists. A contract without a justifiable-reason clause has already lost the argument.
• Picking a reason for convenience. “Project work” on a role that is plainly core and ongoing will not survive scrutiny, and the onus is yours.
• Rolling three-month contracts back to back. Successive contracts with no real break are continuous employment. The clock does not reset.
• Letting it lapse. Work continuing past the end date with no new contract is indefinite employment by default.
• Forgetting the 24-month severance point. Where section 198B applies and the contract ran past 24 months, severance may be owed when it ends. Check before, not after.

Common questions