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FIXED TERM CONTRACTS - UNDER THE NEW AMENDMENTS (Part 2)

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Justifiable Reasons

Some of the reasons which will be deemed justifiable reasons are, if the employee:
a)*Is replacing another employee who is temporarily absent from work;
b)*Is engaged on account of a temporary increase in the volume of work which is not expected to endure beyond twelve months;

c)*Is a student or recent graduate who is employed for the purposes of being trained or gaining work experience in order to enter a job or profession;

d)*Is engaged to work exclusively on a genuine and specific project that has a limited or defined duration;

e)*Has been engaged for a trial period of not longer than six months for the purpose of determining the employee's suitability for employment;

f)*Is a non-citizen who has been granted a work permit for a defined period;

g)*Is engaged to perform seasonal work;

h)*Is engaged on an official public works scheme or similar public job creation scheme;

i)*Is engaged on a position which is funded by an external source for a limited period;

j)*Has reached the normal or agreed retirement age applicable in the employer's business. *

The list is not exhaustive but provides direction, in conjunction with the previous expectation of renewal concepts, with regards to how a longer fixed term contract can be justified. *

Exclusions

The new section 198B does not apply to certain categories of employees. *
a)*Employees earning above the threshold - The Minister sets a statutory threshold (usually annually) in the Government Gazette. The current threshold is R193 805 per annum. Employees who earn above the threshold fall outside of certain provisions in the Basic Conditions of Employment Act ("BCEA.

b)*Employees employed in terms of a law, Sectoral Determination or collective agreement that permits a fixed term contract for a longer period.

c)*The provisions do not apply to an employer who employs less than ten employees or to a company that employs less than fifty employees but has been in existence for less than two years. (Excludes a business formed by division or dissolution of existing busines or if the employer conducts more than one business.)*

It is important to remain aware of the level of the threshold and the salaries of employees. In certain instances it may be prudent to establish a salary so that it exceeds the threshold whilst there may be times where the threshold increases and therefore an employee who was previously excluded from the fixed term contract provisions may now be entitled to the new provisions. *

Significant Impacts

Employees employed on justifiable fixed term contracts for a period exceeding twenty-four months are entitled to receive a week's salary per completed year. This falls away if the employee is offered full-time employment, or, in certain instances, where a new contract is procured for the employee on an alternative site or project. *

Contracts that contain 13th*cheque provisions need particular scrutiny; employers will need to balance these contractual provisions against the severance type provision of the new amendment. *

The employer needs to commit to a justifiable reason on conclusion of the contract. It thereby limits the employer's discretion to retain a flexible work force. *

The onus in unfair dismissal disputes or disputes as to whether an employee is permanent shifts to the employer. Whereas the employee had to demonstrate a ‘reasonable expectation of renewal' the employer must now show justification, failing which the employee is deemed to be permanent. *

The requirement that the conditions of employment must be no less favourable to fixed term contracts employees in comparison to permanent employees may raise payroll costs considerably. Returning to the aforesaid discussion regarding 13th*cheques, this amendment would require the employer to afford the same 13th*cheque benefit to the fixed term employee who would still be entitled to severance benefits. *

Linking the term of a contract to the work permit of an employee provides a justifiable reason for contracts that exceed the new time periods. The amendment is silent with regards to if the employee obtains a new work permit and / or whether the employer is obliged to extend a new offer of employment which is a pre-requisite to obtaining a work permit in terms of the Immigration Act.*It is submitted that if the employee obtains a new work permit that the employee would then have an expectation of renewal and the employer may be forced to extend the offer of employment. *

Conclusion

The new amendment brings about significant changes that could have substantial cost implications with regards to the payroll. Further, employers will need to justify the use of fixed term contracts and time periods, failing which the employee will be deemed permanent. *

Employers are advised to analyse the wording of their fixed term contracts and their operational requirements in order to bring them onto line with the new dispensation.

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