The LRA and fixed-term contracts: What you need to know
Some small or new employers are also exempt, but not all:
a. You can't hire someone for longer than three months on a fixed-term contract. Unless you have a justifiable reason for it (s198B(3)(b)). Or the work the employee is doing is for a limited or definite duration' (s198B(3)(a));
You can show a justifiable reason to have a fixed-term contract. For example:
• Replacing another employee who's temporarily absent;
• An unexpected temporary increase in the volume of work. If you don't expect it to last for more than 12 months;
• You hire a student or recent graduate so they can get work experience. Or you're training him to enter a job or profession;
• For a specific project with a limited or definite duration;
• A non-citizen that has a work permit for a specific period;
• For seasonal work. For example, you're a contractor and fix roofs. During the rainy season, your work increases. You need to hire someone specifically and just for this time. It's about six months;
• You hire the employee for a specific public work scheme or a similar public job creation scheme;
• The employee is in a position an external source funds for a limited period; and
• The employee reaches the normal retirement age in your business.
b. If you don't have a justifiable reason, the employee is deemed as permanent, indefinitely. And you have to treat him as such (s198B(5)).
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c. But, even if you justify the fixed-term appointment, after the first three months, you have to adjust the employee's pay and benefits. You must then treat him no less favourably than a permanent employee in the same or similar position. Unless you have a justifiable reason for this differentiation (s198B(8) as read with section 198D(2)). For example, experience, length of service, seniority of the appointment, merit or performance. This will apply to all employees who are on fixed-term contracts on 1 January 2015, but only after a three month grace period is up (s198B(8)(b)) . So, from 1 April 2015.
d. We don't quite know how the Courts will treat the ambit of not treating employees less favourably. This is because it seems to extend to more than just applying the same terms and conditions. Or the idea of 'on the whole no less favourably' and could extend to all aspects of employment.
e. You have to treat a deemed permanent employee accordingly. You can differentiate when it comes to pay and benefits if you base it on justifiable reason. For example, experience, length of service, seniority of the appointment, merit or performance. This gives you a chance to link pay to performance for all employees creatively, using the basic principle of 'performance before pay'.
f. You must give all fixed-term and permanent employees equal chance to apply for vacancies (s198B(9)). This means you can't give preference to permanent employees during your recruitment process.
g. If you end the contract at the end of the fixed-term, you're open to two claims (s186(1)(b)). The first is a claim for permanent appointment, if the employee has a reasonable expectation of permanent employment and can prove it. The other claim is one of reasonable expectation of renewal. Especially if you've done this in the past. It is likely that temporary employees will claim both. But, if the employee is successful in his claim, the Court will probably base compensation on the scale of 'on the whole not less favourably' than that of a comparable permanent employee you have in the company.
h. The contract of a temporary employee must be in writing. You must specify the reason why the appointment is only temporary and include the employee's agreement to the temporary appointment (s198B(6)). You have to make sure you adapt your fixed-term contracts in line with the changes.
i.Note that if you have temporary employees who work for more than 24 months, you have to pay them severance pay when the contract expires. Severance pay must be equal to one weeks' pay per year of service, unless you provide them with alternative employment (s198B(10)(a) and (11)). If you have a contract like this in place before the changes, you only have to work out the severance for any period he works after the amendments come into affect (s198B(10)(b)).
j. In any dispute about whether an employee is temporary or permanent, and you insist the appointment is temporary, you must prove there's a good reason for it. You must also prove the employee agreed to the terms (s(198B(7)).
Keep in mind that if employees earn less than the threshold, they'll be regarded as permanent employees after three months unless you can prove a good, business reason for the temporary appointment. Thus, after three months, you need to assess their pay and benefits and adjust them if necessary. It doesn't matter if the employee is still temporary or is now permanent.