Every working relationship is built on an employment contract. It establishes the rights and responsibilities of the employer and the employee. It provides certainty about the terms upon which work is conducted. In South Africa, there is no requirement that all employment contracts be in writing, but a well-drafted written agreement is one of the best instruments to prevent disputes in the workplace and to ensure compliance with labour law.
The type of employment contract could have implications on matters such as job security, termination of employment, employee benefits, operational flexibility and dispute resolution.
The Legal Framework
Contract law sets the broad principles that apply to contractual agreements, whereas employment legislation governs the work relationship. Among the most essential statutes are the Labor Relations Act 66 of 1995 (“LRA”), the Basic Conditions of Employment Act 75 of 1997 (“BCEA”), and, where relevant, industry-specific collective agreements reached through bargaining councils.
The Labour Relations Act is particularly important when dealing with fixed-term employment contracts. Section 198B of the LRA was introduced to prevent the abuse of fixed-term employment by employers who repeatedly renewed temporary contracts to avoid creating permanent employment relationships.
Permanent Employment Contracts
A permanent employment contract means that the relationship remains until legally terminated by resignation, retirement, dismissal, or retrenchment. Permanent staff are fully protected by South African labour regulations, including the protection against wrongful dismissal under the Labor Relations Act.
The permanent employment contract should specify the remuneration, hours of work, leave entitlements, disciplinary procedures, notice periods, confidentiality obligations, restraining provisions (where applicable) and the workplace rules.
Employers should note that a drafted contract cannot override minimal statutory rights in legislation or collective agreements.
Fixed-Term Employment Contracts
A fixed-term employment contract is to be automatically terminated upon the occurrence of a specific event, the completion of a specified project or upon a given date.
Examples include bringing in more workers at times of peak demand, filling a vacancy created by a temporarily absent employee, staffing for a particular construction project or providing one-off security services for a special event.
It does not make a contract legally compliant just because it has an expiry date. Employers must have a valid reason for using a fixed-term contract.
Where there is no justifiable cause, the employee may be considered to be employed indefinitely. Employers should therefore avoid using fixed-term contracts simply because they wish to retain flexibility or avoid the obligations associated with permanent employment.
Permanent vs. Fixed-Term: Which Is Appropriate?
It depends on the employer’s operational needs. Permanent employment is often appropriate where the employer has a continuing need for the employee’s services in the course of its routine business activities.
Fixed-term employment is more appropriate where the work itself is temporary, project-based, seasonal, or related to a defined operational requirement that will end.
Employers should not opt for a contract type merely because it is administratively easy. In labour law, what matters is the essence of the employment relationship, not the name of the contract.
Employment Contracts in the Private Security Industry
Security services are often contracted by clients for a specified amount of time, to provide temporary protection services for special events or to supply additional officers during moments of high operational need.
Employers operating within the private security industry must ensure that employment contracts comply with national labour legislation and also with the collective agreements concluded under the National Bargaining Council for the Private Security Sector (NBCPSS).
The Main Collective Agreement regulates numerous employment conditions, including minimum wages, working hours, leave, and provident fund obligations.
A fixed-term employment contract cannot be used to circumvent obligations imposed by the Main Collective Agreement. Where the collective agreement applies, employers remain bound by its provisions irrespective of the type of employment contract used.
In Enforce Security Group v Fikile and Others (DA24/15) [2017] ZALAC 9; (2017) 38 ILJ 1041 (LAC); [2017] 8 BLLR 745 (LAC), the importance of distinguishing between a fixed-term arrangement and an arrangement that is being used to avoid the protections afforded to employees is illustrated. The matter concerned security guards employed by a security service provider on fixed-term eventuality contracts linked to the employer’s contract with its client. The Labour Appeal Court considered whether the termination of the client’s contract resulted in the automatic termination of the employees’ contracts and whether such termination constituted a dismissal. The Court accepted that, depending on the wording and circumstances of the contract, a genuine fixed-term contract may terminate automatically when the stipulated eventuality occurs.
Conclusion
In determining the type of employment contract to be used, the employer should consider whether the work is in fact temporary, whether any applicable industry-specific collective agreements apply, and whether the contract accurately reflects the true nature of the employment relationship.
Choosing the right sort of contract is vital to control legal risk, provide operational predictability and compliance with South African labour legislation.
Permanent employment is still the most common form of employment, but fixed-term contracts are nevertheless important in cases where they are justified.
Employers should resist the temptation to use fixed-term contracts as a substitute for permanent employment without a legal basis, especially in industries like private security, where collective agreements impose additional requirements.
