The Labour Relations Amendment Act 2014 (promulgated on 18 August 2014 and effective from 1 January 2015) introduced tighter regulation of fixed term contracts of employment with employees earning below the statutory threshold or employed in businesses with less than 10 employees or less than 50 employees during the first 2 years of the business’s operation.
A fixed term contract means a contract of employment with a limited duration that automatically terminates on either the occurrence of a specified event (I.e. another employee returning from maternity leave), or the completion of a specified task or project (i.e. repair of hole in ship), or on a fixed date other than an employee’s normal or agreed retirement date (i.e. 3 month period from 1 June 2016 to 31 August 2016).
The LRA amendment (section 198B) regulates that if a fixed term contract endures for longer than 3 months, the employment is deemed to be of indefinite duration (commonly referred to as “permanent employment”) unless the employer can show that the nature of the work is of a definite duration or satisfies one of 9 justifiable criteria set out in section 198B(4)(a)-(i). The offer to employ an employee on a fixed term basis must be in writing, include the contents required under section 29 of the Basic Conditions of Employment Act and must also state whether or not it is of a definite duration or satisfies one of the 9 justifiable criteria set out in section 198B(4)(a)-(i).
Importantly, an employee who is employed on a fixed term contract for longer than 3 months may not be treated less favourably than a permanent employee unless there is a justifiable reason for different treatment, and an employee who is employed on a fixed term contract on a specific project for longer than 24 months must, on termination of the contract, be paid additional remuneration of 1 week’s pay for each completed year of the contract (similar to severance pay when retrenched).
Employers are well advised to actively manage their fixed term contracts in order to reduce their risks, or alternatively consider outsourcing this to a specialist provider such as Human Alliance.
If you need any further advice or assistance on labour issues, you may contact Human Alliance
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