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18
GRAANGIDS
2017
GRAIN GUIDE
Which type of employment contract
should I use?
The employment contract forms the basis of the relationship between the employer and the employee and
affirms in writing the conditions of employment agreed upon during the interview.
It is extremely impor-
tant for the employer to implement the correct employment contract and make sure that the content
adheres to relevant labour legislation.
It is critical for employers to understand that a contract of employment cannot be changed or undone
unilaterally. Prior discussions that led to the creation of the contract are usually irrelevant if they are not
embodied in the terms of the contract. The contract also cannot contain terms that are contradictory, or
less favourable than the terms of the applicable legislation – such terms are invalid and illegal.
Employers generally use the following types of contracts:
Verbal contracts
A verbal contract is valid, but it is very difficult, in most cases impossible, to prove the specific terms
of the contract. Employers are therefore urged to not make use of verbal contracts. The Labour Rela-
tions Act also provides that fixed-term contracts for longer than three months, entered into with an
employee earning less than the income threshold (currently R205 433,33 per annum), must be
in writing.
Contracts with independent contractors
By law, an independent contractor is not regarded as an employee. Contracts entered into with in-
dependent contractors are similar to those with ordinary service providers and are regulated by civil
law and actions. The Act, as well as various court judgments, determines that employees appointed
as independent contractors and employed as regular employees should be seen as employees and
not as independent contractors – despite the contract concluded with them. Employers are encour-
aged to get expert advice before these types of contracts are entered into or terminated.
Fixed-term contracts
A fixed-term contract is a contract that is automatically terminated in the following circumstances:
• Following a set period – for example from 1 January 2016 until 30 June 2016.
• With the occurrence of a specific event, for example when the employee was appointed to
perform a specific service and the client terminates the service delivery agreement.
• With the termination of a specific project or task, for example the ending of a harvest.
Amendments to the Labour Relations Act, which came into effect on 1 January 2016, made material
changes to fixed-term contracts. Among other things, the legislation provides that employees earning
less than the income threshold (currently R205 433,33 per annum) and employed by the employer
for longer than three consecutive months, must be appointed in terms of a written fixed-term contract.
The reason for not appointing the employee permanently should be clearly stipulated in the contract.
If the reason is no longer valid and the employee’s contract is extended, the employee is regarded as
a permanent employee. Employees appointed on a fixed-term contract for longer than two years are
also entitled to a severance package similar to retrenched employees. However, there are employers
who are excluded from these provisions – including employers with fewer than ten employees.