Fixed-Term Contracts in South Africa: the LRA Section 198B Traps
The fixed-term contract rules South Africa‘s employers must navigate changed fundamentally in 2015 when section 198B came into force — and they remain one of the most litigated areas at the CCMA because employers still treat fixed-term contracts as a way to dodge permanent employment obligations. This guide explains when a fixed-term contract is lawful, when it converts to indefinite employment by operation of law, and how to manage renewals without creating dismissal claims.
- ✔The 3-month protections apply to employees earning below the BCEA earnings threshold (adjusted annually).
- ✔Longer than 3 months needs a justifiable reason — written into the contract.
- ✔Rolling one contract into the next creates a reasonable expectation of renewal.
- ✔Non-renewal after creating that expectation is a dismissal — with reinstatement as a possible remedy.
- ✔Fixed-term does not mean ‘no BCEA’: full leave, payslips, NMW and notice rights apply throughout.
When a fixed-term contract is lawful
A fixed-term contract ends on a specified date, a specified event, or completion of a specified task. It is entirely lawful for work that is genuinely temporary — the LRA’s own examples include:
- Replacing a permanently employed employee who is temporarily absent (maternity cover is the classic)
- Work of limited or definite duration — a project with a real end date
- Seasonal work
- Employment of students or recent graduates for training or work experience
- Positions funded for a limited period by an external source
- Employment past the normal or agreed retirement age
For contracts longer than 3 months with below-threshold employees, state the justifiable reason in the written contract. If the reason is genuine and recorded, the fixed term survives; if it is a pretext, the law rewrites your contract for you.
The 3-month deeming rule (section 198B)
For an employee earning below the BCEA earnings threshold, a fixed-term contract that runs longer than 3 months is deemed to be of indefinite duration — permanent — unless the nature of the work is of limited or definite duration or you can show another justifiable reason. The deeming happens by operation of law: no letter, no agreement, no waiver can stop it.
From the same 3-month point, the employee must be treated no less favourably than a comparable permanent employee doing the same or similar work — pay, benefits, access to vacancies — unless different treatment is objectively justifiable (seniority, experience, merit).
The BCEA earnings threshold is adjusted annually. Employees earning above it are outside section 198B’s deeming and equal-treatment provisions — but not outside the reasonable-expectation protection, which applies to everyone.
Renewals and the reasonable-expectation trap
Section 186(1)(b) of the LRA: it is a dismissal if an employee reasonably expected the employer to renew a fixed-term contract on the same or similar terms — or to retain them indefinitely — and the employer did not. You create that expectation by:
- Renewing repeatedly, especially without gaps or paperwork explaining each renewal
- Assurances from managers (‘there will always be work for you here’)
- Treating the role as permanent in practice: performance reviews, promotion talks, long-term projects
- Renewing others in identical roles while letting one person go
If the expectation was reasonable, the non-renewal must be defended like any dismissal — with a fair reason and a fair process. Remedies include reinstatement, which is how ‘temporary’ staff become permanent through the back door.
Managing fixed-term contracts properly
- ✓Use fixed-term contracts only for genuinely temporary work — say why, in the contract
- ✓Give below-threshold employees on 3+ month terms the same treatment as permanent staff
- ✓Diarise every contract end date; decide renew or end BEFORE it arrives
- ✓At renewal: a fresh signed contract each time, with the current justifiable reason stated
- ✓At non-renewal: written notice that the contract ends on its date, final pay including leave payout, UI-19 on uFiling
- ✓Never use serial fixed terms to avoid permanent employment — the pattern is the evidence against you
The free Employment Contract Generator includes a fixed-term template with the section 198B reason clause built in. And if a renewal decision is already heading for a dispute, read what the CCMA looks at before you act.
- LRA — sections 186(1)(b) and 198B: fixed-term contracts
- CCMA — fixed-term and reasonable expectation disputes
Always confirm current requirements with the official source — rules and deadlines change.
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Frequently asked questions
How long can a fixed-term contract be in South Africa?
Any length for genuinely temporary work — but for employees below the BCEA earnings threshold, a contract longer than 3 months is deemed indefinite (permanent) unless the limited nature of the work or another justifiable reason is real and stated. The reason, not the label, decides.
Can I keep renewing a 3-month contract indefinitely?
Not safely. Each renewal strengthens the employee's reasonable expectation of renewal or permanent employment. When you finally do not renew, that pattern is exactly the evidence that makes the non-renewal a dismissal you must defend — with reinstatement on the table.
Do fixed-term employees get leave and UIF?
Yes, in full. Fixed-term employees accrue annual leave, sick leave and all other BCEA entitlements, must get payslips, and must be registered for UIF and covered by COIDA like any employee. Their final pay on expiry includes a payout of accrued untaken leave.
Is ending a fixed-term contract early a dismissal?
Yes — unless the contract provides a lawful early-termination mechanism and you follow a fair process (the LRA's fairness requirements apply to early termination like any dismissal). Simply invoking 'the contract allows one week's notice' for a no-fault exit is procedurally unfair without a process.
What must be in a fixed-term contract?
Everything section 29 of the BCEA requires for any contract, plus: the end date/event/task, and — for terms over 3 months with below-threshold employees — the justifiable reason for the fixed term. Vague reasons ('operational requirements') without substance will not survive scrutiny.
Last reviewed: July 2026 · How we research our guides
EmployerGuide.online provides general information about South African employer obligations — not legal, tax or professional advice for your specific situation. Laws, rates and deadlines change; confirm current requirements with the official sources linked above, or ask Admin Boss. See our disclaimer.