Severance Pay on Fixed-Term Contracts

Many employers are using fixed-term employment contracts to reduce employment costs – as there is no medical, pension and provident fund benefits for employees falling under this category of employment. To counter this, the legislature has revised and tightened this aspect of the labour law.

The Labour Relations Amendment Act 6 of 2014, which commenced on 15 August 2015, inserted section 198B into the Labour Relations Act 66 of 1995. Section 198B deals specifically with “Fixed term contracts with employees earning below earnings threshold.”

Currently ISASA has no policy regarding severance for fixed-term employees, however, section 9.2 of the ISASA pro forma contract of employment (2014) states that the employee will not be entitled to the payment of severance pay upon expiry of a temporary contract. The memorandum below therefore seeks to amend this recommendation in light of the latest developments in legislation.

Severance Pay Fixed-Term

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