In this newsletter, we will analyze the types of employment contracts called fixed-term and indeterminate contracts, which are essential for business life. On the other hand, it takes at least six months to qualify for the social security provisions. If a fixed-term contract has been entered into one after the other without substantial cause, it becomes an indeterminate contract from the outset, so that the start of the 6-month period of service begins from the date of the worker`s engagement. The challenge with fixed-term contracts is that they involve some legal risk. If you regularly extend fixed-term contracts, the courts may decide that the worker is indeed an indeterminate worker. In many countries, the number of times a fixed-term contract can be renewed is also limited. In addition, some countries provide the same protection against redundancy and severance pay, including fixed-term contracts. Parliament limits the right to enter into a fixed-term contract to section 11 of labour law. It regulates the objective terms of this type of contract to be concluded and accepts that not only the duration of the contract set by the parties, but also the contractual time, are objectively accepted as a fixed-term contract.
An indeterminate contract will exist if the duration of the contract between the parties is uncertain or indeterminate. In addition, it should be considered that a contract is implicitly fixed-term when the parties have not clearly set a term contract period, but must be understood for the purpose of working. Check local labour laws to make sure you include all other necessary conditions, guidelines or information. It is also a proven method of explicitly making all the implied conditions imposed by the regulators so that you and the staff understand the full contractual terms. Have we noticed anything we missed? Or do we have a question about fixed-term or indeterminate contracts that we have not answered? So, please, contact us. There are several advantages to a fixed-term contract. First, the fixed-term contract ends by law. This means that many rules do not apply to termination of a fixed-term contract. For example, the employer is not obliged to apply for dismissal authorization and not take into account certain notice periods and dismissal bans (unless it is an early dismissal). The fixed-term contract automatically expires when the duration indicated in the employment contract has expired. However, the obligation to terminate must be taken into account. In addition, a fixed-term contract can be used as a kind of test contract.
The trial period for indeterminate contracts is a maximum of two months. Employers who do not find this period long enough generally choose to enter into a fixed-term contract with the worker concerned first. In this way, they can assess whether the employee is fit for the long term. In the event of a breach of an indeterminate contract, remedial measures are generally financial damages that reimburse the losses incurred by the uninjured party. Standard defences may apply in the event of an indeterminate breach of contracts. This was also the approach taken by the courts of Amalgamated Beverage Industries Ltd against Rond Vista Wholesalers 2004 (1) SA 538 (SCA); Trident Sales (Pty) Ltd v AH Pillman – Son (Pty) Ltd 1984 (1) SA 433 (W); Putco Ltd v TV – Radio Guarantee Co (Pty) Ltd and other related cases 1985 (4) SA 809 (A).