Probation vs Fixed-Term Employment Contracts

Often parties to an employment relationship fail to appreciate the differences between employment contracts with probationary periods and employment contracts with a fixed duration. There are benefits to both forms of employment contracts, but each may only be used in limited circumstances.

Probation

Probation periods allow employers an opportunity to assess the work performance of an employee before confirming their permanent employment. Practically this means that employers are required to evaluate, assist, train, and support the employee during probation, to determine whether the employee is capable of the required performance level. The obligations on the employer are substantial and in many ways, one could consider probationary employees to be “almost” permanent employees.  

After the employer has discharged its onus of reasonably assisting the employee to perform adequately, and at the expiry of the probationary period, the employer should hold a formal meeting with the employee to discuss the employee’s performance.  This meeting takes a similar form to a formal performance hearing, and the employee should be given the opportunity to make representations and be assisted by a fellow employee or shop steward. If it is determined that the employee is not performing as required, the employer may elect to extend the probationary period or terminate the employment of the employee.

Probationary employees, if dismissed, certainly have rights to claim their dismissal is unfair at the CCMA.   Importantly for employers, the Code of Good Practice: Dismissal allows them to terminate their employment for “less compelling reasons” compared to permanent employees.

Fixed-Term

Employees employed on a fixed-term basis are not probationary or permanent employees. A fixed-term employment contract terminates automatically upon the happening of a certain event, such as a pre-determined date or the completion of a particular project.   The automatic termination of a fixed-term contract is viewed to have been a termination by mutual agreement between the parties and therefore the cessation of employment will not constitute a dismissal.

However, fixed-term employees are highly protected and there are limitations to when this form of contract may be used.   If an employee earns below an earnings threshold as determined by the Minister of Labour from time to time (currently at R205 433.30 per annum) the employee may not be employed on a fixed-term contract or consecutive fixed-term contracts for longer than a total period of three months, unless certain exceptions apply. The exceptions are provided in Section 198B of the Labour Relations Act 1995.  Examples of such exceptions are if the employer employs less than 10 employees, if the fixed period relates to a specific project, or if the employee has reached the employer’s normal retirement age.

For employers, the benefits of a fixed-term contract are the greatly reduced risks of unfair dismissal claims.   As the cessation of the employment, due to the fact that expiry is not viewed as a dismissal, the employee will not normally have unfair dismissal rights.    

When to Use Them

Employers should have template fixed-term employment contracts and probationary/permanent employment contracts ready for use.   The right solution will depend upon the nature of the position offered and the future requirements of the business.

For assistance with employment contracts, kindly contact Workplace Strategies at info@workplacestrategies.co.za.