So, you've found the ideal candidate to join your team, and now it's time to formalise the employment relationship with a contract. This can be a rather complicated process, with many different considerations. 

There are various types of employment contracts which serve different purposes and offer unique benefits for both employers and employees. In this blog post, we will briefly explore the three primary types of employment contracts commonly used; permanent contracts, fixed term contracts, and project-based contracts. 

By understanding the characteristics and implications of each type, you can make informed decisions when structuring your workforce. It is important to note that all contracts of employment are subject to the Basic Conditions of Employment Act, 75 of 1997 (BCEA). 

Permanent Contract of Employment:

A permanent contract of employment, as the name suggests, establishes an ongoing employment relationship without a specified end date. This is the most common type of employment contract entered into between employers and employees. 

Generally, a permanent contract of employment is subject to a probationary period of approximately three months. During this period, an employer will be able to assess the employee and determine their suitability for the position in the long run. Employers must be careful to ensure that the correct assessments and processes are followed during probationary period. 

This type of employment contract is entered into when the intention of the parties is to have a long term continued relationship. The term permanent does not mean that it will never be terminated but rather that the nature of the employment is not fixed, temporary, or dependent on a specific project. 

Fixed-Term Contract of Employment:

A fixed-term contract creates an employer-employee relationship for a specific or fixed term. Although there are some slight differences, employees who are employed on a fixed term are still protected by the BCEA in the same manner as permanent employees. 

This type of contract is often used in instances where a business requires the services of the employee for this fixed period only. These instances include, temporary or seasonal work, specific projects, to cover absences of permanent employees, or when a business requires additional employees during a peak period.

Fixed-term contracts of employment clearly set out the duration of employment. In other words, under the duration clause of the contract of employment, the exact dates for the employment relationship will be included. If the contract does not set out the specific dates, but rather pertains to the completion of a specific project, this will fall under the category of “project-based contract of employment” as is discussed hereunder. 

The main distinction between a permanent contract of employment and a fixed-term contract of employment is the duration of the contract. A fixed-term contract of employment will automatically be terminated on the specified date. Should a fixed-term contract of employment be extended a number of times, this may create the impression that the employee’s contract will continue to be renewed. In instances where an employee has a reasonable expectation that the contract will be renewed, it has been held that then terminating the fixed-term contract of employment will constitute a dismissal. 

Project-Based Contract of Employment:

Project-based contracts of employment are similar to a fixed-term contract of employment. Neither of these contracts give rise to an expectation of continued or permanent employment past a certain point. 

The main difference between a project-based contract and a fixed-term contract is seen in the duration of the contract. Project-based contracts are generally used where an employer requires the services of an employee for a specific project or assignment rather than for a specific fixed period. A project-based contract of employment is automatically terminated once the specified project or assignment has been completed.

Generally, project-based contracts of employment are used where the exact duration of the completion of the project is not known. The contract will set out the duration of the contract to be up until the completion of a specifically defined project. These contracts are often used in industries which are project driven, such as construction, software development, and event management. These contracts generally outline the scope of the work, the anticipated project duration, the required deliverables, and any specific terms of the project. 

Closing Remarks:

From what has been discussed it is clear that there are various different types of contracts of employment which each serves a specific function. It is crucial for both employers and employees to understand the different types of employment contracts. Ensuring that the correct contract of employment is used is vital to managing the expectations of both the employer and the employee. 

Whether it's a fixed-term contract, permanent contract, or project-based contract of employment careful consideration should always be given to ensure compliance with labour laws and to meet the needs of the employer and employee. By effectively structuring employment contracts, you can establish positive working relationships, foster productivity, and contribute to the success of your business.

If you require further guidance or assistance with employment contracts, Quid Nunc Consulting is here to provide reliable and comprehensive human capital solutions tailored to your business. Contact us at info@qnc.co.za or give us a call at 067 402 0231 to learn more about how we can support your organisation's human capital requirements.