What is the section 198B fixed-term rule?
Section 198B of South Africa’s Labour Relations Act limits fixed-term contracts for employees earning at or below the BCEA earnings threshold. An employer may keep such an employee on a fixed-term contract, or successive contracts, for longer than three months only if there is a justifiable reason.
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The work itself may be of limited or definite duration, or the employer may show another justifiable reason. The Act accepts, among others, an employee who:
- replaces an employee who is temporarily absent
- covers a temporary increase in work not expected to last beyond 12 months
- is a student or recent graduate gaining work experience
- works only on a specific project of limited duration
- is a non-citizen with a work permit for a defined period
- does seasonal work or works on a public works scheme
- holds a post funded externally for a limited period, or has reached retirement age
Who it applies to
The rule does not cover employees earning above the threshold (R269,600.90 a year from 1 May 2026), employers with fewer than 10 employees, or employers with fewer than 50 employees whose business has operated for less than two years, unless they run more than one business or the business came from splitting an existing one. Fixed-term contracts permitted by a statute, sectoral determination or collective agreement are also outside it.
Consequences for employers
A contract concluded or renewed in breach of the rule is deemed to be of indefinite duration. Any offer of a fixed-term contract, renewal or extension must be in writing and state the reason, and in a dispute the employer must prove it.
After three months, a fixed-term employee must not be treated less favourably than a permanent employee doing the same or similar work without a justifiable reason, and must have equal access to vacancies. A project-based contract that runs for more than 24 months entitles the employee to one week’s pay for each completed year when it ends, unless the employer offers or arranges similar work that starts on expiry.
Fixed-term hires through an EOR
With TopSource as your Employer of Record in South Africa, we check the employee’s earnings against the threshold and the reason for any fixed term before the contract is issued, so the paperwork supports the arrangement from day one.
Frequently asked questions
How long can a fixed-term contract last in South Africa?
For employees at or below the earnings threshold, longer than three months only with a justifiable reason, such as a defined project or seasonal work. Above the threshold, section 198B does not apply.
What happens if a fixed-term contract breaches section 198B?
The employment is deemed to be of indefinite duration, so the employee is treated as permanent.
Do fixed-term employees get a payment when the contract ends?
Only in one case: an employee on a project-based contract longer than 24 months is owed one week’s pay per completed year at expiry, unless offered similar work that starts when the contract ends.
Related terms in South Africa
- Temporary Employment Services (South Africa)
- BCEA Earnings Threshold (South Africa)
- Retrenchment (South Africa)
- Restraint of Trade (South Africa)
- Family Responsibility Leave (South Africa)
- Sick Leave Cycle (South Africa)
- Employment Equity Act Reporting (South Africa)
- B-BBEE Scorecard (South Africa)
- Critical Skills Work Visa (South Africa)
- POPIA and Employee Data (South Africa)
- EMP201 Monthly Return (South Africa)