When hiring offshore employees in South Africa, your EOR (Employer of Record) partner must comply with the Labour Relations Act (LRA), which distinguishes between limited duration contracts (LDCs) and permanent employment contracts. The classification of employment directly affects the rights of employees and the obligations of employers.
Permanent Employment Contracts:
Under the Labour Relations Act, a permanent employment contract is an open-ended agreement where the employee remains employed until resignation, dismissal, or retirement.
Key aspects include:
Job Security – Dismissals must be procedurally and substantively fair under the LRA.
Benefits & Protections – Employees are entitled to leave benefits (annual, sick, family responsibility, and maternity leave) under the Basic Conditions of Employment Act (BCEA).
Retrenchment Rights – If an employer terminates employment for operational reasons, the employee is entitled to severance pay.
Permanent employees enjoy strong legal protections against unfair dismissal, requiring valid reasons and due process.
Limited Duration Contracts (LDCs):
A limited duration employment contract is one that automatically terminates on a specific date or upon completion of a project. However, the Labour Relations Act places strict limits on the use of LDCs to prevent abuse.
Automatic Termination – No dismissal process is required when the contract ends.
Valid Justification is Essential – Employers must prove a justifiable reason for hiring an employee on a fixed-term basis. Acceptable reasons include:
- Temporary project work
- Seasonal employment
- Replacing an absent permanent employee
It is important to note that if an employee earning below the BCEA threshold, is employed for longer than 3 months without a valid reason, they are deemed a permanent employee. Employers who repeatedly renew LDCs without valid justification, risk facing claims of unfair dismissal or permanent employment conversion. In South African labour law, permanent employment is the standard, while limited duration contracts require valid justification.
