Question: Is an employee whose fixed-term contract comes to an end entitled to severance pay?
Answer: An employee who has been employed for more than 24 months is entitled to severance pay when the fixed-term contract comes to an end, unless the employee earns in excess of the relevant income threshold (currently R205 433/annum or R17 119,41 per month) prescribed by the Minister of Labour in terms of section 6(3) of the Basic Conditions of Employment Act (the BCEA).
Brief explanation: Employees on fixed-term contracts have enjoyed more protection since the amendments to the Labour Relations Act (the LRA) came into effect from 1 January 2015.
A benefit that has almost gone unnoticed, is the right to claim severance pay (section 198B(10)(a) of the LRA). The severance pay is calculated at 1 week’s pay per completed year of service.
Employees who earn in excess of the relevant threshold are not entitled to severance pay when their fixed-term contracts come to an end.
What happens if there have been successive contracts or extensions, or where employment has been interrupted? These questions are addressed by section 84 of the BCEA, which provides that - for the purposes of determining the length of an employee’s employment with an employer - previous employment with the same employer must be taken into account if the break between the periods of employment is less than one year.
Considering that this amendment to the LRA came into effect from 1 January 2015, employment before that date does not have to be taken into account (section 198B(10)(b) of the LRA).