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An employee is employed on a fixed term contract for one year from 1 January to 31 December 2019. He is then appointed on a permanent basis by the same company as from 1 January 2020, the day following the expiry of his fixed term contract. Two years later he is retrenched at the end of 2021. Bearing in mind section 84 of the BCEA, must his years of service for severance pay purposes be calculated from 2019, when he was on a fixed term contract or from 2020? That is, must he get 2 weeks or 3 weeks service pay?
It is quite clear that he must get three weeks. They have to recognise the previous service. See the basic conditions of employment act. The gap in employment was one day.
Michael might be right but there is a complexity. Normally, a fixed-term contract does not provide for retrenchment if the employee is retained for the entire term. This is because the contract expires naturally and there is no need for a retrenchment. in the light of this, I do not think that the period of the fixed-term contract should be taken into account in deciding on the severance pay when the employee is retrenched 2 years later.
When one considers section 41 of the Basic Conditions of Employment Act (“BCEA”), it is evident that “employees” are entitled to severance pay for each completed year of continuous services with that employer. The definition of the word “employee” in the BCEA is not subject to the nature of the contract of employment. In other words, even if a person is in a fixed-term contract he or she falls within the definition of the word “employee”. Therefore, when one considers the set of facts, the individual has been an “employee” from the inception of the fixed-term contract.
The remaining question is whether or not “there was continuous service with the same employer”. Some guidance is provided in this regard by section 84 of the BCEA which provides that the length of an employee’s previous employment with an employer must be taken into account if the break between the periods of employment is less than one year. In the given facts there is and/or was not even a break. Therefore, it is my view that the employee has been in continuous service with the same employer and his or her employment during the fixed-term contract must be taken into account for the purposes of calculating the severance pay which is due.
I agree with Michael that he could be paid 3 weeks. This is because the one-year FTC was employment and should be added to the 2-year stint of permanent employment.
On Anna’s point: An FTC can be terminated early for operational reasons. If so, the employee would be entitled to severance pay for more than one-years’ service. This assumes the FTC was for more than one year – or if a one-year FTC had been renewed for another period.
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