No employee should work without a contract of employment.
Failure to have such a contract in place before the commencement of any work can lead to what could be perceived as broken promises or failures to deliver as expected. This would be mainly because expectations would not have been discussed, agreed upon and formalised for both parties to be in the know.
Section 2 of the Employment Act defines a contract of employment as “an agreement, whether oral or in writing, expressed or implied, whereby one person agrees for a wage or other benefit or both to let his labour to and to perform it under the orders of another person who agrees to hire it.” One of the most underrated aspects of contracts of employment is the use of proper terminology. A simple wording problem can distort what the employment contract stands for or what it is trying to communicate.
HR practitioners must ensure that no confusion is caused by something as simple as jargon used in contracts, but this is not to say that potential employees should not familiarize themselves with the terms normally used in these contracts. For this article, we will focus on two terms which are normally used erroneously or interchangeably just to clear the midst surrounding them. The terms in question are employment contract extensions and contract renewals. Read on!
Definition
It is worth stating that extensions and renewals are related to fixed-term contracts of employment. A contract of employment extension is a process of continuing an existing contract that was meant to end at a particular point in time. For example, when a contract of employment that was to expire on the 10th of February 2024 is extended to the 31st of March 2024. A contract renewal on the other hand, is the process of extending a new contract prior to the expiry of an existing contract. For example, if an employee is on a three-year fixed-term contract that is coming to an end on the 29th of February 2024, then a new contract would be extended effective 1st March 2024 until 31st March 2026. This particular contract would be a renewal on the basis of a previous one as a relationship would have already been established prior, but maybe other terms would be slightly different like remuneration, working hours, etc.
The rules
As a collective, these terms apply to fixed-term contracts solely because they are time-based. Contract extensions are pertaining to employment contracts that are currently running or active and the same terms apply i.e., no variations unless they are mutually agreed upon. Notice is given prior to the expiration of the contract and it is usually safer to have it in writing, this however does not take anything away from the fact that oral contracts are also considered legal.
The possibility of extensions must be highlighted in the initial contract, so that it doesn’t come as a shock. For contract renewals, there must have been a previously existing contract that expired or is to expire. Secondly, this is considered a brand-new contract, this means all dues for the previous contract must have been settled i.e., all terminal benefits paid out. The terms of this contract can vary from the previous one as technically the two would not be connected, this then leaves it to the employee to accept or decline. Finally, it is important to have the renewal shared within a reasonable time to ensure that should it not be accepted, then the employer would still have time to source for an alternative resource.
Contacts
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