The young men had pleaded guilty to charges of illegally and deliberately injuring another person's dignity. The video, made in 2007, showed the five employees being forced to consume food and drinks that appeared to be tainted with urine. The students later described it instead as a "harmless" liquid.
In a sentence broadcast live on nationwide television, Magistrate Mziwonke Hinxa said it was "disheartening" such offenses have continued in the country.
However, he said he found imprisonment was not appropriate, and he ordered the four to pay $2,720 (20,000 South African rand) each. He also imposed a six-month jail term suspended on condition of good behavior for five years.
The four must not repeat "discrimination against any other person on grounds of race" over the next five years, Hinxa said.
The main South African labor federation welcomed the ruling, saying it would send a clear message to perpetrators of racist acts and leaders of the Bloemfontein university and other institutions where they had occurred.
The video insulted not only the workers it portrayed but the whole nation, said Sam Mashinini, a top official of the Confederation of South African Trade Unions in Bloemfontein.
Mothusi Lepheane, head of South African Human Rights Commission's Bloemfontein office, said no incidents of racial tension arising from the sentence were reported in the city. Scuffles linked to the criminal prosecution of the men have previously broken out.
Defense attorneys for the former students had argued for a lenient fine of about $700 (5,000 South African rand), saying the four had expressed remorse and had been punished both by university authorities and international criticism.
The five workers also asked the court to impose a fine instead of jail, court officials said. A civil damages suit is expected to follow.
The small Freedom Front Plus party, which advocates for the white Afrikaaner community, said Friday further civil action would likely hurt what it called the "good spirit" among South Africans left by the nation's successful hosting of the FIFA World Cup soccer tournament that ended July 11.
"Nobody won from this matter. The whole exaggerated saga was bad for South Africa ... it was drawn out and blown out of proportion," it said in a statement.
The video — which first emerged in 2008 at the University of the Free State in Bloemfontein, 260 miles (420 kilometers) southeast of Johannesburg — used the university employees to re-enact the initiation rights normally given to students trying to get into a residence hall. The employees included four middle-aged women and one man.
The residence hall, known as the Reitz men's residence, was shut down after the video received worldwide publicity.
Police dispersed stone-throwing students on the sprawling campus and classes were canceled after the video emerged.
The university in Bloemfontein has been regarded as a bastion for Afrikaners, descendants of Dutch settlers who are often most closely linked with white apartheid rule.
Commentary on the video in the Afrikaans language included sarcastic references to the university's policy of integrating the campus dorms years after the end of apartheid in 1994.
Black students make up 60 percent of the Free State university's 25,000-strong student body. Most of the support staff are black but the teaching staff are mainly white.
Two of the students said they had been "crucified as racists" and regretted making the film, meant as a "satirical slant" on the issue of racial integration at the university hostels.
In a sign of the gravity of the case, South Africa's most senior prosecutor, Johan Kruger, appeared for the state.
Renowned attorney Kemp J. Kemp, who defended Jacob Zuma before he took office as president last year, represented the students.
