Here is what you should know about severance pay on retirement in South Africa. The only exception to the statutory requirement for employers to pay severance pay to retrenchees is where the employees unreasonably refuse an offer of alternative employment. Our aim is to ensure that our clients make the correct payments to employees so that an employee’s right to a fair dismissal for operational requirements and their dignity are protected throughout the retrenchment process. This obligation to pay severance pay is tempered by the provisions of section 41 (4). Due to the immense financial impact of COVID 19, many employers have had to take the drastic and inevitable steps to consider reducing their employees’ remuneration. Severance, notice and leave pay are specified in terms of South African labour law, along with the basis of their calculation. Of the extra R10-billion, R2-billion is intended for initial operations, R2.2-billion for severance packages for 3 622 employees and R1.7-billion will go towards aircraft lease cancellations. In Article Archive - Home, Labour News, Labour News Teazer by Jan Truter 27 November 2019 2 Comments. The Labour Relations ... Read: Should South African employees always get their jobs back after being unfairly dismissed? 75 of 1997 (BCEA) provides that an employer who dismisses an employee for ‘operational requirements’ must pay severance of one week’s remuneration for every completed year of service. That is, the BCEA does not require the payment of such severance pay … The statutory requirement for the payment of severance pay covers only cases where the employment is terminated due to the operational requirements of the job (better known as retrenchment). South Africa Airways Administrators Told by Court to Halt Severance-Pay Plan. It is therefore left to employers, employees and trade unions to fight this out based on their own viewpoints. It is also up to the CCMA, bargaining councils and courts to develop their own interpretations of this provision. Remarks: There is no general right to severance pay following a fair dismissal. Taxation of severance and retrenchment benefits. How to pay and renew your vehicle license online? I am 33 years old and only have a car debt of R138,000. Answer: An employee who has been employed for more than 24 months is entitled to severance pay when fixed-term contract comes to an end, unless … ... South Africa needs to raise taxes – and the wealthy will most likely foot the bill. Further, according to the latest Bloomberg report, South Africa has the highest unemployment rate among 83 surveyed countries. It is frequently required by employment law. The starting point to calculate the employee’s severance pay will be to understand sections 35 and 41 of the Basic Conditions of Employment (BCEA). 335/2000 (Industrial Court). Subscribe. With regards to Severance Pay, you need to first apply for a tax directive from SARS. Employers are therefore not advised to deal with these without the assistance of an experienced and reputable labour law advisor. Email: As a result, many employers have unfortunately had no choice but to retrench employees at great cost. According to the South African Revenue Service (SARS), the amount of tax you pay on your severance depends on the pay-out you receive and the number of times you’ve been retrenched. 2. That is, the BCEA does not require the payment of such severance pay in cases of resignation, retirement, death, expiry of an employment contract, dismissal for misconduct, poor performance, illness or other reasons. That calculation clearly pertains to the pre-liquidation period, given the fact that an employee is generally precluded from performing work after the commencement of liquidation (s 38(2)( a )). Once the directive has been received, you will process the payment as follows: 1. Employees are entitled to severance pay when they are retrenched due to their employers’ operational or economic reasons. (4) If an employee’s remuneration or wage is calculated, either wholly or in part, on a basis other than time or if an employee’s remuneration or wage fluctuates significantly from period to period, any payment to that employee in terms of this Act must be calculated by reference to the employee’s remuneration or wage during—. In other words, it is money or benefits that an employer pays an employee who loses their job through no fault of their own. Severance pay is required by the BCEA (sec. The first R500,000 severance benefit is tax free and the amount above R500,000 up to R700,000 is taxed at 18%. South African Airways (SAA) is offering severance packages to its entire workforce of around 5,000 workers, a proposal by the airline’s administrators showed, after the government said it wouldn’t provide more funds for rescue efforts. CONTACT US. Allowances for private travel in the employee’s own vehicle, The employer’s contribution to benefit schemes such as death benefit, funeral, retirement and medical aid fund contributions, Payments in kind including free accommodation. All rights reserved, website designed and hosted by, How to calculate severance pay due to employees during retrenchments, Skills Development Facilitation and Employment Equity, SDF Extended with Training And Labour Services, Labour Pro - Labour Relations for Businesses, understanding of the process of a retrenchment. 2019; 2018; 2017; 2016; 2015; 2014; 2013; 2012; 2011; 2010; 2009 Domestics are also entitled to severance pay of one week for each year of service, as well as four months' unpaid maternity leave. To avoid paying unnecessary tax on your retrenchment benefits, structure your package according to the guidelines above. The first R500,000 severance benefit is tax free and the amount above R500,000 up to R700,000 is taxed at 18%. The economic climate in which many South African firms operate has meant that dismissals for operational requirements have become an inescapable concern. The respondent refused to pay it. Sabelo Skiti. Severance Pay The Basic Conditions of Employment Act provides for severance pay. Enter the lumpsum amount on a Gratuities Earning line, IRP5 code 3901. How is the severance pay calculation South Africa? The obligation to pay severance pay to fixed-term employees By Johan Botes, Director, Employment Law, Cliffe Dekker Hofmeyr. South Africa Airways Administrators Told by Court to Halt Severance-Pay Plan Antony Sguazzin , Bloomberg News (Bloomberg) -- South Africa’s labor court told the administrators of the state airline that they can’t force workers to accept severance payments, deepening the chaos surrounding the bankrupt company’s future. Severance pay. Labour unions, representatives of non-unionised managers and ground staff have agreed to accept the South African Airways (SAA) voluntary severance packages (VSPs). This unfortunate step is referred to as a ‘dismissal based on operational. How to overcome unforeseen delays during a retrenchment consultation, The current economic situation that we all currently face has ultimately left employers with little or no option but to reconsider the number of people they employ and retrenchments then become a reality. Acts Online provides legislation, including amendments and Regulations, in an intuitive, online format. This means that the first R500 000 is not subject to tax, the next R200 000 is taxed at 18%, the subsequent R350 000 at 27% and all amounts above R1 050 000 at 36%. He may be contacted on (011) 888-7944 or 0828522973 or via e-mail address: [email protected]. Where employees are retrenched the Basic Conditions of Employment Act (BCEA) requires employers to pay the retrenchees severance pay of at least one week’s remuneration per year of completed service. The South African Cabin Crew Association and the National Union of Metalworkers of South African could not be … When the number of discouraged job seekers are included in the current unemployment statistics, the unemployment rate seems higher than 27% and closer to 43%. Employers should offer their employees a week … There are various limitations on the right to severance pay, which include but are not limited to the following: Where an employee has a significant break in service (more than 12 months), that employee will not be entitled to severance pay for the years preceding the break in service; What is meant by the term "unreasonably refuse' in not entirely clear because the term "unreasonable’ is subjective. 1. How will Whatsapp’s new privacy policy affect you? ... South Africa George 55 York Street Dormehls Drift George, 6529 South Africa. My pension is R460,000 and my severance pay is R128,000. If your severance pay is less than R500,000, you’ll not pay any tax. Severance payments in South African law are … Must Read. WhatsApp's new policy regarding personal data and sharing thereof with Facebook has concerned many of its users. (2) An employer must pay an employee who is dismissed for reasons based on the employer’s operational requirements severance pay equal to at least one week’s remuneration for each completed year of continuous service with that employer, calculated in accordance with section 35. You must pay them one week's remuneration for every continuous year … REPUBLIC OF SOUTH AFRICA 2013/01/1610:38 AM Home About us Contacts Services Media Desk Tenders Vacancies Site Map Basic Guide to Severance Pay If retrenched workers have a dispute about severance pay, they may refer the dispute for conciliation or arbitration. However, not every retrenchment results in payment of severance pay. (+) show remarks. For the non-payment of additional notice on retirement, see the decided case of Philemon Kunene vs. Swazi Oxygen (Pty) Ltd, Case No. It is correct that severance pay is calculated at one week’s remuneration for each completed year of continuous service. Unions reject SAA severance pay. In this blog, we will look at some of the fundamentals when calculating severance pay in the event of retrenchment. REPUBLIC OF SOUTH AFRICA Not reportable Of interest to other judges THE LABOUR COURT OF SOUTH AFRICA, CAPE TOWN JUDGMENT Case no: C 763/15 In the matter between: ... [13] The claim for severance pay was based on the contract of employment. (1) For the purposes of this section, ‘‘operational requirements’’ means requirements based on the economic, technological, structural or similar needs of an employer. Severance, notice and leave pay are specified in terms of South African labour law, along with the basis of their calculation. The employee earn an average of R14 000 per month and has never been retrenched. This is in terms of s 41(2) of the Basic Conditions of Employment Act 75 of 1997 (BCEA). They would be entitled to one week's pay for every year of service, one month's pay in lieu of notice pay and pay for outstanding annual leave. Severance pay helps employees to stay on their feet financially while they look for a new job. The Labour Law allows for a minimum payment of one week per completed year of service. Bonuses and pension benefits payments are subject to your employment contract. What is the legal effect of a resignation when attempting to avoid a disciplinary hearing or sanction of dismissal? A benefit that has almost gone unnoticed, is the right to claim severance pay (section 198B(10)(a) of the LRA). SERR Synergy assists employers to understand and appreciate the correct final payments to be made to employees during these extraordinary and challenging times. May an employer unilaterally reduce an employee’s remuneration due to the effects of COVID-19? ... your pension fund administrator will apply for a directive from the South African Revenue Services on your behalf and pay the Tax accordingly. An employer has the right to take justified disciplinary action against employees found guilty of misconduct during their employment, while an employee also has the right to resign and terminate the employment relationship provided that the resignation is not in breach of the contract of employment. I have accepted a VSP. Yes, there is - the South African Domestic Service and Allied Workers' Union (SADSAWU). The Second Wave of the Covid-19 pandemic will irrefutably place a further colossal financial constraint on businesses and/or numerous revenue sources and/or sector(s). How To Improve Your Focus and Limit Distractions, Invitation to our online workshop: Restoring Your Workplace Effectiveness, World Knowledge Olympiad: Grade 8 to Grade 12 Learners, Vaccine Side Effects Should Be Expected, Says Karim, Moderna Says Vaccine Is Effective Against Covid-19 Variants, 5 Major Trends To Drive The New Post-Pandemic Workplace, COVID-19 Corona Virus South African Resource Portal. The economic climate in which many South African firms operate has meant that dismissals for operational requirements have become an inescapable concern. The severance pay is calculated at 1 week’s pay per completed year of service. FIXED-TERM CONTRACTS AND SEVERANCE PAY. A worker, who is dismissed for reasons based on the employer's operational requirements or whose contract of employment is terminated on account of insolvency, is entitled to the severance pay at the rate of one week of pay for each completed year of service. Severance pay is a form of compensation that an employee receives when they are let go by a company. The obligation to pay severance pay to fixed-term employees Share page The amendments to the Labour Relations Act, No 66 of 1995 (LRA), ushered in an era of greater protection for employees on fixed-term contracts where the employees earn below the earnings threshold (currently R205,433.30) published annually in terms of the Basic Conditions of Employment Act, No 75 of 1997 (BCEA). Would it be advisable for me to pay off my vehicle? A severance agreement also helps the employer to guarantee that their employee will not cause any harm to … It has also happened that employers pay a severance amount but neglect to apply for a tax directive. 2.1 South African Law Section 196 of the LRA used to deal with severance pay, but was repealed in 1997. Severance pay should be at least one week’s remuneration per completed year of service. As prescribed by the Basic Conditions of Employment Act, a severance package must be paid to a retrenched employee at a minimum rate of one week’s salary for every year of service. 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. In the absence of both pension and severance pay, this would mean those retiring employees would go home empty handed as even additional notice is not payable to a retiring employee. 18 Jun 2020. “ An employer must pay an employee who is dismissed for reasons based on operational requirements or whose contract of employment terminates or is terminated in terms of section 38 of the Insolvency Act, severance pay equal to at least one weeks remuneration for each completed continuous year of service to the employer as calculated in terms of section 35.” : 2005/028472/07 is what you should know about severance pay, you pay. 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