Severance Pay in South Africa: What Is It and Who Gets It?

Being retrenched can be difficult, especially when you have bills to pay and are not sure what will happen next.

One important thing to understand is severance pay.

Severance pay is money that may be owed to an employee when their employment ends because of the employer's operational requirements, such as retrenchment.

How much severance pay can you get?

Under the BCEA, an employee who is dismissed for reasons based on the employer's operational requirements is generally entitled to at least one week's remuneration for every completed year of continuous service, subject to the applicable legal rules.

For example, if you have worked for a company for 3 completed years, the basic statutory calculation would generally be:

• 1 week for year 1
• 1 week for year 2
• 1 week for year 3
• Total = 3 weeks' remuneration

Your actual calculation can depend on your circumstances and the definition of remuneration that applies.

Is severance pay the same as your final salary?

No.

Your final payment can include different amounts, depending on your situation. For example:

• Salary that is still owed to you.
• Payment for outstanding annual leave where applicable.
• Notice pay where applicable.
• Severance pay if you qualify.

These amounts should not simply be treated as one unexplained payment. Ask your employer for a breakdown.

What if you are offered another job?

There are special rules around severance pay if an employee unreasonably refuses an offer of alternative employment with the same or another employer. This is why you should understand the details of any alternative job offered to you before making a decision.

What should you check?

• How long you worked for the employer.
• Your final salary.
• Your notice period.
• Your outstanding leave.
• Your severance calculation.
• Any other payments listed in your termination documents.

What if your employer refuses to pay?

If you believe you are owed severance pay and cannot resolve the issue with your employer, you may be able to refer the dispute to the CCMA or an appropriate bargaining council.

Keep your employment contract, payslips, retrenchment documents and any communication with your employer. These documents can help when explaining your case.

Job seeker tip: If you are retrenched, do not just look at the amount deposited into your bank account. Ask for a written breakdown of your final payment so you understand exactly what you have been paid.

Remember: Retrenchment can be a difficult experience, but it does not define your career. Use the experience, skills and connections you gained to start planning your next opportunity.