Severance pay: What it is (and how it differs from termination pay) and how to calculate it.
The Act provides, that operational requirements is defined as requirements based on the economic, technological, structural or similar needs of an Employer. When an Employee is dismissed for reasons based on the Employers operational requirements, also known as retrenchment, the Employee will be entitled to receive severance pay. Section 41 of the Basic Conditions of Employment Act states that an Employer must pay an Employee who is retrenched severance pay equal to at least one week’s remuneration for each completed year of continuous service with that Employer calculated by reference to the number of hours the Employee ordinarily works.
As for notice of termination of Employment, this occurs when an Employee wishes to terminate his/her contract of employment by way of resignation or if an Employer contemplates retrenching Employees based on the Employers operational requirements. The period applicable is regulated by Section 37 of the Basic Conditions of Employment Act and provides that one party shall give the other party notice of not less than seven days if the Employee worked less than six months, two weeks if the Employee worked more than six months but less than a year, and four weeks if the Employee worked for more than a year. During the period, the Employee will still be remunerated for the prescribed notice period worked calculated by reference to the number of hours the Employee ordinarily works and can only be waived if both the Employer and Employee party agree to it.
Both severance and notice of termination will apply and be paid when retrenchment is concluded, however only notice of termination will be applicable where the Employee has tendered his/her resignation to the Employer. To further understand what an Employees full entitlement will be when termination occurs either by way of retrenchment, resignation or dismissals based on misconduct, poor work performance or ill health or injury contact a Joblaw office in your area for more details.
To arrange a consultation, for more information, with a member of our qualified team, contact Erin Steyn on 021 919 6418 or email erin@joblaw.co.za
