How is a retrenchment package taxed in South Africa?

Your employer will submit a tax directive application to SARS before the lump sum amount is paid to you. Upon receipt of this form, SARS will work out the correct amount of employees’ tax that your employer must withhold on the severance benefit, and you will receive that benefit net of tax from your employer.

How is retrenchment compensation calculated?

Condition precedent to retrenchment Calculation of average pay is done by dividing the last drawn monthly salary by 25 and then multiplying the dividend by 15 for every completed year of continuous work.

Can you negotiate retrenchment package?

Severance packages can be negotiated Employees are legally entitled to negotiate a better package. They can do this by themselves, through their trade union or with a labour lawyer.

How long does the retrenchment process take in South Africa?

Normally on average such a process takes between two and three weeks. We employee more than 50 employees and contemplate dismissing at least 10 employees based on the company’s operational requirements. In such instances the employer will have to follow the steps outlined in section 189A of the Labour Relations Act.

Can you refuse retrenchment?

What is clear from the judgment is that an employer, in the context of a retrenchment exercise at least, may dismiss employees for refusing to accept a change to terms and conditions of employment, provided of course that the employer can demonstrate that there is a genuine operational need to change terms and …

What is the minimum retrenchment package in South Africa?

Severance pay – this should be at least one week’s remuneration per completed year of service. Remuneration is calculated including basic salary and payments in kind. Outstanding leave must be paid out in full. Notice pay may vary depending on your employment contract.

What is retrenchment salary?

Retrenchment is the termination of an employee by an employer for reasons other than a punishment meted out by disciplinary action. Employees terminated in such a manner are financially compensated by the employer. This kind of compensation is known as retrenchment compensation.

What are the rules for retrenchment?

The retrenchment procedure as laid down in the Labour Relations Act (LRA) must be followed properly and in good faith by the employer. The employer must also prove that he/she has shared with the targeted employees (or their representatives) all documentary and other information pertinent to the retrenchment.

What is a fair severance package?

The severance pay offered is typically one to two weeks for every year worked, but can be more. The general practice is to try to get four weeks of severance pay for each year worked. Middle managers and executives usually receive a higher amount. Some executives, for example, may receive pay for more than a year.

What is a fair retrenchment package?

Severance pay – a retrenched employee must at least be paid 1 week’s pay for each completed year of ongoing service. if the employee was employed for more than 6 months but less than 1 year, s/he must be paid 2 weeks’ notice pay; if the employee was employed for more than 1 year, s/he must be paid 4 weeks’ notice pay.

Can you retrench during lockdown?

Is anyone allowed to get retrenched? Employers are not precluded from retrenching employees during the national lockdown, provided the employer has a valid operational reason to implement retrenchments and follows the procedures set out in section 189 of the LRA.

What are my rights if I get retrenched?

How are retrenchment benefits calculated in South Africa?

Severance, notice and leave pay are specified in terms of South African labour law, along with the basis of their calculation.   Bonuses and pension benefits payments are subject to your employment contract. To avoid paying unnecessary tax on your retrenchment benefits,  structure your package according to the guidelines above.

When is an employee entitled to a retrenchment package?

When the employee enters into an agreement with his/her employer to be retrenched, not to claim unfair dismissal and not to claim additional pay, in return for payment of a retrenchment package which includes his/her severance pay, leave, other pay s/he is legally entitled and additional benefits.

Do you have to write retrenchment package in writing?

Retrenchment packages must be put in writing and discussed in private with each affected employee. However, in working out severance packages, Section 41 and Section 35 of the Basic Conditions of Employment Act must be read in conjunction with one another. Section 35 lays down the exact criteria for calculating the legally correct package.

What are the conditions of retrenchment in the UK?

The Labour Relations Act and the Basic Conditions of Employment Act (1997) have made provisions for what employees about to be retrenched are entitled to in terms of severance pay and further conditions of retrenchment.