When must severance pay be paid?
Severance pay becomes a very hot topic when employees are losing their jobs through no fault of their own. These terminations are termed operational requirement dismissals. The following case shows that, in most cases and even with termination of client contracts, severance pay will be applicable.
In United Association of South Africa obo Khethe and others / Born to Protect Security Services – (2017) 26 CCMA 5.5.1 also reported at [2017] 12 BALR 1369 (CCMA):
• The employees, all security guards, were posted at the Department of Justice and Constitutional Development by their employer to render service.
• When the employer's contract with the department expired, it was replaced by a new security company. The employees claimed they were entitled to leave pay, a pro-rata share of their annual bonus and severance pay.
• The employer was of the view that the employees were not entitled to severance pay because they had all kept their jobs.
• The Commissioner noted that the question was whether the employer had offered the employees alternative employment. The employer confirmed it did not know the identity of the new service provider when it informed the employees that their services were no longer required.
• The new service provider had offered the employees positions if they satisfied the company's selection criteria. This meant that it was uncertain whether they would be hired.
• The employer had played no role in securing the offer from the new service provider. The employer was accordingly obliged to pay severance pay.
• The employer was directed to pay the employees severance pay as prescribed by the Basic Conditions of Employment Act 75 of 1997.
The principle is that where alternative jobs are offered that are at similar rates of pay and benefits then severance pay is not payable. This was not the circumstances in the above case as the jobs were not secure.