GETTING RETRENCHED
This is how you should be paid out if your job is being cut
FIRST STEPS
Employees in all income groups and job levels can be retrenched if the employer has valid reasons for doing so. Employers must follow the law: first they must issue a notice that explains how many people are being retrenched, and why and when. Employees can negotiate this and make alternative suggestions. If the employer offers you another job as part of the process, think carefully before saying no, unless you have good reason – it could mean that you forfeit your severance pay.
TAX-FREE
Since 2014 the first R500 000 of your severance pay is tax-free. This doesn’t include payouts for pro rata bonuses, which are taxed according to your individual tax rate. To get this tax break you must receive a one-off lump sum from your employer for being retrenched. Your employer must apply to the revenue service for a tax directive which will specify how much of your severance package is taxable. Go to sars.gov.za for more information.
PAYOUTS
Legally an employer must offer you a severance deal that includes a minimum payout of one week’s salary for every full year of service, and reimburse you for outstanding leave. If you’re a member of the company’s retirement fund, your pension savings must be paid according to the fund’s regulations. You must still work, and get paid for, a minimum period from the date the retrenchment notice is issued. You might also be entitled to a pro rata bonus depending on your service contract conditions.
YOU NEED TO KNOW
Don’t rush into making major financial decisions, and beware of spending your pension fund payout – try to save the full amount for your retirement. Ask your employer if the services of a financial adviser is part of the severance deal. Revise your budget, curb your spending and refresh your CV. If you’re contributing to the Unemployment Insurance Fund (UIF), you’re entitled to unemployment benefits. Ask the human resources department for information on your UIF contributions.
It’s not what you achieve, it’s what you overcome. That’s what defines your career – CARLTON FISK, AMERICAN BASEBALL PLAYER