Farmer's Weekly (South Africa)
The truth about the retirement age in SA
An employee’s retirement age is determined by the employer, not the state, and must be set down in the employment contract.
There is no general retirement age in South Africa. An employee’s retirement age is determined by the employer and agreed to by the employee. This retirement age must be placed in writing in the employment contract to avoid a case of unfair dismissal or automatically unfair dismissal when the employment contract is terminated at the end of the month in which an employee reaches the agreed-upon retirement age.
Often, an employee is still mentally and physically capable of conducting the duties required by the position after reaching the agreed-upon retirement age. Nonetheless, the employee’s permanent employment contract must still be terminated. Should both parties decide to continue the employment relationship, they can enter into a fixed-term employment contract.
Employers should take note that if the permanent employment contract is not terminated when the agreed-upon retirement age is reached and the employee continues to render services for a period thereafter, the employee will be deemed to be a permanent employee without a fixed termination date. The employer will then have to follow an incapacity process when the employee is no longer mentally and/or physically capable of conducting the duties required by the position.
TREATMENT OF A FIXED-TERM EMPLOYEE
Employers should take note that a fixedterm employee must receive the same treatment as a permanent employee in terms of wages, leave and other benefits. An employee on a fixed-term contract must also be given equal access to opportunities to apply for vacancies. In addition, if the fixed-term contract exceeds 24 months the employee is entitled to severance pay upon termination of employment.
The terms and conditions of employment may never be changed unilaterally. So if there is no fixed retirement age in the workplace, the employer must consult with the employees in order to establish a fixed retirement age. Such an agreement must be in writing and signed by the relevant parties.
As with all rules and policies in the workplace, the retirement age must be applied consistently to avoid unfair discrimination in the workplace, in which case the employee can be awarded up to 24 months’ remuneration as compensation.
The employment contract can come to an end when the employee resigns, reaches retirement age, is dismissed, or is retrenched.
One of the greatest misconceptions in labour law involves the payment of a severance package. Severance pay is payable only when an employee is retrenched.
When the employment contract is terminated upon the employee reaching retirement age, the employer is obliged to pay the employee remuneration up to and including the last working day and accumulated leave. No further payments are required by law. If the employer wishes to make an ex gratia payment, it will be at his or her sole discretion.
THE EMPLOYER CAN OFFER A CONTRACT AFTER RETIREMENT AGE
An employment contract is crucial in managing labour relations as it is the basis of the relationship between the employer and the employee. It defines the terms and conditions as agreed upon between the parties and regulates their relationship. It also describes the rules and responsibilities to be adhered to by both employer and employee.
The employment contract is important for keeping confusion and discontent in the working relationship to a minimum. By including additional information in the employment contract, employers empower themselves and can proactively manage possible future disputes, saving time and money.