South Africa Severance Pay Calculator for Employees (BCEA)

About the South Africa Severance Pay Calculator for Employees (BCEA)

In South Africa an employer who retrenches an employee — a dismissal for the employer’s operational requirements — or whose business becomes insolvent must pay severance pay of at least one week’s remuneration for each completed year of continuous service (Basic Conditions of Employment Act, section 41). A week’s remuneration is worked out under section 35: a month is 4⅓ weeks, so R20 000 a month is R4 615,38 a week, and 10 completed years give at least R46 153,85.

Enter how the job ends, your first and last day (or years and months) and your pay. The calculator applies section 41 and its exclusions, the notice period of section 37 and the pay instead of notice, the leave pay due on leaving (section 40), and the Labour Relations Act’s payment at the end of a fixed-term project contract of more than 24 months. It also estimates the tax on a severance benefit with SARS’s retirement lump sum table and compares your employer’s offer with the minimum. Nothing you type leaves your browser.

Without a pass the page gives a free preview of your own result: whether severance pay is due and why, your completed years, the notice period and the rules, with every amount hidden until you unlock it with a Pro pass.

Who gets severance pay

Section 41 of the Basic Conditions of Employment Act gives severance pay to an employee dismissed for the employer’s operational requirements — requirements based on its economic, technological, structural or similar needs — and to one whose contract ends under section 38 of the Insolvency Act because the employer is insolvent: at least one week’s remuneration for each completed year of continuous service (BCEA).

An employee who unreasonably refuses the employer’s offer of alternative employment, with that employer or another, loses it (section 41(4)). Severance pay does not take away any other amount the employee is owed (section 41(5)). A dispute about the severance pay alone can go to a bargaining council or the CCMA for conciliation and then arbitration.

There is no statutory severance pay after a resignation, a dismissal for misconduct or incapacity, the end of an ordinary fixed-term contract, or a retirement, unless a contract or a collective agreement gives one. The Act’s termination chapter does not apply to someone who works fewer than 24 hours a month for the employer.

A week’s remuneration

Under section 35 a monthly remuneration is 4⅓ times the weekly one, so a week is the month × 3 ÷ 13. When pay is worked out on another basis than time (commission, piece work) or changes a lot from one period to the next, the average of the last 13 weeks is used. Remuneration can include more than the basic pay — payments in money or in kind — and section 35(5) lets the Minister decide which payments count, so add regular allowances and the value of payments in kind. A day’s remuneration, for leave pay, is the week divided by the days worked in it.

Completed years and earlier service

Only completed years count: 9 years and 11 months is 9. Service with the same employer before a break of less than a year counts too, and payments or leave already given for that earlier period are taken into account (section 84): add it under More.

Notice and pay instead of notice

Either side ends a contract with written notice of at least one week in the first six months, two weeks after six months up to a year, and four weeks from a year — and four weeks for a farm worker or domestic worker employed for more than six months. A collective agreement may shorten the four weeks of an employee with a year or more of service to no less than two. The employer may not give notice during the employee’s leave, or let it run at the same time as leave other than sick leave (section 37).

Instead of notice, the employer may pay the remuneration the employee would have earned during it (section 38). When an employee resigns and the employer waives the notice, the employer pays it unless they agree otherwise. Notice does not stop a dismissed employee from challenging the dismissal under the Labour Relations Act. When the employer is insolvent the contract ends under section 38 of the Insolvency Act rather than by notice, so the calculator works out no notice pay for that case.

Leave pay when the job ends

Section 40 makes the employer pay, on leaving: the annual leave still due from earlier leave cycles and not taken, and — once employed for longer than four months — leave for the unfinished cycle: one day’s remuneration for every 17 days worked or paid, or more on a better basis such as the contract’s. Paid time off owed for overtime or Sunday work is paid too. Sick leave and family responsibility leave are not paid out. The leave calculator works out the cycles and the days.

Fixed-term project contracts of more than 24 months

An employee on a fixed-term contract to work on a specific project of limited or defined duration for longer than 24 months must be paid, when the contract expires, one week’s remuneration for each completed year of the contract, unless the employer offered or found employment from the expiry on the same or similar terms (Labour Relations Act section 198B). The section does not apply to employees earning above the BCEA earnings threshold (determination), to employers with fewer than 10 employees (or fewer than 50 while the business is under two years old), or to contracts a statute, sectoral determination or collective agreement permits.

Tax on a severance package

For SARS a severance benefit is a lump sum from an employer for the loss of a job when the employee is 55 or older, illness or injury ends the work for good, or the employee is made redundant in a general reduction of staff or the employer stops trading — but never for someone who held more than 5% of the company. It is taxed on the retirement lump sum table, together with the retirement fund lump sums, withdrawals and earlier severance benefits you have received: the first R550 000 of all of them is tax-free, then 18%, 27% and 36% (SARS). Notice pay and leave pay are not part of it: they are taxed with salary through PAYE, and the employer asks SARS for a tax directive before paying the severance benefit (SARS employer guide).

Other countries

Severance and redundancy pay elsewhere: United Kingdom, Australia and the Philippines.

Limitations

• The statutory minimum under the BCEA and the Labour Relations Act: a contract, a collective agreement or a sectoral determination can give more, and a voluntary package is whatever is agreed.
• Whether a dismissal was really for operational requirements, and fair, or a refusal of other work unreasonable, is decided by the CCMA, a bargaining council or the Labour Court, not by a calculator.
• The notice length depends on the service on the day notice is given; the calculator uses the last day of work, which is the same when the notice is paid instead.
• Which payments count as remuneration follows the Minister’s determination under section 35(5): enter regular allowances and payments in kind yourself.
• The tax is an estimate on the retirement lump sum table; SARS’s directive decides the tax withheld. PAYE on notice and leave pay, a pro rata bonus and UIF benefits are not worked out.

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