After working for his company for 24 years, Joseph was offered a voluntary retrenchment package. Due to his years of service the package is attractive with the company effectively offering him a year’s salary. Joseph is not part of the union and he wants to fully understand the implications of accepting this package.
Phil Sack, HR Executive at Old Mutual says that Joseph should be wary before accepting the offer as employers may use a voluntary severance package as a way to avoid following labour regulations.
“If an employer decides an employee’s position may be redundant then in terms of the Labour Relations Act it is supposed to engage with that employee (and their Union if they are a member) through a series of consultations and meetings,” says Sack. These meetings clarify why the position is being made redundant and looks at alternatives to retrenching the employee/s in that position, for example transferring them to other jobs or reskilling. The employer also needs to consult over severance pay, the timing of the termination and any employee assistance programmes. The employee should also receive a certificate of service and completed UIF forms.
Sack says the employer has to pay a severance package of at least one week of remuneration per year of service under the Basic Conditions of Employment Act. In Joseph’s case the employer is offering a voluntary package of three weeks of pay to a maximum of 52 weeks. Joseph would receive double the severance package which he is entitled to under the law if he accepts the voluntary package.
However if Joseph accepts the package he is agreeing to the termination. Sack says therefore he cannot challenge the dismissal as unfair at the CCMA because it is something that he initiated himself.
Joseph needs to weigh up the options and also assess his possibility of obtaining employment elsewhere. Although a lump sum of a year’s salary may be attractive, if he has not found work after a year he may find himself in financial difficulty.
This article first appeared in City Press
I am an ithala employee working 5 &1/2 days per week. I started to work for ithala from 1st October 1992 and I got a letter of retrenchment today 27/08/2014 that my severance pay is R97805.22 before taxation. Please give advice if this is correct & is it suppossed to be taxed? My salary is currenty R12096 per month. My last day will be 30/09/2014. Am I entitled to get this little