New tool: work out your retrenchment package, what the law says you are owed

Personal Finance
1

I have added another free tool to the site, this one for a hard moment, when your job is ending and you need to know what you are actually owed.

A retrenchment package is built from a few separate pieces, and it is easy to be short changed because most people do not know the rules. So the tool works it out the way the Basic Conditions of Employment Act does, line by line.

Severance pay, which is one week of pay for every completed year you worked there, and which the law only requires on a retrenchment, not on a resignation or an ordinary dismissal.

Notice pay, which is one, two or four weeks depending on how long you have been there, paid as a lump sum if the employer would rather you did not work it.

The leave you built up but never took, which must always be paid out whatever the reason you are leaving.

A pro rata share of a 13th cheque or guaranteed bonus, if your contract promises one.

On top of that it adds a rough estimate of the UIF you can claim from the state while you look for work, on the sliding scale that replaces between 38 and 60 percent of your income up to the monthly ceiling, for up to about a year. You have to claim within twelve months, so it is worth starting the moment your job ends.

You put in your salary, how long you have worked there, the reason your job is ending and any leave still owed, and it shows the minimum you should be paid before you sign anything.

Two honest notes. These are legal minimums, a fair employer or a negotiated retrenchment agreement may give you more. And a real severance lump sum is taxed gently, on the same favourable table as a retirement lump sum with a large tax free portion, so your take home can be better than the before tax figure suggests. It is general information, not legal advice, and if you think a retrenchment was unfair you can take it to the CCMA, normally within 30 days.

Try it here: Retrenchment & Severance Pay Calculator SA

If you have been through a retrenchment, I would like to know whether the figures matched what you were actually paid.

2

Small update to this one. You can now print your result, or save it as a PDF, straight from the tool.

Scroll to the bottom of your figures and tap Print or save as PDF. It strips out the website around it and gives you a clean one page document, with your details at the top, the full breakdown of what you are owed, and the UIF estimate, dated for the day you ran it.

It is handy if you want to take the numbers into a meeting with HR, keep a record before you sign a retrenchment letter, or send them to someone for a second opinion. It works the same on a phone or a computer, and on a phone the same button lets you save it to your files or share it.

3

Another update, and a useful one if the tax question has ever worried you. The tool now gives you a rough take home figure after tax, not just the before tax payout.

The good news is that a real retrenchment is taxed kindly. Your severance pay is taxed on its own SARS table, where the first R550,000 you ever take is tax free, so most people pay no tax at all on the severance itself. Your notice pay, leave pay and any bonus are normal income and are taxed at your usual rate, and your UIF is tax free on top. The calculator does that split for you and shows what you are likely to keep.

It is a rough guide, not tax advice. It assumes you are not a shareholder or director with more than a five percent holding, and your own tax number, age and any earlier lump sums can change it, so check with SARS or a tax practitioner before you rely on the figure.

Have a look here: Retrenchment & Severance Pay Calculator SA

4

The part about unused leave is what catches people out the most. So many of my colleagues did not know that money belongs to them no matter why they are leaving, and they just walked away from it.

5

Last year one of my guys at the shop got retrenched from his old job at a warehouse before he came to work with me, and they tried to pay him out like it was a normal resignation, nothing for severance, nothing for his leave days. He didn’t know better so he nearly signed. Eish.

Lerato is spot on about the leave, that money is yours no matter what. A tool like this puts the power back in the worker’s hands so the boss can’t play games. Knowledge is the real hustle.

One thing bra, can you maybe add a little note on what to do if the employer still refuses to pay after you show them the numbers? Like where to take the CCMA route?

6

That story makes my blood boil Sipho, and good on your guy for not signing. That is exactly the trick the tool is meant to stop.

Good shout on the next step, I will add a short note inside the tool. The quick version is that there are really two different fights, and they go to two different doors.

If the problem is simply money they have not paid you, the severance, the leave, the notice, that is a claim for what you are owed. You take it to the Department of Employment and Labour, where you lodge a complaint and an inspector can order them to pay, or you refer it to the CCMA. Smaller amounts can also go to the Small Claims Court.

If the problem is that the retrenchment itself was unfair, no real reason or no proper consultation, that is unfair dismissal and it goes straight to the CCMA, and the clock is tight, normally within 30 days of the dismissal.

Either way it costs nothing to refer and you do not need a lawyer to start. Just keep every payslip, the retrenchment letter and your printed figures from the tool, because that paper trail is what wins it.