What Am I Entitled To If I Get Retrenched?

A man wearing a face mask while carrying a box of his personal items after being retrenched.

The South African unemployment rate is very high and continues to climb during these tough economic times as more people are being retrenched. If retrenchment is on the cards for you, then you must understand your rights and what you are entitled to under South African law. Below are some of the financial benefits that you are entitled to if you are retrenched.

Notice Pay

The notice period that employers are required to give employees is determined by the employee’s length of service and is usually between one to three months. Employers have the choice of paying employees to work during the notice period or they can pay employees in lieu of notice. If you’re not able to find a new job immediately, then your notice pay can offer you some financial relief until you do.

Severance Pay

if you’ve been employed for more than 12 months then you are entitled to severance pay if you are retrenched. Your length of service and remuneration are used to calculate the severance pay amount owed to you. You are entitled to one week’s pay for every year of continuous service. Your severance pay is tax-free up to a certain amount.

Unemployment Benefits

As an employee in South Africa every month you pay a percentage of your salary towards UIF which is usually deducted from your monthly salary. If you are retrenched, you are entitled to claim unemployment benefits from the Unemployment Insurance Fund (UIF). The amount of this benefit is based on your salary. You can claim UIF for a maximum of 12 months.

Pension and Provident Funds

if you have contributed to a monthly pension or Provident fund you are entitled to the benefits that have accrued in the fund. These benefits can include a lump sum payment, annuities, or even a combination of both. The amount of the benefit is dependent on your contributions and the fund’s investment performance.

Tax Implications

When you get retrenched, there are many things to consider, and the tax implications are often not discussed. Notice pay, severance pay, leave pay, and pension and provident fund benefits are all subject to tax. If you receive these payments, you will need to consider this and adjust your tax liabilities and make the necessary arrangements to pay any additional tax that is due. Retrenchment can be very overwhelming and stressful, but it’s vital that you know what you’re entitled to and to ensure that you receive it. If you want to understand more about retrenchment and how to prepare for it, then be sure to sign up for our Retrenchment Webinar.

IIY’s Surviving for Retrenchment webinar:

Date: Wednesday, 27 September 2023
Time: 12:00 to 13:00 and 18:00 to 19:00
Duration: 1 hour
Location: Online
R395.00 (Early Bird: R276)

Click here to buy your ticket and for more information about the webinar content.

Click here to register

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