Five components, and the one calculation most often wrong

When employment ends in South Africa, several amounts are due, and one calculation drives the largest of them.

What should be paid

• Salary for days worked to the termination date
• Accrued annual leave — days × (monthly salary ÷ 21.67)
• Notice pay under Section 37, if notice was not worked
• Severance under Section 41, if retrenched
• Any outstanding commission or allowances

The seven-day rule

Your employer must provide your certificate of service, your IRP5 and all final payments within seven days of your termination date, or on the next scheduled pay date.

Check the remuneration figure first

Severance uses remuneration, not basic salary. Verify that the figure used includes:

• Regular cash allowances — transport, housing, cellphone
• Employer contributions to medical aid
• Employer contributions to retirement

If it used basic salary alone, the severance is understated — and this is described as the single most common employer error.

The years count

Only fully completed years count. Six years and eleven months rounds down to six.

The 13-week average

If you earn commission or regular overtime, confirm the 13-week average was used rather than a single month.

Tax on the lump sum

SARS applies specific lump-sum tax tables and aggregates lifetime lump sums since March 2009. An IRP3(a) directive is required for the correct rate.

If you have received a previous severance or retirement lump sum, it affects the tax on this one.

Leave is paid regardless

Accrued untaken annual leave is paid out whatever the reason for termination — retrenchment, resignation or dismissal.

Before you sign

Accepting payment does not waive your right to challenge fairness, unless the document you sign specifically waives it. Read it.

If something is wrong

The CCMA for severance and dismissal disputes. The Department of Employment and Labour for the UI-19 and other statutory breaches.