How much severance pay am I entitled to? Calculate your retrenchment package per Section 189 of the LRA and BCEA minimums, including tax on lump sum payouts.
Calculate end-of-service gratuity and severance pay
Check your employment contract for actual formula
Affects tax treatment of payout
Minimum: 1 week's pay per completed year of service. Your contract may offer more. First R550,000 of retrenchment package is tax-free.
BCEA minimum: 1 week per year of service. Many employers offer more generous packages. Must be paid within 7 days of termination.
Retirement/Retrenchment: First R550,000 tax-free. Resignation: Taxed as income at marginal rate. Strategy: Wait for retirement if close.
Pension fund withdrawals have separate rules. Consider preserving funds instead of withdrawing for better tax treatment.
Gratuity is not mandatory in SA unless specified in your employment contract. Check your contract and company policy. The BCEA only mandates severance pay for retrenchment.
The BCEA guarantees a minimum of 1 week's pay per completed year of service on retrenchment. The first R550,000 of your severance package is tax-free under the retirement lump sum tax table.
1 week pay per completed year of service
First R550,000 of retrenchment is tax-free
Severance must be paid within 7 days
Your contract may offer better terms
BCEA minimum: 1 week per year. Many employers offer 2 weeks or more. Tax-free up to R550,000.
Often more generous packages to encourage voluntary exits. Same tax treatment as retrenchment.
No legal entitlement to severance. Only receive accrued leave payout. Taxed as income.
Pension/provident fund withdrawals are separate from severance. Consider preserving funds for better tax treatment. Withdrawal rules changed with two-pot system in 2024.
Yes! The BCEA sets minimums, not maximums. Many employees negotiate 2-4 weeks per year, especially for senior positions or long service. Consider getting advice from a labour lawyer.
You cannot be forced to accept voluntary retrenchment. However, if it's a genuine operational requirement (Section 189), refusal may result in dismissal with severance anyway.
Yes! UIF is separate from severance. You can claim UIF benefits (up to 365 days based on credits) in addition to your retrenchment package.
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