{"id":10381,"date":"2025-01-28T08:40:12","date_gmt":"2025-01-28T06:40:12","guid":{"rendered":"https:\/\/dotnewsconnect.co.za\/law\/?p=10381"},"modified":"2025-01-29T09:31:09","modified_gmt":"2025-01-29T07:31:09","slug":"employers-how-to-avoid-paying-severance-pay-on-retrenchment","status":"publish","type":"post","link":"https:\/\/dotnewsconnect.co.za\/law\/2025\/employers-how-to-avoid-paying-severance-pay-on-retrenchment\/","title":{"rendered":"Employers: How to Avoid Paying Severance Pay on Retrenchment"},"content":{"rendered":"\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">\u201cOnly in our dreams are we free; the rest of the time we need wages.\u201d (Terry Pratchett)<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Retrenching employees can be an expensive business. You\u2019ll have to pay each employee a minimum of one week\u2019s pay for each completed year of ongoing service, and that total liability can add up alarmingly.<br><br>A recent Labour Court ruling has however set out clear guidelines for avoiding that cost by arranging alternative employment for your retrenched employees.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\">A lost cleaning contract and a raft of retrenchments<\/h6>\n\n\n\n<p class=\"wp-block-paragraph\">A contract cleaning services company, fearing it would lose a particular contract in an upcoming tender process, warned all staff employed at the factory in question that they could face retrenchment.<br><br>Sure enough, the tender went to a competitor. The company was able to absorb 130 employees into other positions and locations, but 41 had to be retrenched. Eleven of them were given severance pay, but the employer declined to pay anything to the 30 who accepted alternative employment.&nbsp;<br><br>The employees were having none of that, and approached the CCMA (Commission for Conciliation, Mediation and Arbitration). The CCMA awarded them both retrenchment pay and notice pay.<br><br><strong>The employer then took the matter to the Labour Court, which set aside those awards.<\/strong>&nbsp;So, the employer is off the hook on both counts \u2013 and employers and employees should understand the Court\u2019s reasoning for that decision.<\/p>\n\n\n\n<h6 class=\"wp-block-heading\">Having your cake, and eating it<\/h6>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The BCEA (Basic Conditions of Employment Act) provides that employees cannot demand severance pay if they are offered alternative employment and unreasonably reject it. As the Labour Court here put it, \u201cthe raison&nbsp;<em>d&#8217;\u00eatre<\/em>&nbsp;of [severance pay] is to compensate an employee who has been dismissed for operational requirements, through no fault of her own, to be paid compensation for her loss of employment. However, the legislature considered that an employee who<strong>&nbsp;unreasonably refuses an offer of alternative employment<\/strong>&nbsp;is not without blame. She should therefore shoulder the loss of employment without any compensation.\u201d (Emphasis added)<br><\/li>\n\n\n\n<li>Equally, \u201cwhere an employee&nbsp;<strong>accepts alternative employment,<\/strong>&nbsp;arranged by the employer, she forfeits her right to receive severance pay.\u201d Being paid both severance pay and a salary is a double benefit not intended by the BCEA.<\/li>\n<\/ul>\n\n\n\n<h6 class=\"wp-block-heading\">Employers: Two practical steps to avoid liability&nbsp;<\/h6>\n\n\n\n<p class=\"wp-block-paragraph\">Employers should take two lessons from this ruling:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Don\u2019t just \u201csit on your hands watching the world go by\u201d!<\/strong>&nbsp;As this Court put it, employers are incentivised to ensure that their employees get another job. Which is exactly what the cleaning company did here: it \u201cdid not just sit on [its] hands and impassively watch the world go by,\u201d it managed to find alternative employment for 30 employees. It was extremely pro-active in this regard, meeting with the new employer, giving it all the information it needed, and allowing employees paid time off to attend interviews at a venue which it arranged.&nbsp;<br><\/li>\n\n\n\n<li><strong>Act early and urgently<\/strong>. This employer avoided the claim for notice pay by giving over four weeks\u2019 notice of termination. What\u2019s more, it engaged in the consultation process and issued notice of retrenchment circulars at the earliest opportunity, then acted \u201cas a matter of some urgency\u201d to collaborate with the new employer in arranging new job offers.&nbsp; &nbsp;<\/li>\n<\/ol>\n\n\n\n<h6 class=\"wp-block-heading\">Another point to consider<\/h6>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s worth noting perhaps that the Court also mentioned in passing (<em>\u201cobiter dicta\u201d<\/em>) that even if an employee were to find her own new employment \u201cthrough her own efforts and without the aid of her retrenching employer\u201d she \u201cneeds no soft cushion of severance pay to land on\u201d and would have to justify any such claim.&nbsp;<br><br>Still, on the \u201cbetter safe than sorry\u201d principle, employers should not take chances here &#8211; rather be pro-active in arranging alternative employment as soon as you can.&nbsp;&nbsp;<\/p>\n\n\n\n<h6 class=\"wp-block-heading\">A final thought for employees<\/h6>\n\n\n\n<p class=\"wp-block-paragraph\">Before you decide to reject any offer of alternate employment bear in mind that, as this court confirmed, it will be up to you to prove your entitlement to severance and\/or notice pay \u2013 it\u2019s not automatic!<br><br><strong>Whether you\u2019re an employer planning to retrench staff, or an employee facing an impending retrenchment, getting the best legal advice is key.<\/strong><\/p>\n\n\n\n<p style=\"border-top: 1px solid #dedfe0!important;padding-top: 20px!important;margin-top: 20px!important\">Disclaimer:\u00a0The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.<\/p>\n<p style=\"text-align: right\">\u00a9 LawDotNews<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cOnly in our dreams are we free; the rest of the time we need wages.\u201d (Terry Pratchett) Retrenching employees can be an expensive business. You\u2019ll have to pay each employee a minimum of one week\u2019s pay for each completed year of ongoing service, and that total liability can add up alarmingly. A recent Labour Court [&hellip;]<\/p>\n","protected":false},"author":101014,"featured_media":10382,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[10],"tags":[],"class_list":["post-10381","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-employment-and-labour-law"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Employers: How to Avoid Paying Severance Pay on Retrenchment &#8226; LawDotNews<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/dotnewsconnect.co.za\/law\/2025\/employers-how-to-avoid-paying-severance-pay-on-retrenchment\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Employers: How to Avoid Paying Severance Pay on Retrenchment &#8226; LawDotNews\" \/>\n<meta property=\"og:description\" content=\"\u201cOnly in our dreams are we free; the rest of the time we need wages.\u201d (Terry Pratchett) Retrenching employees can be an expensive business. 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