Final payments due upon termination of employment

There are different ways in which an employment contract may terminate. It can either be by way of the employee resigning, reaching the retirement age set in the workplace, the employee being dismissed for misconduct or retrenched due to operational reasons. There are certain requirements for the employer under each of these circumstances and it is important for an employer to understand what payments should be made to an employee upon termination to avoid non-compliance with legislation.

Resignation by the employee

If an employee resigns, it should preferably be in writing. If the employee resigns with immediate effect, the employer may institute civil action for any damages suffered as a result of the employee not working a notice period. The employer does not have to remunerate the employee for the notice period when an employee resigns with immediate effect, but the employer cannot withhold the employee’s final salary under these circumstances.  Payment for days worked and accumulated leave will be due to the employee.

Employee reaching retirement age

It is of paramount importance for an employment contract to be clear on the retirement age within the business. If there is no retirement age, the employer should institute a retirement policy. The statutory notice period is still applicable when an employee retires. The employee is paid for the notice period that they work. Accumulated leave will also be due to the employee. An employee is not paid for years of service. Any ex gratia (out of goodwill) payment is solely at the discretion of the employer and is not a legal requirement.

Dismissal of an employee

Firstly, before any form of dismissal may take place, a disciplinary hearing must be held. Once the employee has been found guilty and there are sufficient grounds to proceed with a dismissal, an employer may proceed with a sanction of this nature. When an employee is dismissed, the employee should receive his/her salary up to the last working day, including the finalisation of the disciplinary hearing. Accumulated leave will also be due to the employee. No notice period is applicable when an employee is dismissed for misconduct.

Retrenchment of an employee

Correct procedures have to be followed before an employee may be retrenched. A retrenched employee is entitled to accumulated leave, notice pay (if applicable) and severance pay. If an employee is not required to work a notice period, the employee should be paid for this period. An employer must pay an employee severance pay equal to at least one week’s remuneration for every completed year of service. Only when an employee is retrenched, is it a legal requirement for the employer to pay for years of service.

The employer has an obligation to provide an employee with a certificate of service and final salary advice upon termination of employment. A UI19 document has to be completed and submitted to the Department of Employment and Labour.

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