Can my employer retrench me without paying severance?

No, your employer cannot simply retrench you and pay nothing. Under the Basic Conditions of Employment Act 75 of 1997 (BCEA), an employee who is dismissed for operational requirements is entitled to severance pay of at least one week's remuneration for each completed year of continuous service with that employer. That is a minimum, not a ceiling, and it is separate from your notice pay and your leave pay.

There are only a few situations where you walk away with no severance, and the main one is where you turn down a reasonable offer of another job. The rest of this guide explains how the money is worked out, what the process should look like, and what to do if your employer refuses.

What a retrenchment actually is

A retrenchment is a dismissal based on the employer's operational requirements. In practice that means economic, technological, structural or similar needs of the business. The Labour Relations Act 66 of 1995 (LRA) treats it as a "no fault" dismissal. You did nothing wrong. The job went away.

Because you did nothing wrong, the law puts the burden on the employer to run a fair process first and to soften the blow with severance pay afterwards. If your employer calls something a retrenchment but is really punishing you for poor performance or misconduct, that is a different kind of dismissal and different rules apply. See Can I be fired without a disciplinary hearing? if that sounds closer to your situation.

How severance pay is calculated

The statutory formula is one week's remuneration for each completed year of continuous service. "Completed" matters. Seven years and ten months usually counts as seven years unless your contract, a workplace policy or a collective agreement says otherwise.

"Remuneration" is not always just your basic cash salary. Payments in kind and regular allowances can form part of it. If you get a guaranteed monthly transport or housing allowance, ask for it to be included in the calculation and ask the employer to show you their working.

Better terms in your contract, in a company retrenchment policy, or in a bargaining council agreement override the statutory minimum. Many employers pay two weeks per year of service. You get whichever is more favourable.

You can sanity check your own numbers with our retrenchment package calculator before you sign anything.

What else you are owed on top of severance

Severance is only one line on the final payslip. In most retrenchments you should also receive:

• Notice pay for the notice period set by the BCEA or your contract, whichever is longer. See What is the notice period when you resign? for the notice table, which works the same way when the employer gives notice.
• Accrued annual leave that you have not taken. This must be paid out on termination. See Do I get paid for unused leave when I leave a job?.
• Any pro rata bonus or commission your contract or policy provides for.
• Your pension or provident fund benefit, which is dealt with by the fund rules, not by your employer directly.

Your employer must also give you a certificate of service and the UI-19 form and other documents you need to claim from the Unemployment Insurance Fund.

When you can lose your severance pay

The main exception is refusing alternative work. If your employer offers you suitable alternative employment, with the same employer or with another employer, and you unreasonably refuse it, you can forfeit severance pay.

Whether a refusal is "unreasonable" depends on the facts. A commissioner will usually look at the pay, the status of the new role, the work itself, the location and your personal circumstances. Turning down a job that pays far less, or one that would mean relocating your family across the country, is not obviously unreasonable. Turning down an identical job in the same building at the same salary usually is.

Being dismissed for misconduct or poor performance is not a retrenchment, so no severance arises. Resigning is also not a retrenchment. If you resigned because your employer made your life unbearable, read What is constructive dismissal? before you accept that you have no claim.

The process your employer must follow

Severance is the end of the story. The process comes first. Before anyone is retrenched, the employer must consult, and consult properly, with you, your union, or whoever else is required to be consulted. The consultation must be a genuine attempt to reach agreement on things like:

1. Ways to avoid the retrenchments altogether, or to reduce the number of people affected.
2. The timing of the retrenchments and how to soften the impact.
3. The method for selecting who goes. "Last in, first out" is common, but any fair and objective criteria can be used.
4. The severance package itself.

Your employer must give you written notice inviting you to consult and must disclose relevant information in writing so that you can consult meaningfully. Being handed a letter on a Friday afternoon telling you your last day is the end of the month, with no consultation at all, is a strong sign the retrenchment was procedurally unfair.

What to do if your employer refuses to pay

Start in writing. Ask for the calculation and the reason for any shortfall. Keep the reply.

If that does not work, you have free routes:

• A bargaining council, if one covers your sector. Councils handle disputes for their industry and are the correct forum where they exist.
• The CCMA, where there is no council. Referring a dispute is free. Phone 0861 16 16 16.
• The Department of Employment and Labour, which enforces BCEA entitlements such as severance, notice and leave pay through its inspectors.

A dispute about whether severance is payable at all is usually dealt with by the CCMA or council. A dispute about whether the retrenchment itself was fair is an unfair dismissal dispute, and the 30 day clock for referring an unfair dismissal starts running on the date of dismissal, so do not sit on it.

If you cannot afford advice, Legal Aid South Africa can be reached on 0800 110 110.